U. S. Department of Energy

Prepared by the Office of Chief Financial Officer

Consolidated Financial Statements

for Fiscal Year 1996

DOE/CR-0047
CONSOLIDATED FINANCIAL STATEMENTS FOR FISCAL YEAR 1996

U.S. Department of Energy

1000 Independence Avenue, S.W.

Washington, D.C. 20585-1000

Telephone: 202-586-4171

TABLE OF CONTENTS

February 1997

The Chief Financial Officer is interested in the comments and suggestions of those

who read this document. The Reader Reponse Sheet at the end of this document is

designed to provide information on ways to improve this report and make it more

useful to you, our valued customer. Please take a few minutes to complete the

response sheet and forward it as indicated.

Page

Message from the Acting Secretary ............................................................................. 2

Overview .................................................................................................................... 4

Message from the Acting Chief Financial Officer ...................................................... 25

Financial Overview ................................................................................................... 27

Inspector General’s Report on DOE’s Consolidated Financial Statements ................. 35

Principal Statements.................................................................................................. 40

Notes to the Financial Statements.............................................................................. 42

Consolidating Schedules ........................................................................................... 61

Supplemental Financial and Management Information ............................................... 66

Inspector General’s Report on Internal Control Structure .......................................... 95

Inspector General’s Report on Compliance with Laws and Regulations................... 107

Reader Response Sheet ........................................................................................... 109
DOE’s FY 1996 Consolidated Financial Statements

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Message from the Acting Secretary

It is my pleasure to present the Department of Energy’s audited

financial statements for fiscal year 1996. The Department has

prepared these statements as required by the Chief Financial

Officers Act of 1990 and the Government Management Reform

Act of 1994 and related central agency guidance. The Office of

the Inspector General has conducted an audit of these statements

in accordance with generally accepted government auditing

standards. This audit resulted in an unqualified opinion. The

accomplishments and results achieved during fiscal year 1996 and

reflected in these statements have allowed the Department to

deliver more quality products and services.

Fiscal Year 1996 marked the second year the Department executed a Performance Agreement with

the President. In carrying out the agreement, we continued to advance the nation’s priorities and the

Administration’s commitments in science and technology, national security, environmental quality,

and energy resources. The Department continued the difficult task of downsizing through office

consolidations, business process reengineering, and elimination of nonessential activities. Building

upon past successes, we strengthened nuclear nonproliferation, replaced underground testing with

science applications, began the process of understanding and dealing with risks associated with

environmental problems resulting from nuclear weapons production during the Cold War, and continued the promotion of secure, clean, and affordable supplies of energy.

The Department continues to move toward more efficient and effective government and has progressed in achieving the $1.7 billion in savings over five years that we committed to in announcing

our Strategic Alignment Initiative in May of 1995. Our efforts to reduce Federal spending through

the Strategic Alignment Initiative have resulted in the departure of 1,397 Federal employees (of which

999 occurred during Fiscal Year 1996), the closure of eight field site offices, the vacating of five

headquarters office locations, and the consolidation of several programs. The Department has utilized management tools such as buyouts, attrition, outplacement, critical position hiring, and involuntary separations to achieve staffing targets. A review of the Strategic Alignment Initiative, conducted

by the General Accounting Office, complimented us on our efforts and savings accomplishments that

are being realized ahead of our targets, but encouraged us to exercise diligence and persistence

throughout the next four years.

The Department has adopted a policy of openness to better serve the nation and increase confidence

in Departmental decisions. Over the past several years, the Department has declassified thousands of

documents, many of which have contributed to public discussion of complex issues such as the

disposition of plutonium and the ethics of early medical experiments that helped to determine the

effects of radiation. The Department has also reduced an extensive backlog of public requests for

information.

The future will provide demanding and unprecedented challenges for the Department. I have confidence in our good management team and our dedicated and talented employees who have demonstrated a continued commitment to turn resources into results for a productive future. The DepartCharles B. Curtis
Message from the Acting Secretary

3

ment will continue to be open and collegial to all stakeholders and strive for excellence and efficiency

in all programs. By anticipating the need to change and maintaining a commitment to customer

service and operational excellence, the Department will be well positioned to address the challenges

and opportunities of the future.

Charles B. Curtis

Acting Secretary of Energy
DOE’s FY 1996 Consolidated Financial Statements

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Overview

The following overview and accompanying audited financial statements have

been prepared for Fiscal Year (FY) 1996

to report the financial position and the

results of operations of the Department

of Energy. These statements include the

consolidated Statement of Financial

Position and the consolidated Statement

of Operations and Changes in Net

Position. The statements have been

prepared in accordance with the Office

of Management and Budget Bulletin No.

94-01, Form and Content for Agency

Financial Statements, and were developed in accordance with the hierarchy of

accounting standards described therein.

The overview provides a narrative on the Department of Energy’s mission, activities, and accomplishments. Utilizing performance measures as the primary vehicle for communicating Departmental

accomplishments and results, this overview discusses the most significant measures while others are

discussed in the supplemental information to the financial statements.

Profile of the Department of Energy

The Department of Energy’s roots can be traced to the Manhattan Engineer District of the U.S. Army

Corps of Engineers, which was established in 1942 to manage development of the atomic bomb.

After World War II, Congress created the Atomic Energy Commission in 1946 to direct the design,

development, and production of nuclear weapons. The Atomic Energy Commission was also responsible for developing nuclear reactors and, in later years, regulating the commercial nuclear power

industry. In 1975, Congress replaced the Atomic Energy Commission with the Nuclear Regulatory

Commission and the Energy Research and Development Administration. These agencies were created to manage the nuclear weapons, naval reactors, and energy development programs and to research the environmental, biomedical, and safety aspects of energy technologies. In 1977, Congress

created the Department of Energy, which brought together functions and responsibilities of the

Energy Research and Development Administration and units of other agencies under one cabinet level

department.

Today the Department of Energy provides vital services to the nation in preserving our national

security, advancing U.S. leadership in science and technology, building a sustainable energy future,

and engaging in the largest environmental cleanup of our nation’s history. At the Department of

Energy, we are focused on the way we deliver these services in view of our changing post-Cold War

mission and our obligation to make the most cost effective use of the taxpayer’s hard earned dollars.
Overview

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Organization and Structure of the Department

The Department’s headquarters organizations are located in Washington, D.C. and Germantown, MD

and consist of an executive management structure that includes the Secretary, the Deputy Secretary,

and the Under Secretary; nine Secretarial staff organizations; and program organizations that provide

technical direction and support to the principal programmatic missions of the Department. The

Department’s organization also includes the Federal Energy Regulatory Commission, which is an

independent regulatory organization within the Department having responsibility for setting rates and

charges for the transportation and sale of natural gas and for the transmission and sale of electricity

and the licensing of hydroelectric power projects.

The Department has a complex field structure that is comprised of operations offices, field offices,

power marketing administrations, laboratories, and other facilities, as reflected in the following chart.

The eight operations offices are the largest field organizations under the Secretary’s supervision and

management and provide a formal link between headquarters, the laboratories, and other operating

facilities. The Department also has several other field offices concerned primarily with specific

programs. These field offices include the Rocky Flats Field Office (responsible for managing waste

and materials, clean-up, and converting the site to beneficial use), the Golden Field Office (responsible for promoting the research, development, commercialization, and worldwide application of

energy efficiency and renewable energy technologies), the Ohio Field Office (primarily responsible for
DOE’s FY 1996 Consolidated Financial Statements

6

providing administrative, financial, and technical support in completing environmental restoration and

waste management at the Fernald Environmental Management Project Area Office), the Naval Petroleum Reserves Offices (responsible for managing, operating, and maintaining the Reserves to produce

oil and gas for the greatest value and benefit to the United States), the Energy Technology Centers

(responsible for providing research, development, and deployment of technologies for the greater use

of coal and other energy sector products), and the Naval Reactor Offices (responsible for overseeing

the Bettis and Knolls Atomic Power Laboratories). The marketing and transmission of electric power

produced at Federal hydroelectric projects and reservoirs is carried out at the Department’s five

power marketing administrations. The vast majority of the Department’s energy research and development, nuclear weapons research and development, and testing and production activities are carried

out by major contractors at laboratories and other facilities located across the country. These major

contractors (e.g., management and operating (M&O) contractors, management and integrating

contractors, and environmental restoration management contractors) operate, maintain, or support

the Department’s Government-owned facilities across the country on a day-to-day basis.

More information about the Department can be obtained by accessing our Internet home page at

http://www.doe.gov
Overview

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Mission of the Department

The Department’s first priority is to help the President achieve his vision of an investment-driven

economy capable of creating high wage jobs that increase incomes of the American people. This

requires a strategy for empowering and utilizing the Department’s tremendous scientific and technological assets to help the U.S. compete in the global economy. This has prompted the Department’s

mission which reads as follows:

The Department of Energy, in partnership with our customers, is entrusted to contribute to

the welfare of the Nation by providing the technical information and scientific and educational foundation for the technology, policy, and institutional leadership necessary to

achieve efficiency in energy use, diversity in energy sources, a more productive and competitive economy, improved environmental quality, and a secure national defense.

Recent changes in the world have had a profound impact on the Department. The end of the Cold

War has allowed us to reshape our vision and change how we do business. Our vision is as follows:

The Department of Energy through its leadership in science and technology will advance

U.S. economic, energy, environmental, and national security by being:

• A key contributor in developing, applying, and exporting sustainable, clean, and economically competitive energy

technologies.

• A key contributor in maintaining U.S. global competitiveness through leadership in environmentally-conscious

materials, technologies, and industrial processes.

• A major partner in maintaining energy security and reducing vulnerability to energy disruptions through

international leadership in effective, coordinated emergency response and petroleum replacement plans and

programs.

• A major partner in world class science and technology, research centers, university research, and educational

programs.

• A world class leader in environmental restoration, waste management, and pollution prevention.

• A vital contributor to reducing the global nuclear danger through its national security and nonproliferation

activities.

• A safe and rewarding workplace that promotes excellence, nurtures creativity, rewards achievement, and is resultsoriented and enjoyable.

The key goals to accomplish the Department’s mission are:

• Leverage the Department’s unique science and technology capabilities to provide knowledge that drives the

nation’s future.

• Reduce the global nuclear danger.

• Restore, stabilize, protect, and enhance the environment.

• Develop and promote clean efficient energy technologies and enhance energy security.

• Stimulate U.S. economic productivity.
DOE’s FY 1996 Consolidated Financial Statements

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Business Lines

Science & Technology

Leverage DOE’s Unique Science and Technology Capabilities to Provide Knowledge that

Drives the Nation’s Future.

Fundamental and applied research supported by the Department advances U.S. world leadership in

science, mathematics, and engineering. The Department’s National Laboratories play a critical role in

large scale, multi-disciplinary research in the national interest. The Department offers unique

Accomplishing the Goals through 5 Business Lines

More than ever, American citizens are holding the

government more accountable for superior results

with fewer resources. We now measure performance

from the customer’s perspective, strategically

aligning business plans, goals, and organizational

structures with our vision. The Department has

developed a strategic plan which defines and

integrates the business activities into “business lines”

that represent elements of the Department’s mission:

science and technology; national security;

environmental quality; energy resources; and

economic productivity. In order for the Department’s

business lines to produce results and sustain all of our

initiatives, the organizational systems need alignment

and integration. Therefore, the Department has

developed four critical success factors -

communication and trust; human resources;

environment, safety, and health; and management

practices - that must be integrated into each of the five business lines.

Program Performance Measure Highlights

The Department has established commitments that identify our most significant outcomes under each

business line and critical success factor. Under each of these commitments, the Department has

established “measures of success” consistent with our FY 1996 budget. The FY 1996 Performance

Agreement with the President sets forth 67 commitments and 183 measures of success. Many of

these significant performance commitments are discussed within the overview, and the remaining

performance commitments are discussed in the supplemental information.

The following performance commitments highlight many of the Department’s significant FY 1996

results under each business line and each critical success factor.
Overview

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advanced research facilities for the use of the nation’s and

world’s scientific community. We support the research of

individuals of unparalleled intellectual strength and

scientific curiosity.

Our energy, environmental, and health research provide

the foundation for new technologies that supply energy,

conserve resources, control pollution, reduce

manufacturing waste, predict the impacts of global climate

change, develop new ways to cleanup hazardous waste,

and assess energy related health and environmental risks.

Our basic research in high energy physics and fusion leads

to new insights into the nature of energy and matter. The

Department also provides leadership in the national effort

to improve science, mathematics, and engineering

education.

Improving Service Delivery at DOE Science Facilities

Improve the efficiency of operations and quality of services provided to scientists at the Department’s leadingedge basic research facilities. Ensure that facilities are available to users and operated in a reliable and

predictable manner that ensures high-quality research products and technology innovations.

Goal:

Increasing the availability of DOE scientific facilities

consistent with the Science Facilities Initiative to enable

a wide array of research that will advance science and

produce tomorrow’s technologies by increasing the

operating time at the:

- Stanford Synchrotron Radiation Laboratory from

4,000 to 5,600 hours, a 40 percent increase;

- Advanced Light Source from 3,000 to 4,200 hours, a

40 percent increase;

- Intense Pulse Neutron Source from 2,000 to 4,000

hours, a 100 percent increase; and

- High Flux Beam Reactor from 3,600 to 4,700 hours,

a 30 percent increase;

and increasing or upgrading user beamlines from 200 to

210 to improve user capabilities at the synchrotron light

sources and neutron facilities.

FY 1996 Results:

The Department has improved the efficiency of

operations and quality of services provided to scientists

at the Department’s leading-edge basic research

facilities. The Department continues to ensure that

facilities are available to users and operated in a reliable

and predictable manner that ensures high-quality

research products and technology innovations.

Consistent with the Science Facilities Initiative, the

Department’s operating times have increased:

- Stanford Synchrotron Radiation Laboratory

operating at 5,252 hours, a 31 percent increase;

- Advanced Light Source operating at 4,461 hours , a

49 percent increase;

- Intense Pulse Neutron Source operating at 4,104

hours, a 105 percent increase; and

- High Flux Beam Reactor operating at 6,261 hours, a

74 percent increase.

There were 11 new beamlines and 8 upgraded beamlines

put into operation during FY 1996 to improve user

capabilities at the synchrotron light sources and neutron

facilities, and several more have received funding.

AT&T Bell Laboratories built this unique chamber at the

National Synchrotron Light Source at the Brookhaven National

Laboratory for surface studies of materials.
DOE’s FY 1996 Consolidated Financial Statements

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Transferring Environmental Technologies

Demonstrate new environmental technologies and systems and transfer them to private industry and Federal

facilities.

Goals:

Demonstrating over 166 new environmental technologies

and systems, to include the:

- Radioactive Plasma Hearth Process;

- Cesium Removal Demonstration at Oak Ridge; and

- Spectral Gamma Probe for Cone Penetrometer.

Making 66 environmental technologies available for

transfer and use by private industry and Federal

facilities, to include the:

- Light Duty Utility Arm at Hanford;

- Portable Vitrification Unit at Oak Ridge;

- Mobile Evaporator at Oak Ridge; and

- LASAGNETM in-situ process for waste treatment.

FY 1996 Results:

Due to decreased funding and delays, the Department

revised the target to 126 new environmental technologies

and systems demonstrated. The Department has

completed the key technologies and systems; however,

only 123 of the 126 planned demonstrations were

completed due to technical or procurement problems.

The target was also revised to 48 technologies available

for transfer and use because of decreased funding and

delays. The Department completed 44 of the 48 planned

transfers. The four not completed were delayed until FY

1997 due to problems during the final demonstration

phase or cost and performance data reviews.

Exploring the Frontiers of High Energy Physics

Pursue opportunities for the U.S. to participate in the Large Hadron Collider (LHC) project at the European

Laboratory for Particle Physics (CERN) in Geneva, Switzerland to explore the frontier of experimental high

energy physics and promote increased international scientific collaboration.

Goal:

Success will be measured in 1996 by negotiating one or

more LHC agreements with CERN, in partnership with

the National Science Foundation (NSF) to enable

American scientists to explore the fundamental nature of

energy and matter.

FY 1996 Results:

In June 1996, the Department’s negotiating team reached

tentative agreement on DOE contributing $200 million in

goods and services to the LHC Accelerator and $250

million to the two large detectors over a 10 year period.

NSF will contribute about $80 million. The Umbrella

Agreement and Accelerator and Detector Protocols have

been drafted and are under review by the administrative

Working Group. The Accelerator and Detector Working

Groups have identified areas of responsibility within

defined funding levels. Work is progressing with

interested U.S. laboratory and university groups on

detailed cost estimates and proposal preparation for

DOE and NSF.

Providing Radioisotope Power Systems for U.S. Space Exploration

Provide the Radioisotope Thermoelectric Generators (RTGs) and Radioisotope Heater Units (RHUs) for

current National Aeronautics and Space Administration (NASA) missions and maintain the infrastructure and

capability to produce radioisotope power systems for the future.

Goals:

Delivering, by August 1996, three RHUs for the Mars

Pathfinder mission to be launched in December 1996.

Completing fabrication of 157 RHUs and two of the three

heat sources to be placed in the RTGs for the 1997

Cassini mission to Saturn.

FY 1996 Results:

The Department delivered on schedule the three RHUs

for the Mars Pathfinder mission, which was launched in

December 1996.

The fabrication of the 157 RHUs and the two heat

sources for the RTGs was successfully completed for the

Cassini mission to Saturn.
Overview

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National Security

Reduce the Global Nuclear Danger

The Department is responsible for

effectively supporting and maintaining

a safe, secure, and reliable enduring

nuclear weapons stockpile without

underground nuclear testing or new

weapons production. In addition, the

Department will safely dismantle and

dispose of excess weapons and

provide the technical leadership for

national and global nonproliferation

activities.

In August of 1995, the President

announced the U.S. would seek a

zero-yield Comprehensive Test Ban

Treaty. This decision was based in part on assurances by the Department that our science based

stockpile stewardship program, along with new certification procedures, would ensure the continued

safety and reliability of the nuclear weapons stockpile.

The Department developed a Stockpile Stewardship and Management program as a single, highly

integrated technical program for maintaining the safety and reliability of the U.S. nuclear weapons

stockpile in an era without underground testing or new weapons production. The program has three

basic challenges: (1) maintaining the enduring nuclear weapons stockpile while transforming the

complex into one more appropriate for a smaller stockpile; (2) preserving the core intellectual and

technical competencies of the weapons laboratories; and (3) ensuring the activities needed to maintain

the nation’s nuclear deterrent are coordinated and compatible with the nation’s arms control and

nonproliferation objectives.

Reducing the Weapons Stockpile

Safely reduce the U.S. nuclear weapons stockpile in order to reduce the nuclear danger and enhance

international accord.

The parachute is removed from the tail section of a nuclear weapon

during disassembly at the Pantex Plant in Amarillo, Texas. DOE

has disassembled some 50,000 nuclear weapons over the years in a

safe, secure, efficient, and environmentally sound manner.

Goal:

Dismantling 1,164 weapons in FY 1996 without adversely

impacting the environment, public safety, and health.

FY 1996 Results:

The Department has dismantled 1,064 warheads. The

target of dismantling 1,164 warheads was not reached

due to the temporary shutdown of the B61-2 weapon

dismantlement line with safety concerns that slowed down

operations.
DOE’s FY 1996 Consolidated Financial Statements

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Managing Surplus Weapons-Usable Fissile Materials

Define and implement a path forward for verifiable storage and disposition of U.S. weapons-usable fissile

materials and support efforts to attain reciprocal actions for disposition of surplus Russian plutonium.

Goals:

Publishing, by February 1996, a draft and, by September

1996, the final Programmatic Environmental Impact

Statement (PEIS) for storage and disposition of weaponsusable fissile materials.

Completing by May 1996 a final Environmental Impact

Statement (EIS) for down-blending surplus weaponsusable uranium into low enriched uranium for potential

use in commercial reactor fuel.

Completing, by September 1996, a United States/Russian

joint study to develop a set of consistently evaluated

plutonium disposition alternatives.

FY 1996 Results:

The Department issued a draft PEIS for Storage and

Disposition of Surplus Weapons-usable Fissile Materials

in February 1996, and a final PEIS was released in

December 1996. A Record of Decision was released in

January 1997. These efforts will provide the President

with the basis and flexibility to implement plutonium

disposition in a manner that encourages reciprocal

action abroad.

The final EIS for the Disposition of Surplus Highly

Enriched Uranium was approved for publication in May

1996, and the Department’s preferred alternative is to

down-blend highly enriched uranium to low enriched

uranium for peaceful use as commercial reactor fuel.

The report of the joint U.S./Russian working group

studying technical options for the disposition of surplus

weapons plutonium was completed and sent to Presidents

Clinton and Yeltsin in September 1996.

Establishing Transparent and Irreversible Nuclear Reductions Worldwide

Exchange and confirm data on weapons materials inventories. Monitor nuclear warhead production and

expedite dismantlement of excess weapons under bilateral agreements. Conduct reciprocal bilateral inspections

of nuclear components and materials. Implement the purchase agreement of the 500 metric tons of highly

enriched uranium (HEU) from dismantled former Soviet Union warheads. Work to reduce weapons

inventories.

Goals:

Implementing the draft agreement with Russia initialed in

November 1995 and implementing transparency measures

for the Ural Electrochemical Integrated Enterprise

(UEIE) and the Portsmouth Gaseous Diffusion Plant.

Finalizing annexes to the agreement with Russia.

Before the 6th Gore/Chernomyrdin Commission meeting,

resolving issues of timely payment to Russia for the

natural uranium used to convert the HEU into low

enriched uranium (LEU).

Supporting White House efforts to obtain Congressional

approvals for Presidential authority to waive antiFY 1996 Results:

During FY 1996, the U.S. and Russian officials conducted

very successful monitoring visits to facilities in each

country. The U.S. opened the UEIE Permanent Presence

Office in Novouralsk, Russia.

At the Fourth Session of the Transparency Review

Committee in Vienna, Austria, in April 1996, the U.S. and

Russia finalized all remaining HEU transparency

annexes. Comprehensive transparency measures are now

in place.

Passage of the United States Enrichment Corporation

(USEC) Privatization legislation has, in large part,

resolved the issue of allowing a substantial portion of the

natural uranium component from the Russian LEU

project deliveries to enter the U.S. market, allowing the

Russians to receive revenues from the sale of the natural

uranium.

The Department supported White House efforts to include

language in the USEC Privatization legislation that
Overview

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dumping duties against uranium imported into the U.S.

under the HEU Purchase Agreement.

Obtaining the low enriched equivalent of 12 metric tons

of HEU.

would have waived anti-dumping duties against uranium

imported into the U.S. under the Russian HEU Purchase

Agreement. Although the language was not included in

the final USEC Privatization Act, the act did help resolve

other uranium importation issues.

The low enriched equivalent of 12 metric tons of HEU

has been delivered from Russia to the U.S.

Environmental Quality

Restore, Stabilize, Protect, and Enhance the Environment

The Department needs to understand and reduce the environmental, safety, and health risks and

threats from operations and to develop the technologies and institutions required for solving domestic

and global environmental problems. The Department’s six priorities are to: address urgent risks;

assure worker safety; assume managerial and financial control; obtain on-the-ground results; focus

our technology development; and

involve the public in our decisions.

Reducing urgent risks from unstable

plutonium, corroding spent nuclear

fuel and targets, and high-level waste

tanks will remain our highest priority.

We will continue to get more cleanup

results through the changes we have

made in the way we do business.

Public involvement is helping us to

make economically acceptable

decisions on how our program is to

move forward. Our budget “work

out” sessions are bringing the

Department together with the Federal

and State regulators to find more

cost-effective ways to meet our

commitments and modifying existing

compliance agreements as necessary

to conform with budget constraints.

Understanding and Dealing with the Risks

Utilize newly developed information to maximize risk reduction and risk prevention associated with

environmental problems resulting from nuclear weapons production during the Cold War.

The Defense Waste Processing Facilty at the Savannah River

Site converts high-level radioactive waste into borosilicate glass

through a process called vitrification.

Goals:

Completing the sampling, analysis, and characterization

of 25 high-level radioactive waste tanks at Hanford.

FY 1996 Results:

The Department has completed sampling, analysis, and

characterization on 40 high-level radioactive waste tanks
DOE’s FY 1996 Consolidated Financial Statements

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Finishing an analysis of DOE “materials in inventory,”

including a path forward for at least 10 material types,

including lithium, chemicals, and weapons components.

Submitting to Congress in May 1996 an updated Baseline

Environmental Management Report (BEMR) that will

improve the accuracy of cost data over the 1995 report.

This report will analyze the long-term cost impact of

delaying or accelerating funding rates.

at Hanford, and 40 characterization reports have been

received and accepted by the Department.

The Department has completed an analysis of DOE

“materials in inventory” and published a report in

January 1996, “Taking Stock: A Look at the

Opportunities and Challenges Posed by Inventories from

the Cold War Era.” Efforts are underway to address

recommendations in the report and implement changes

early in FY 1997.

The Department has also released an updated version of

the BEMR in May 1996 that gives an improved estimate

of costs and shorter schedules for cleanup than last

year’s report.

Reducing the Risks; Cleaning up Nuclear Weapons Sites

Reduce environmental, safety, and health risks by cleaning up DOE sites.

Goals:

Completing 120 environmental cleanup actions.

Stabilizing 250 kg of plutonium residues and solutions at

the Hanford and Savannah River sites.

Finishing 12 decommissioning projects and 154 Uranium

Mill Tailings Remedial Action (UMTRA) property cleanups. (Targets were revised to 43 decommissioning

projects and 137 vicinity property remedial action

projects at both Formerly Utilized Sites Remedial Action

Program and UMTRA sites.)

Treating and/or disposing of more than 3 million cubic

meters of DOE waste, including starting up vitrification

of high-level radioactive waste at the Defense Waste

Processing Facility in Savannah River by December 1995

and at the West Valley Demonstration Project by March

1996.

FY 1996 Results:

The Department has completed 272 environmental

cleanup actions in 16 states, consisting of 157 final

remedial actions and 115 interim actions.

The Department exceeded expectations and stabilized 482

kg of plutonium residues and solutions. This includes 99

kg of plutonium solutions at Savannah River and 2 kg of

plutonium solutions plus 381 kg of plutonium residues at

Hanford.

The Department has completed 47 decommissioning

projects and 163 vicinity property remedial actions.

The original waste disposal goal may have been derived

from all the DOE legacy waste in inventory and ongoing

operations as stated in the Baseline Environmental

Management Report or the vast quantity of waste water

that is cleaned and returned to the environment. Through

FY 1996, the Department tracked performance against a

baseline inventory of 348,211 cubic meters. During FY

1996, 12,865 cubic meters of high-level waste (HLW)

were reduced from DOE’s waste inventory. The FY 1996

ending inventory is 346,137 cubic meters. The Defense

Waste Processing Facility began radioactive waste

processing in March 1996, and the West Valley

Demonstration Project received authorization to begin

processing radioactive high-level waste in June 1996. A

total of 89 canisters of vitrified radioactive high-level

waste have been filled at these facilities.
Overview

15

Finding Solutions to Spent Nuclear Fuel Storage and Funding Issues

Refocus the Civilian Radioactive Waste Management Program to provide meaningful deliverables that are

consistent with reduced funding and revised policies.

Goals:

Issuing by March 1996 a revised program plan to

determine the suitability of the Yucca Mountain site.

Preparing a plan by September 1996 that identifies the

steps to ensure an aggressive start on interim storage of

spent fuel should enabling legislation be enacted.

Completing, by March 1996, 2.5 miles of the exploratory

tunnel and beginning two test alcoves in the potential

repository formation at Yucca Mountain.

FY 1996 Results:

A May 1996 revised program plan aligns future activities

and milestones with the Department’s FY 1997 budget

request and with Congressional guidance received in the

FY 1996 appropriations legislation.

The steps necessary to ensure an aggressive start on the

interim storage of spent fuel have been incorporated in

the program plan.

The Department exceeded set performance goals by

boring more than four miles of the exploratory tunnel and

completing work on four test alcoves.

The sulfur lamp installation outside of DOE’s Forrestal Building produces

4 times as much light at 1/3 the cost of conventional lighting.

Energy Resources

Develop and Promote Clean Efficient Energy Technologies and Enhance Energy Security

The Department will encourage

efficiency and advance alternative and

renewable energy technologies;

increase energy choices for all

consumers; assure adequate supplies

of clean, conventional energy; and

reduce U.S. vulnerability to external

events. Departmental research and

development programs are part of the

nation’s investment in our energy

future. The work covers a broad

spectrum of energy forms and

technologies intended to make

production and utilization of all forms

of energy, including renewables, fossil,

and nuclear, more efficient and

environmentally benign.

Energy research and development has resulted in important gains in energy efficiency and fuel

substitution that counteract the nation’s reliance on oil imports. It has also yielded technologies that

allow us to produce and use conventional fuel resources more efficiently and with significantly less

environmental impact. The work will improve the energy outlook for future generations. Protecting

and enhancing environmental quality is a vital aim of the Administration’s energy policy. The

Department plays a major role in implementing the Climate Change Action Plan through voluntary

programs and partnerships.
DOE’s FY 1996 Consolidated Financial Statements

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Goals:

Adding six new major Energy Savings Performance

Contracts, including an innovative government-wide

contract to make it simpler, cheaper, and faster for

government agencies to save energy.

Applying the 15 energy and money saving technologies

used in the “Greening of the White House” to three

additional showcase buildings and existing Federal

facilities. Adopting these technologies will save

taxpayers and their Federal agencies $50 million in

energy costs in 1996, 10 percent from DOE facilities, and

attract double the current private investment for new

Federal facility energy projects, accumulating $60

million by year’s end.

Weatherizing 83,300 more low income homes, for a total

of 4.4 million homes, which will save those residents a

total of $450 million in energy costs every year.

FY 1996 Results:

The Department has seven new major Energy Savings

Performance Contracts underway.

The 15 energy and money saving technologies are being

applied at the Pentagon, Presidio, Forrestal building,

and Yellowstone Park. Federal energy cost savings

greatly exceeded targets. These technologies added $40

million in private sector investment commitment,

exceeding our target by $10 million.

The Department weatherized over 56,000 homes as a

result of the delayed passage of a smaller budget. This

performance conducted under a smaller budget is

equivalent to the number of homes projected with a fully

funded budget.

These strategies and the successes they are producing for future energy security are backed up by

vigorous leadership in the International Energy Agency to develop and maintain effective,

coordinated response measures to deter and mitigate near-term energy supply threats. This

leadership, backed up by a system of strategic energy reserves held by the member nations, provides

an effective security environment for the orderly development of sufficient, efficient, and

environmentally benign energy forms and technologies for the future.

Transferring Proven Energy Efficiency Measures

Apply energy efficiency measures to buildings and operations to reduce government energy consumption by 30

percent by 2005, save low-income residents over $10 million in annual energy costs, and reduce energy

consumption by one quad by the turn of the century.

Developing Renewable Domestic Energy

Advance renewable energy development through cost-shared industry, laboratory, and DOE partnerships.

Goals:

Developing the U.S. renewable industry through $400

million of foreign and domestic sales.

Showcasing 25 energy efficiency and renewable energy

technologies at the 1996 Summer Olympic Games in

Atlanta to over 2 million visitors and 3 billion viewers.

Attracting $100 million of private sector investment to

cost share our research and development in renewable

technologies.

FY 1996 Results:

The Department estimates that developments in the U.S.

renewable industry have fostered over $600 million in

foreign and domestic sales for renewable energy projects,

far surpassing the target. This represents over 400

megawatts of renewable energy installations.

Twenty six efficiency and renewable energy technologies

were demonstrated at the 1996 Summer Olympic Games.

Private sector investments totaled $85 million. Extended

negotiations on one major contract, expected to be more

than $15 million, delayed award to FY 1997.
Overview

17

Goal:

Completing an initial series of laboratory-scale baseline

tests that verify the potential for significantly reducing

the cost of producing liquid fuels by processing coal with

plastics, rubber, or other solid wastes.

Providing a New Option to Supplement the Nation’s Liquid Fuels

Provide the nation by 2005 with an alternative source of liquid fuels, costing $25 per barrel or less, that can be

produced from coal and solid wastes.

FY 1996 Results:

Research is being conducted at the Consortium for Fossil

Fuel Liquefaction Science (U. of Kentucky, U. of

Pittsburgh, West Virginia U., Auburn U., and the U. of

Utah), Hydrocarbon Technologies, Inc., CONSOL, Inc.,

and the Pittsburgh Energy Technology Center.

Preliminary economic analysis performed by MITRETEK

indicates economic promise with plant sizes at 10,000

barrels per day and larger. While early results

demonstrated feasibility, process studies were needed to

establish reaction conditions that could produce highconversion at steady-state when “real” waste materials

were used. Baseline tests have been conducted. Results

using tire rubber, mixed plastic waste, and coal have

been successful, having confirmed the preliminary

economic analysis which showed that coal/waste

processing has the potential to produce coal derivedliquid fuels at about $21 per barrel in plants integrated

into existing refineries. Process work will continue to

firm up the database and to find cheaper approaches that

could be economic at smaller-scale. A Sources Sought

announcement has been issued to define stakeholders and

their interests in this research area. Responses received

so far indicate interests from waste managers, technology

developers, and potential project sponsors.

Implementing the Climate Change Action Plan

Support the President’s Climate Change Action Plan to reduce carbon emissions by over 23 million metric

tons, produce $15 billion in energy savings, and stimulate $20 billion in industrial investment by the year 2000.

Goals:

Increasing sales of the most energy efficient appliances

and building equipment by $50 million this year through

eight industry collaboratives and four of the biggest

national appliance retailers. This program, Energy

Saver, will save enough energy to eliminate 8 million

metric tons of carbon by 2000.

Tripling industry Climate Wise commitments to

voluntarily reduce carbon emissions by adding 100

additional industrial companies and two new Climate

Wise Trade Associations. Our industrial partners are

improving their competitive position by recycling,

eliminating waste, and saving energy; enough to reduce

carbon emissions by 4 million metric tons by 2000.

Awarding 16 new National Industrial Competitiveness

Through Energy, Environment, and Economics (NICE3)

grants to industry and government cost-shared projects

that will demonstrate new cost-effective clean energy

technologies, attracting five investor dollars for every

FY 1996 Results:

The Department achieved the equipment sales objective

of $50 million this year.

The Department added 120 Climate Wise partners,

bringing the number of partners to 150.

The Department awarded and implemented 16 new NICE3

grants for $7 million in projects in 14 states.
DOE’s FY 1996 Consolidated Financial Statements

18

Federal dollar and reducing our year 2000 carbon

emissions by nearly 2 million metric tons.

Implementing our 21 new Showcase national partner

demonstration projects for electric motor drives and

systems in our Motor Challenge program, saving

businesses $4 million this year and taking more than 5

million metric tons of carbon out of the air by the year

2000.

Nearly doubling the community and regional

partnerships to improve commercial building energy

efficiency. The 90 Rebuild America partnerships - 40 are

new this year - attract an average of $30 of private

investment for every public dollar. By the year 2000, the

buildings adopting the Rebuild energy savings practices

will save their communities over $2 billion and take over

1 million tons of carbon out of the air.

Adding 40 new utilities to our 108 Climate Challenge

agreements to voluntarily reduce emissions. By the end of

the year we will have 600 partner utilities that account

for two-thirds of utility carbon emissions. We expect our

utility partners to increase their ongoing energy saving

programs enough to take an additional 7 million metric

tons of carbon out of their service areas by the year 2000.

The Department continued implementation of 18

Showcase partnership demonstration projects (3

companies dropped out) and initiated 12 new

demonstration projects. During FY 1996, completed

projects saved $1.2 million, and 20 continuing projects

are on track to save $2-3 million.

During FY 1996, the partnership goal was met by adding

55 new partners and retrofitting commitments for 200

million commercial square feet and 50,000 homes.

The Department now has 630 utility Climate Challenge

partners, exceeding the partner goal. Utility partners

remain committed to take an additional 7 million metric

tons of carbon out of their service areas by the year 2000.

Economic Productivity

Stimulate U.S. Economic Productivity

The Department will promote sustained

economic growth and the creation of highwage jobs through research and development

partnerships with industry and other Federal

agencies. The Department will put the vast

scientific and technological assets of its

laboratories and facilities to the best use in

advancing the U.S. position in a global market

that is becoming increasingly competitive.

This business line is crosscutting in nature, as

it reaches across multiple organizational

missions, funding levels, and activities. As a

result, this business line is incorporated within

the other four business lines when displaying various financial information.

Increasing U.S. Energy Technology and Exports and Investments

Stimulate sales of U.S. energy technology and capital investments in countries with large, emerging markets.

Diversify world wide supply through targeted support for U.S. industry efforts to invest in new oil and gas

supplies and energy efficiency and renewable technologies.

Atlantic-Pacific Technologies, Inc., a U.S. firm, signs a contract to

develop a renewable energy hybrid systems manufacturing plant

with Wagner Systems, a South American company, as the former

Secretary of Energy Hazel O’Leary and the former South African

Minister of Mineral and Energy Affairs Pik Botha observe.
Overview

19

Goals:

Promoting the U.S. renewable industry in fostering

foreign and domestic sales of $400 million and foreign

sales agreements representing $1.5 billion in sales.

Removing barriers to U.S. companies in coal technology

export and efficiency and renewables markets, including

those in China, Brazil and other developing countries

that will use coal, by:

- establishing U.S. and foreign partnerships; and

- providing technical expertise to multilateral and

regional financing institutions in evaluation of

finance applications.

Initiating a forum, similar to that done for the Western

Hemisphere, for Arctic oil and gas practices with the

Russian producing associations.

Opening of oil, gas, energy efficiency, and renewable

technology opportunities for U.S. companies by Ukraine.

Critical Success Factors

The Department has adopted total quality management principles to improve overall effectiveness and

reduce costs. In efforts to realize the Department’s mission and exceed customer requirements, the

Department has focused on the following four critical success factors.

Communication and Trust

Improve Communication and Trust

This factor examines how we communicate information and build trust within the Department and

with our stakeholders and customers. This is especially important with our post-Cold War missions

in the environment of openness, communication, and trust.

FY 1996 Results:

The Department estimates that efforts in promoting the

U.S. renewable industry have fostered over $600 million

in sales of foreign and domestic renewable energy

projects.

The Department’s ongoing communications have

encouraged China to strongly consider use of efficient

clean coal technologies with improved environmental

performance. A wider acceptance of larger scale

fluidized bed combustion in China has resulted from

continued information exchange. Interaction with the

Asian Development Bank has resulted in their interest in

financing the use of the integrated coal gasification

combined cycle technology in China. The Department

has held successful workshops on Coal Fires and Clean

Coal Technology and on Fossil Fuel Power Generation

and Clean Application. These workshops have resulted in

reverse trade missions relating to clean coal

technologies, more efficient energy producing

tecnologies, and the purchase of a U.S. fluidized bed

combustor by the Brazilians.

DOE has identified candidates for a joint experts group.

The Russian Government has proposed, and the U.S. has

agreed to hold a workshop to facilitate a meeting of the

experts group.

Following major changes in the Ukrainian Government,

DOE participated in an oil and gas investment

conference held by the Ukraine in October 1996. A

binational meeting between the U.S. and Ukraine was

also held in October 1996 on coal and power sector

reforms, domestic oil and gas development, and energy

efficiency and included a dialogue on opportunities for

U.S. investment and technology export.
DOE’s FY 1996 Consolidated Financial Statements

20

Making More Information Available to the Public

Declassify information under the Atomic Energy Act and Executive Order 12958, reduce the volume of new

information classified, and make information more accessible.

Goals:

Reviewing 440,000 documents for possible

declassification.

Completing a survey of classified DOE records for

declassification and making public a list of records

reviewed.

Completing declassification and release of 15 percent of

historically significant national security information

records 25 years old and older.

Issuing the final report on Fundamental Classification

Policy Review and implementing its recommendations for

declassifications.

Making available on the Internet a list of unclassified

documents on Human Radiation Studies

FY 1996 Results:

The Department reviewed 620,000 documents in

classified collections for possible declassification during

FY 1996.

The Department has completed a survey of classified

records. The records database will be available to the

public in 1997.

The Department exceeded the goal by successfully

completing the declassification of 19 percent of the

collections containing 25 year old or older permanently

valuable national security information for release,

pending final archival processing.

A report has been completed; however, discussion and

coordination for implementation of recommendations are

being held with the Department of Defense.

The inclusion of unclassified data on Human Radiation

Studies was substantially completed in October 1996.

250,000 pages of data are now accessible.

Human Resources

Increase Productivity of DOE’s Human Resources for Our New Mission

This factor examines how we recruit, train, and develop; reward performance; motivate; and promote

diversity within our workplace. The Department aims to create an environment where teamwork,

trust, openness, pride, and respect are standard practices, and excellent performance is rewarded.

Additionally, the Department aims to provide meaningful work opportunities and implement

innovative compensation and personnel initiatives to attract and retain a diverse and well-trained

workforce capable of carrying out the Department’s mission.

Ensuring Workforce Diversity

Recruit, hire, and retain a diverse workforce and assure that DOE contractors achieve diversity.

Goals:

Maintaining diversity achievements during downsizing in

FY 1996.

Developing and implementing diversity strategies at all

DOE field sites.

Implementing the DOE strategic diversity plan at five

additional sites.

FY 1996 Results:

During FY 1996, the DOE permanent workforce

decreased by 1,146 (6.52 percent) from 17,587 to 16,441.

The percentage of minorities and women decreased by

0.15 percent, from 47.94 percent to 47.79 percent.

Strategic Diversity Plans were received from 17 of 22

headquarters elements and 13 of 18 field elements.

Developed and implemented a Diversity Program

Monitoring System to measure the Department’s success

in recruiting, hiring, and retaining a diverse workforce
Overview

21

during the strategic alignment process. Conducted a

DOE Contractors Diversity Conference at Chicago

Operations Office during June 4-5, 1996. Developed

Diversity Partnership Statement and strategies for

implementation at contractor organizations. Conducted

quarterly conferences with DOE diversity program

managers at different field sites. Operations offices are

responsible for monitoring contractor activities in the

areas of affirmative action and equal employment. This

monitoring activity includes the review of formal

complaints filed against contractors with enforcement

agencies to identify systemic issues.

FY 1996 Results:

Training on the SES performance appraisal system

process was conducted in February and March 1996.

SES employees received “360 Degree” feedback as part

of their overall performance appraisals via mid year

progress reviews in May 1996.

Thirteen of DOE’s 20 principal field organizations and

one Headquarters organization have implemented or are

planning to implement “360 Degree” feedback systems

that cover all categories of employees.

As of the end of FY 1996, the Department has provided

quality training to 871 senior managers through the

Executive Leadership Forum training effort. This

training consisted of Covey training, “The Seven Habits

of Highly Effective People,” “Leaders for a CustomerDriven Organization,” and other quality training

sponsored by the Department.

Effective partnerships have been established with two

headquarters offices for the purposes of sharing

resources and reducing processing times of personnel

actions by as much as 50 percent.

Improving Human Resource Practices

Develop techniques for ensuring management success in achieving performance goals critical to realizing the

Department’s mission.

Goals:

Implementing “360 Degree” performance feedback for

all Senior Executive Service (SES) employees by

collecting input from supervisors, peers, subordinates,

and customers and by obtaining input for all career SES

employees during FY 1996.

Beginning to implement the “360 Degree” process for

non-SES supervisors and managers by March 1996.

All managers receiving appropriate quality training by

June 1996 and promoting training for their staffs.

Establishing pilot partnership programs to reengineer

how personnel services are delivered to customers, with a

goal of reducing processing times of typical personnel

services by 25 percent.

Environment, Safety, and Health

Achieve Excellence in the Safety and Health of DOE Workers, the Public, and the

Environment

This factor examines how the Department ensures safety and health of workers and the public and

how it protects and restores the environment. The Department continues to shift from a reactive

approach to an emphasis on prevention and excellence in protecting worker and public safety and

health and in achieving environmental standards. The Department has opened its records related to

environment, safety, and health and provided stakeholders easy access to the information.
DOE’s FY 1996 Consolidated Financial Statements

22

Incorporating the Existing Risk-Based Planning and Budgeting Process into All Major

Contracts

By September 1996, incorporate the risk-based environment, safety, and health planning and budgeting process

into all new major contracts and those that are scheduled for renewal.

Goal:

Inclusion of strong and effective environment, safety, and

health provisions in six major contracts.

FY 1996 Results:

The Department has included strong, effective

environment, safety, and health provisions in eighteen

major contracts.

Implement the “Necessary and Sufficient Closure Process” to Ensure Safe Operations in a

Streamlined Environment

Identify and implement standards appropriate for work being done that will provide for the health and safety of

workers, the public, and the environment.

Goal:

Success will be measured by completing nine pilot

projects initiated in FY 1995 and beginning the full

implementation of this process into the Department’s

operations by February 1996

FY 1996 Results:

The Department has successfully completed nine

WorkSmart Standards pilot projects which have resulted

in a renewed focus by the Department on the relationship

between work, the hazards associated with the work, and

standards tailored to that work. An additional 15

projects are currently underway.

Management Practices

Become the “Best In Class” in the Use of Management Practices

This factor examines how the Department allocates, spends, and accounts for resources and procures,

produces, and contracts for goods and services. The Department is adopting “Best in Class”

management practices in conjunction with our mission by meeting or exceeding customer

expectations, by empowering and enabling people to be results-oriented and cost-effective, and by

contributing to the Administration’s deficit reduction objectives. The Department is also taking an

integrated approach to managing headquarters, field, and contractor operations that focuses on

performance.

Aligning the Department to Save Money and Enhance Performance

Implement the Strategic Alignment Initiative through office consolidations, business process re-engineering,

and elimination of non-essential activities.

The Department has undertaken a major organizational transformation through a deliberate and phased strategy

that will significantly improve the efficiency of our operations and promote a forward thinking approach to

meet future challenges and commitments. This major initiative started with the creation of our Strategic Plan

that redefined our business lines and core missions and continues with the implementation of the Secretary’s

Strategic Alignment Initiative to achieve $1.7 billion dollars in savings over a five year period. The

Department’s implementation of this initiative will provide better, more cost-effective means of performing the

core missions as defined in the strategic plan.

Early on, the Department’s leadership realized that Strategic Alignment would never be a complete success

unless it was reported and publicized to a wide audience, including DOE employees and the Congress. Special

emphasis was placed on conservative, realistic estimates of the dollar savings resulting from the success of

several key initiatives.
Overview

23

In an effort to arrive at accurate data at a reasonable cost, the savings tracking processes agreed to by the

initiative champions and validated by the Strategic Alignment Support Team are somewhat different for each

major initiative. In the case of support service contracting, for example, procurement data were used to

compare FY 1996 obligations to an adjusted FY 1995 baseline. By contrast, the National Environmental

Policy Act (NEPA) process savings are consensus estimates. This is because NEPA data are not separately

reported in the Department’s systems, and the new reengineered process makes comparison to a prior FY 1995

baseline inappropriate.

In summary, the Strategic Alignment Initiative savings data shown in this report represent the Department’s

best estimates of our successes. The credibility of the savings data was measured by the General Accounting

Office (GAO) in a May 1996 report, Energy Downsizing. This report indicated GAO’s acceptance of these

methods sufficiently to state that the plans to achieve cost savings for FY 1996 appeared to be on track.

Goals:

Closing eight field offices and four headquarters

locations and reducing 1,380 Federal staff positions from

May 1995.

Through process improvement, saving $90 million in

support contracting, $49 million in information resource

management, $35 million in Federal and contractor

travel, and $6 million in NEPA compliance activities.

Returning $15 million to the Treasury from the sale of

surplus assets.

FY 1996 Results:

Since implementing the Strategic Alignment Initiative in

May 1995, the Department has closed eight field offices

and five headquarters locations, saving more than $1.6

million. Federal staff positions were reduced by 1,836,

resulting in a level of 12,221 positions at fiscal year end

(actual on-board employees declined by 999 during FY

1996). This Federal staffing reduction exceeded the

original staffing target set by the Strategic Alignment

Initiative by 456 positions.

End of fiscal year savings from support contracting -

$184 million; information resource management - $88

million; Federal and contractor travel - $40 million; and

while no accounting data exists specifically for NEPA

compliance activities, the Department estimates that this

goal has been met.

$4.7 million was returned to Treasury; short of the $15

million goal. Several sales are still in progress.

Becoming a World Class Quality Organization

Implement improvement action plans based on the results of the 1995 self-assessment. Conduct a 1996 selfassessment of DOE quality management practices using the President’s Quality Award or Malcolm Baldridge

National Quality Award Criteria.

Goals:

Implementing quality improvement action plans by

January 1996 at all headquarters and field organizations

and all headquarters and field organizations completing

their annual quality self-assessment by September 1996.

Demonstrating continuous performance improvement at

all headquarters and field organizations in 1996 as

compared with the results of their 1995 quality baseline

self-assessment.

FY 1996 Results:

During FY 1996, 23 of 38 Departmental Elements

completed a self-assessment. Implementation of longand short-term action plans is progressing. Downsizing

and reorganizations have delayed some assessments.

Numerous improvements have been identified and

reported. Energy Quality Award scores increased from

279 in 1995 to 341 in 1996, a 22 percent increase.

Between 1994-1996, external customer satisfaction

increased from 73 percent to 85 percent; 24 DOE Teams

received Vice President Gore’s Hammer Award for

improvement efforts and efficiencies; 9 major DOE

Organizations received State Quality Awards; and 31

DOE Organizations received Energy Quality Awards.

The levels of excellence highlighted by this recognition
DOE’s FY 1996 Consolidated Financial Statements

24

By January 1996, completing the development of a system

which aligns strategic and operational planning with

strategic intent, ensures this planning drives resource

allocation, involves regular evaluation of results, and

provides feedback.

underscore the superb quality improvement gains

throughout the Department.

With the implementation of the DOE Strategic

Management System in March 1996, DOE fulfilled its

goal to develop a system that aligns strategic and

operational planning with strategic intent, ensures this

planning drives resource allocation, and provides for

regular evaluation of results and feedback.
Message from the Acting Chief Financial Officer

25

Message from the Acting Chief Financial Officer

I am pleased to present the Department of Energy’s first efforts to

prepare consolidated financial statements and disclose our financial

condition and the results of operations for Fiscal Year 1996.

Previously, ten of the Department’s subunits prepared audited

financial statements for commercial type activities. These ten

separate statements represented only about a quarter of the

Department’s activities and received unqualified opinions from the

auditors in Fiscal Year 1995. Building on that experience, the

Office of Chief Financial Officer has prepared the more comprehensive Departmental statements presented here in accordance

with the requirements of the Office of Management and Budget,

the Chief Financial Officers Act of 1990, and the Government

Management Reform Act of 1994.

The Department of Energy has experienced extraordinary changes in the post-Cold War period, many

of which significantly impact these financial statements. The downsizing of the defense complex is

one example of these changes and has resulted in the write-down of asset values for many of the

Department’s weapons production facilities and the recognition of environmental liabilities related to

legacy wastes generated from years of nuclear weapons production. These changes have challenged

the Department in the field of financial management and have required the diligence, dedication, and

effective use of all our resources to realize the greatest value for every taxpayer dollar spent and

ensure no dollars are spent unwisely or improperly.

The Department is firmly committed to excellence in all aspects of financial management. Under the

current Administration, the Department has begun the long journey to achieving total quality

management in all of its administrative and scientific activities, business-type enterprises, and

regulatory functions. This commitment is dramatically changing the way we do business. The

Department, in embracing the total quality management concept, recognizes that our customers and

employees are the most important resources and strives to actively involve those served in the

planning and decision-making processes inherent to carrying out our mission.

Financial management within the Department, and the Federal government as a whole, is on the

threshold of significant change. The need to significantly reduce the budget deficit severely limits the

financial resources available to carry out Federal programs. Promoting efficiency and economy in the

use of these resources is vital to achieving our national goals, and financial considerations have

become an integral part of the decisional process in carrying out the Department’s mission. The

Department, like other Federal agencies, is currently faced with severe Congressionally imposed

reductions in both funding and staffing. Downsizing, buyouts, and reductions in funding present

extremely difficult challenges as managers and staff strive to do more with less. As a result, the

Department must take advantage of all opportunities to significantly improve the efficiency of our

operations and promote a forward thinking approach to meet our future challenges and commitments.

Our current initiatives place the Department squarely on the path to realizing our operational and

financial goals.

Elizabeth E. Smedley
DOE’s FY 1996 Consolidated Financial Statements

26

For example, in the area of financial management, the Department has initiated a concerted effort to

consolidate nineteen field accounting offices into three financial service centers. The Department has

selected the three financial service centers to be the Albuquerque Financial Service Center in New

Mexico, the Oak Ridge Financial Service Center in Tennessee, and the Capital Accounting Center in

the Washington, D.C. area. This consolidation of accounting activities will result in savings of $17.7

million and 61 full-time equivalents over the next five years. The projected savings resulting from the

accounting consolidation will be realized from operational efficiencies, technological and process

improvements, and the physical consolidation of activities that will further improve financial

management throughout the Department.

Elizabeth E. Smedley

Acting Chief Financial Officer
Financial Overview

27

Financial Overview

This financial overview of the consolidated financial statements contains highlights of significant

balances contained in the consolidated financial statements and related financial performance measures.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS - The Consolidated Statement of Financial Position reflects total assets of $94.0 billion and

primarily consists of the following:

Fund Balances with Treasury of $10.9 billion consist primarily of appropriated funds to pay

current liabilities and finance authorized purchase commitments.

Investments of $6.4 billion consist primarily of monies managed for the Nuclear Waste Fund

and the Uranium Enrichment Decontamination and Decommissioning Fund. Fees paid by

owners and generators of spent nuclear fuel and high-level radioactive waste and fees collected from domestic utilities are deposited in the respective funds to pay current program

costs, with excess funds invested in Treasury securities.

Accounts Receivable of $5.4 billion consist of intragovernmental receivables of $688 million

resulting primarily from reimbursable work performed for other Federal agencies and governmental receivables due from the public of $4.7 billion primarily for Nuclear Waste Fund and

Uranium Enrichment Decontamination and Decommissioning Fund fees.

Stockpile Materials of $39.5 billion consist of crude oil at the Strategic Petroleum Reserve

and special nuclear materials. The Strategic Petroleum Reserve component of $15.2 billion

represents the cost of 574 million barrels of crude oil stored in salt domes, terminals, and

pipelines. The reserve provides a deterrent to the use of oil as a political instrument and

provides an effective response mechanism should a disruption occur. The nuclear materials of

$24.3 billion consist primarily of weapons and related components, including those in the

custody of the Department of the Defense under Presidential Directive, and materials used for

research and development purposes.

Property, Plant, and Equipment of $22.0 billion includes over 120 million square feet of

buildings located on over 2.3 million acres of land. The Department’s property and equipment values have been adjusted to reflect the Department’s changing mission (e.g. downsizing

of the defense complex) and to be in compliance with applicable accounting standards and

guidance. Of particular significance was the implementation of the Financial Accounting

Standard Board (FASB) Emerging Issues Task Force Issue 90-8, Capitalization of Costs to

Treat Environmental Contamination. This guidance requires the expensing of facilities and

equipment that treat, store, or dispose of existing environmental wastes generated by past

operations. This has resulted in a $4.6 billion write-down of facilities and equipment, of

which $1.6 billion occurred during Fiscal Year (FY) 1996.
DOE’s FY 1996 Consolidated Financial Statements

28

Regulatory Assets of $7.2 billion are associated with the Department’s power generation and

management responsibilities. These regulatory assets represent the Bonneville Power

Administration’s (BPA) right to future revenues generated from non-Federal power generating projects in return for BPA’s payment of debt issued to complete these projects.

LIABILITIES - The Consolidated Statement of Financial Position reflects Departmental liabilities

totaling $264.6 billion. The following significant liabilities represent funds or other resources that will

be paid by the Department as a result of transactions or events that have occurred.

Deferred Revenues and Other Credits of $8.4 billion primarily represent the amount of

Nuclear Waste Fund revenues that exceed the Nuclear Waste Fund expenses. Nuclear Waste

Fund revenues are accrued based on fees assessed against owners and generators of high-level

radioactive waste and spent nuclear fuel and are recognized as costs are incurred for Nuclear

Waste Fund activities.

Environmental Liabilities of $228.9 billion represent the Department’s obligation to correct

the environmental damage done while researching, producing, and testing nuclear weapons.

Facilities requiring cleanup include nuclear reactors, chemical processing buildings, metal

machining plants, laboratories, and maintenance facilities where environmental contamination

occurred as a result of their operation. The environmental legacy derived from the process of

producing nuclear weapons includes thousands of contaminated areas and buildings and large

volumes of waste and special nuclear materials requiring treatment, stabilization, and disposal.

The Department’s environmental liability also includes the cost of addressing existing wastes

and those facilities that have been declared surplus, as well as the cost to decontaminate and

decommission facilities still operating. This liability is also significant from a Governmentwide perspective, in that it is one of the largest in the Federal government and is the primary

reason for the deficit Net Position of ($170.5) billion reflected on the Consolidated Statement

of Operations and Changes in Net Position. Additionally, since this liability is substantially

unfunded, it represents significant future funding requirements for the Department.

Pensions and Other Actuarial Liabilities of $6.1 billion represent amounts which the

Department promises to pay for specified benefits to contractor employees having approved

defined benefit pension plans and postretirement benefits other than pensions. The Department has a unique contractual relationship with these contractor employees that makes the

Department ultimately responsible for funding the defined benefit pension and postretirement

benefit plans and any related liabilities. Defined benefit pension plans provide benefits, such as

a percentage of the final average pay for each year of service, and postretirement benefits

other than pensions which include predominantly postretirement health care benefits.
Financial Overview

29

CONSOLIDATED STATEMENT OF OPERATIONS AND CHANGES IN NET POSITION

REVENUES AND FINANCING SOURCES - Total revenues and financing sources consist primarily

of the following:

Appropriated Capital Used of $19.9 billion represents the funds made available to the

Department to perform its mission through congressional appropriations. These appropriations are recognized as financing sources at the time the related expenses are incurred and the

assets are consumed in operations.

Revenues From Goods and Services Provided of $6.3 billion consist of public revenues of

$4.3 billion predominantly from the sale and transmission of electric power and the sale of oil

from the Department’s reserves and intragovernmental revenues of $2.0 billion from work

done for others.

Other Revenues and Financing Sources of $1.0 billion consist primarily of Nuclear Waste

Fund fees assessed, revenues collected for the Federal Energy Regulatory Commission, and

revenues recognized for the Petroleum Pricing Violation Escrow Fund.

EXPENSES - The revenues contained on the Consolidated Statement of Operations and Changes in

Net Position are offset by expenses totaling $33.9 billion, which primarily consist of the following:

Program Expenses of $16.1 billion make up the majority of the Department’s expenses and

are categorized by business lines and explained in detail in the supplementary information

provided after the Notes to the Financial Statements. The fifth business line, Economic

Productivity, cuts across multiple organizational missions, funding levels, and activities and is

therefore included within the other four business lines.

Program Expenses:

 (in billions)

Energy Resources $2.5

Science and Technology $2.4

National Security $4.4

Environmental Quality $6.2

 Business Line Total $15.5

Management and Other $0.6

 Total $16.1

Cost of Goods & Services Provided of $5.2 billion represents costs incurred in generating

the $6.3 billion of public and intragovernmental revenues from goods and services provided.

Unfunded Liability Adjustment of $9.1 billion primarily consists of the net increase in

unfunded environmental baseline estimates and liabilities for the disposition of excess nuclear

materials.

More detailed explanations of these and other balances on the consolidated financial statements are

included in the Notes to the Financial Statements.
DOE’s FY 1996 Consolidated Financial Statements

30

Financial Performance Measures

Receivables Management

The Department fully supports the laws, regulations, and central agency initiatives for improving

Federal credit management and debt collection. The Department’s receivables fall into five major

categories: petroleum pricing violations, power marketing sales, decontamination and

decommissioning fund fees, nuclear waste disposal fees, and all other receivables as shown in

Chart 1. As of September 30, 1996, the Department had $7.2 billion in outstanding debt due from

the public and a related $2.5 billion allowance for uncollectible accounts. This debt due from the

public consists of $4.7 billion in governmental receivables and $2.5 billion in custodial receivables,

with related allowances for uncollectible accounts of $.2 billion and $2.3 billion, respectively. Of this

$7.2 billion amount, approximately $3.2 billion (44 percent) was current (due within 12 months of the

end of the reporting period), and $4.0 billion (56 percent) was noncurrent (not due within 12 months

of the end of the reporting period). The Department’s delinquent accounts receivable totaled $2.4

billion. Of these delinquent receivables, approximately $2.3 billion are from petroleum pricing

violations. These petroleum

pricing violations receivables are

the result of consent agreements

reached with individuals or firms

that violated petroleum pricing

regulations under the Emergency

Petroleum Allocations Act of

1973. The majority of these

receivables are in bankruptcy, or

collection action is being taken

by the Department of Justice.

The Uranium Enrichment

Decontamination and

Decommissioning Fund and

Nuclear Waste Fund receivables

are supported by contracts and

agreements with public utilities

that have been authorized by

legislation. For example, the

Nuclear Waste Policy Act of 1982 requires the Department to assess fees against owners and

generators of high-level radioactive waste and spent nuclear fuel to fund permanent disposal.

Chart 1
Financial Overview

31

Chart excludes the Bonneville Power Administration.

Prompt Payment

The Department’s FY 1996 on-time payment performance percentage rate was 95 percent. This

performance meets the Federal

government goal set by the Office of

Management and Budget (OMB).

The Department has implemented its

Quality Control Program at each

payment center. During the past year,

the Department served on a working

group tasked to rewrite OMB Circular

A-125, to streamline the Prompt

Payment Standards, and to eliminate

superfluous reporting requirements.

Chart 2 displays the Federal

government’s prompt payment goal

and the Department’s

accomplishments for FY 1994, 1995,

and 1996.

Balances of Uncosted Obligations

Significant balances of uncosted

obligations occur when a Federal agency

contracts out much of its appropriated

funds, as does the Department. These

uncosted balances represent the portion

of contract obligations related to goods

and services which have not yet been

delivered. While balances of uncosted

obligations are natural and acceptable,

concern is directed at agencies when

excess uncosted balances are maintained.

The Department’s uncosted obligations

are evaluated and considered in the

budget formulation process. The

General Accounting Office (GAO)

recommended that controls be developed

to ensure that the analysis of uncosted obligations be performed as part of the Department’s financial

management process. As reflected in Chart 3, the Department has taken aggressive actions to

understand what drives uncosted obligation balances, control and reduce these balances, and more

actively consider these resources when determining budget estimates. As a result of the GAO

recommendations, a process improvement group developed new policy to improve the evaluation of

the year-end carryover of uncosted obligated balances for FY 1996.

Chart 2

Chart 3
DOE’s FY 1996 Consolidated Financial Statements

32

Electronic Funds Transfer

The Debt Collection Improvement Act

of 1996 requires the use of Electronic

Funds Transfer for all Federal

payments made after January 1, 1999,

with limited exceptions. The FY 1996

results portrayed in Chart 4

demonstrate the Department’s

commitment to implementing the

Governmentwide mandate to fully

utilize Electronic Funds Transfer for

salary payments.

Timeliness of Travel

The goal for average processing time from

the receipt of a travel voucher to final

payment of the travel voucher is 10 days

or less, as established by OMB. As

Chart 5 shows, the Department has

exceeded that goal and is currently

working to improve the processing time

for travel vouchers from the receipt to final

payment to 3 days. The measure was

included in the Chief Financial Officer

Strategic Plan and demonstrates our

commitment to improve customer service.

Chart excludes the Bonneville Power Administration.

Chart 4

Chart 5

Chart excludes the Bonneville Power Administration.
Financial Overview

33

Limitations to the Financial Statements

The financial statements beginning on page 40 have been prepared to report the

financial position and results of operations of the Department of Energy, pursuant

to the requirements of the Chief Financial Officers Act of 1990 and the Government

Management Reform Act of 1994.

While the statements have been prepared from the books and records of DOE in

accordance with the formats prescribed by the Office of Management and Budget,

the statements are different from the financial reports used to monitor and control

budgetary resources which are prepared from the same books and records.

The statements should be read with the realization that they are for a component of

a sovereign entity, that liabilities not covered by budgetary resources cannot be

liquidated without the enactment of an appropriation, and that payment of all

liabilities other than for contracts can be abrogated by the sovereign entity.
DOE’s FY 1996 Consolidated Financial Statements

34

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Inspector General’s Report on DOE’s Consolidated Financial Statements

35
DOE’s FY 1996 Consolidated Financial Statements

36
Inspector General’s Report on DOE’s Consolidated Financial Statements

37
DOE’s FY 1996 Consolidated Financial Statements

38
Inspector General’s Report on DOE’s Consolidated Financial Statements

39
DOE’s FY 1996 Consolidated Financial Statements

40

Consolidated Statement of Financial Position (in millions)

as of September 30, 1996

1996

ASSETS

Agency Assets

 Intragovernmental

 Fund Balance with Treasury (Note 2) $10,911

 Investments (Note 3) 6,402

 Accounts Receivable (Note 4) 688

 Governmental

 Investments (Note 3) 72

 Accounts Receivable, Net (Note 4) 4,668

 Stockpile Materials (Note 5)

 Strategic Petroleum Reserve 15,224

 Nuclear Materials 24,264

 Property and Equipment, Net (Note 6) 22,049

 Regulatory Assets (Note 7) 7,197

 Other Agency Assets 1,640

 Total Agency Assets $93,115

Custodial Assets (Note 8) 918

 Total Assets $94,033

LIABILITIES

Liabilities Covered by Budgetary Resources

 Intragovernmental Liabilities

 Accounts Payable $776

 Debt (Note 9) 2,456

Appropriated Capital Owed to Treasury (Note 10) 3,797

 Governmental Liabilities

 Accounts Payable (Note 11) 4,887

 Debt (Note 7) 7,197

 Deferred Revenue and Other Credits (Note 12) 8,417

 Funded Environmental Liabilities (Note 13) 1,165

 Total Liabilities Covered by Budgetary Resources $28,695

Governmental Liabilities Not Covered by Budgetary Resources

 Environmental Liabilities (Note 13) 227,708

 Pension and Other Actuarial Liabilities (Note 14) 6,135

 Other Governmental Liabilities (Note 15) 2,041

 Contingencies (Note 16)

 Total Liabilities Not Covered by Budgetary Resources $235,884

 Total Liabilities $264,579

NET POSITION

Unexpended Appropriations (Note 17) 5,841

Invested Capital 56,714

Cumulative Results of Operations 2,690

Future Funding Requirements (235,791)

 Total Net Position ($170,546)

 Total Liabilities and Net Position $94,033

The accompanying notes are an integral part of these financial statements.
Principal Financial Statements

41

Consolidated Statement of Operations and Changes in Net Position (in millions)

for the Fiscal Year Ended 1996

1996

REVENUES AND FINANCING SOURCES

Appropriated Capital Used $19,907

Revenues from Goods and Services Provided (Note 18)

Public 4,298

 Intragovernmental 1,958

Interest 520

Other Revenues and Financing Sources (Note 19) 1,019

Less Receipts Transferred to Treasury & Other Agencies (Note 20) (1,691)

Nuclear Waste Fund Deferred Revenue Adjustment (Note 12) (962)

Total Revenues and Financing Sources $25,049

EXPENSES

Program Expenses

 Energy Resources 2,495

 Science and Technology 2,417

 National Security 4,377

 Environmental Quality 6,215

 Management and Other Activities 637

Cost of Goods and Services Provided (Note 18)

 Public 3,299

 Intragovernmental 1,882

Depreciation 1,907

Other Expenses (Note 21) 1,621

Unfunded Liability Adjustments (Note 22) 9,051

Total Expenses $33,901

Shortage of Revenues and Financing Sources Over Total Expenses ($8,852)

CHANGES IN NET POSITION

Net Position, Beginning Balance, as Stated ($127,377)

Prior Period Adjustments (Note 23) (30,422)

Net Position, Beginning Balance, as Adjusted ($157,799)

Non-Operating Changes (3,895)

Excess (Shortage) of Revenues and

 Financing Sources Over Total Expenses (8,852)

Net Position ($170,546)

The accompanying notes are an integral part of these financial statements.
DOE’s FY 1996 Consolidated Financial Statements

42

1. Significant Accounting Policies

A. Basis of Presentation

These consolidated financial statements have been

prepared to report the financial position and results of

operations of the U.S. Department of Energy (DOE).

They have been prepared from the books and records of

DOE based on accounting principles and standards

recommended by the Federal Accounting Standards

Advisory Board. These accounting standards are generally accepted accounting principles for the Federal

government and consist of a hierarchy of individual

standards published by the Joint Financial Management

Improvement Program, Office of Management and

Budget (OMB), in OMB Bulletin No. 94-01, Form and

Content of Agency Financial Statements; DOE accounting guidance; and accounting principles published by

authoritative standard setting bodies.

B. Description of Reporting Entity

DOE is a cabinet level agency of the Executive Branch of

the U.S. Government. DOE’s headquarters organizations

are located in Washington, D.C. and Germantown, MD

and consist of an executive management structure that

includes: the Secretary, the Deputy Secretary, and the

Under Secretary; nine Secretarial staff organizations; and

program organizations that provide technical direction

and support for DOE’s principal programmatic missions.

DOE also includes the Federal Energy Regulatory

Commission, which is an independent regulatory organization responsible for setting rates and charges for the

transportation and sale of natural gas and for the transmission and sale of electricity and the licensing of

hydroelectric power projects.

DOE has a complex field structure comprised of operations offices, field offices, power marketing administrations, laboratories, and other facilities. The majority of

DOE’s environmental cleanup, energy research and

development, and testing and production activities are

carried out by major contractors. These contractors

operate, maintain, or support DOE’s government-owned

facilities on a day-to-day basis and provide other special

work under the direction of field organizations.

These contractors have unique contractual relationships

with DOE. In most cases, their chart of accounts and

accounting systems are integrated with DOE’s accounting

system through a home office-branch office type of

arrangement. Additionally, DOE is ultimately responsible for funding certain defined benefit pension plans, as

well as post retirement benefits such as medical care and

life insurance, for the employees of these contractors. As

a result, these statements reflect not only the costs

incurred by these contractors, but also include certain

assets (i.e., employee advances and prepaid pension costs)

and liabilities (i.e., accounts payable, accrued expenses

including payroll and benefits, and pension and other

actuarial liabilities) that would not be reflected in the

financial statements of other Federal agencies that do not

have these unique contractual relationships.

C. Basis of Accounting

Transactions are recorded on an accrual accounting basis

and a budgetary basis. Under the accrual method,

revenues are recognized when earned, and expenses are

recognized when a liability is incurred, without regard to

receipt or payment of cash. Budgetary accounting

facilitates compliance with legal constraints and controls

over the use of Federal funds. All material intra-agency

balances and transactions have been eliminated in

consolidation.

D. Revenues and Other Financing Sources

DOE receives the majority of the funding needed to

perform its mission through congressional appropriations.

These appropriations may be used, within statutory limits,

for operating and capital expenditures. Appropriations

are recognized as a financing source at the time the

related operational or administrative expenses are

incurred. Appropriations expended for property, plant

and equipment are recognized as financing sources when

the asset is consumed in operations. Revenues are

recognized when earned (i.e., goods have been delivered

or services rendered.) (See Notes 18 and 19)

E. Funds with Treasury and Cash

Funds with Treasury represent appropriated funds, trust

funds, and revolving funds that are available to pay

current liabilities and finance authorized purchase

commitments. Cash balances held outside Treasury

represent trust fund balances held in minority financial

institutions, letter of credit collateral balances, and

imprest cash amounts. (See Note 2)

F. Investments

Investments in Treasury securities for the Nuclear Waste

Fund are classified as available for sale and are reported

at fair value in accordance with Financial Accounting

Standard No. 115, Accounting for Certain Investments in

Debt and Equity Securities. All other DOE investments

are reported at cost net of amortized premiums or discounts, as it is DOE’s intent to hold the investments to

maturity. Premiums or discounts are amortized using the

effective interest method. (See Note 3)
Notes to the Financial Statements

43

G. Accounts Receivable, Net of Allowance

The amounts due for governmental (non-Federal) receivables are stated net of an allowance for uncollectible

accounts. The estimate of the allowance is based on past

experience in the collection of receivables and an analysis

of the outstanding balances. (See Note 4)

H. Property, Plant and Equipment

Property, plant and equipment that are purchased,

constructed, or fabricated in-house, including major

modifications or improvements, are capitalized if they

have an anticipated service life of 2 years or more and

cost $5,000 or more. Costs of construction are capitalized

as construction work in process. Upon completion or

beneficial occupancy, the cost is transferred to the

appropriate property account. Property, plant and

equipment related to environmental management facilities

processing DOE’s environmental legacy wastes are not

capitalized. (See Notes 6 and 23)

Depreciation expense is generally computed using the

straight line method throughout DOE. The units of

production method may be used only in special cases

where applicable, such as depreciating automotive

equipment on a mileage basis and construction equipment

on an hourly use basis. The ranges of service lives are

generally as follows:

Structures 25 - 40 years

ADP Software 5 - 20 years

Equipment 5 - 45 years

I. Liabilities

Liabilities represent funds or other resources likely to be

paid by DOE as a result of a transaction or event that has

already occurred. However, no liability can be paid by

DOE absent an authorized appropriation. Liabilities for

which an appropriation has not been enacted are, therefore, classified as unfunded liabilities, and there is no

certainty that the appropriations will be enacted. Also,

liabilities of DOE arising from other than contracts can be

abrogated by the Government, acting in its sovereign

capacity.

J. Accrued Annual, Sick and Other Leave

Employee annual leave is accrued as it is earned, and the

accrual is reduced annually for actual leave taken and

increased for leave earned. Each year, the accrued annual

leave balance is adjusted to reflect the latest pay rates. To

the extent that current or prior year appropriations are not

available to fund annual leave earned but not taken,

funding will be obtained from future financing sources.

Sick leave and other types of nonvested leave are expensed as taken.

K. Retirement Plans

Federal Employees

There are two retirement systems for Federal employees.

DOE employees hired prior to January 1, 1984 may

participate in the Civil Service Retirement System

(CSRS), to which DOE makes matching contributions

equal to 7 percent of pay. On January 1, 1984, the

Federal Employees Retirement System (FERS) went into

effect pursuant to Public Law 99-335. Most employees

hired after December 31, 1983, are automatically covered

by FERS and Social Security. Employees hired prior to

January 1, 1984, elected to either join FERS and Social

Security or remain in CSRS. A primary feature of FERS

is that it offers a savings plan to which DOE automatically contributes 1 percent of pay and matches any

employee contribution up to an additional 4 percent of

pay. For most employees hired since December 31, 1983,

DOE also contributes the employer’s matching share for

Social Security. DOE does not report CSRS or FERS

assets, accumulated plan benefits, or unfunded

liabilities, if any, applicable to its employees. Reporting

such amounts is the responsibility of the Office of

Personnel Management and the Federal Employees

Retirement System.

Contractor Employees

Most DOE contractors have a defined benefit pension

plan under which they promise to pay specified benefits,

such as a percentage of the final average pay for each year

of service. DOE costs under the contracts include

reimbursement of annual employer contributions to the

pension plans. Each year, an amount is calculated for

employers to contribute to the pension plan to ensure the

plan assets are sufficient to provide for the full accrued

benefits of contractor employees in the event that the plan

is terminated. The level of contributions is dependent on

actuarial assumptions about the future, such as the

interest rate, employee turnover and deaths, age of

retirement, and salary progression. (See Note 14)

L. Comparative Data

Comparative data for the prior year have not been

presented because this is the first year for which DOE has

issued financial statements on a consolidated basis. In

future years, comparative data will be presented in order

to provide an understanding of changes in DOE’s

financial position and operations.
DOE’s FY 1996 Consolidated Financial Statements

44

M. Use of Estimates

DOE has made certain estimates and assumptions relating

to the reporting of assets and liabilities and the disclosure

of the contingent assets and liabilities to prepare these

consolidated financial statements. Actual results could

differ from these estimates.

2. Fund Balance with Treasury (in millions)

 -------Unobligated------- Investments Total Fund

 in Treasury Balances

 Obligated Unrestricted Restricted Securities With Treasury

Agency Funds

Revolving funds ($16) $262 $3 $249

Appropriated funds 7,992 1,859 561 10,412

Special funds 271 107 5,652 ($5,790) 240

Deposit funds 10 10

 Total agency funds $8,247 $2,228 $6,226 ($5,790) $10,911

Custodial Funds

Trust funds 12 12

Special funds 3 3

Deposit funds 22 22

 Total custodial funds $12 $25 $37

 Total funds in Treasury $8,259 $2,228 $6,251 ($5,790) $10,948

The unobligated restricted funds primarily represent revenues that have been collected and are being held until such

time that Congress appropriates the funds to DOE or directs DOE to return the funds to Treasury. The appropriated

funds represent primarily revenues earned from the sale of oil prior to FY 1994 from the Naval Petroleum and Oil

Shale Reserves which Congress has not made available to DOE. The special and deposit funds represent revenues from

the Nuclear Waste Fund, Uranium Enrichment Decontamination and Decommissioning Fund, and the Petroleum

Pricing Violation Escrow Fund.

3. Investments (in millions)

 Amortized

 (Premium) Investments

 Cost Market Value Discount Net

Agency Assets

 Intragovernmental Non-Marketable Securities

 Nuclear Waste Fund $6,102 $5,897 ($129) $5,897

 Uranium Enrichment D&D Fund 486 482 (2) 484

 Great Plains Gasification Plant Trust Fund 21 21 21

 Subtotal $6,609 $6,400 ($131) $6,402

 Governmental Marketable Securities

 Du Pont pension receipts 72 72 72

 Total agency investments $6,681 $6,472 ($131) $6,474

Custodial Assets

 Intragovernmental Non-Marketable Securities

 Petroleum Pricing Escrow Fund 394 397 3 397

 Low Level Radioactive Waste Fund 4 4 4

 Subtotal $398 $401 $3 $401

 Governmental Marketable Securities

 Petroleum Pricing Violation Escrow Fund 200 200 200

 Total custodial investments $598 $601 $3 $601

 Total investments $7,279 $7,073 ($128) $7,075
Notes to the Financial Statements

45

Pursuant to statutory authorizations, DOE invests monies

in Treasury securities and commercial certificates of

deposit which are secured by the Federal Deposit Insurance Corporation. DOE’s investments primarily involve

the Nuclear Waste Fund and the Uranium Enrichment

Decontamination and Decommissioning (D&D) Fund.

Fees paid by owners and generators of spent nuclear waste

and fees collected from domestic utilities are deposited

into the respective funds. Funds in excess of those needed

to pay current program costs are invested in Treasury

securities. DOE also has non-Federal securities resulting

from an over funded pension plan of a former contractor

and the 1988 sale of the Great Plains Coal Gasification

Project to a private concern.

DOE custodial investments are primarily Petroleum

Pricing Violation Escrow Fund receipts collected as a

result of consent agreements reached with individuals or

firms that violated petroleum pricing regulations during

4. Accounts Receivable (in millions)

Receivable Allowance Net

Agency Receivables

Intragovernmental

 Accounts receivable $569 $569

 Interest receivable 114 114

 Advances 5 5

 Subtotal $688 $688

Governmental

 Nuclear Waste Fund receivables 2,216 2,216

 Uranium Enrichment D&D Fund receivables 1,790 1,790

 Power marketing administrations’ receivables 339 ($2) 337

 Advances and prepayments 66 66

 Credit program receivables 63 (26) 37

 Other 346 (124) 222

 Subtotal $4,820 ($152) $4,668

 Total agency receivables $5,508 ($152) $5,356

Custodial Receivables

 Petroleum Pricing Violation Escrow Fund 2,492 (2,318) 174

 Total receivables $8,000 ($2,470) $5,530

the 1970s. These receipts are invested in Treasury

securities and certificates of deposit at minority financial

institutions pending determination by DOE as to how to

distribute the fund balance.

Except for the Nuclear Waste Fund, DOE’s investments

are valued at the amortized acquisition cost. The Nuclear

Waste Fund investments are reported at fair value in

accordance with Financial Accounting Standard No. 115,

Accounting for Certain Investments in Debt and Equity

Securities, which requires the valuation of investments at

fair value when there is an intent to sell the securities

prior to maturity. Based on past investment practices, the

Nuclear Waste Fund’s Treasury notes are routinely

redeemed prior to maturity in order to maximize the

return on the Fund’s investments and minimize uninvested cash balances. As a result, the Nuclear Waste

Fund’s investment balance includes an unrealized holding

loss of $76 million.

Intragovernmental accounts receivable primarily represent

amounts due from other Federal agencies for reimbursable

work performed pursuant to the Economy Act, Atomic

Energy Act, and other statutory authority. Interest

receivable represents earned revenues on investments held

in Treasury securities.

Governmental receivables represent amounts due primarily for Nuclear Waste Fund (NWF) and Uranium

Enrichment Decontamination and Decommissioning

(D&D) Fund fees. NWF receivables are supported by

contracts and agreements with public utilities that

contribute resources to the fund. D&D Fund receivables

from public utilities are supported by public law. Other

receivables due from the public include reimbursable

work billings and other amounts related to trade receivables, overpayments, and other miscellaneous receivables.

Custodial receivables represent amounts due as a result of

consent agreements reached with individuals or firms that

violated petroleum pricing regulations during the 1970s.

The majority of these receivables are with individuals or

firms that are in bankruptcy, or collection action is being

taken by the Department of Justice. Many cases handled

by the Department of Justice will result in complete writeoffs or settlement agreements for amounts significantly

less than the original consent agreement. Allowance

accounts have been established to reflect the realistic

potential for recovery of amounts owed.
DOE’s FY 1996 Consolidated Financial Statements

46

5. Stockpile Materials, Net

Stockpile materials consist of crude oil held in the

Strategic Petroleum Reserve and nuclear materials. The

Strategic Petroleum Reserve consists of 574 million

barrels of crude oil stored in salt domes, terminals, and

pipelines. The reserve provides a deterrent to the use of

oil as a political instrument and provides an effective

response mechanism should a disruption occur. Oil from

the reserve may be sold only with the approval of Congress and the President of the United States. Congress

authorized the sale of approximately 9.6 million barrels of

oil from the reserve in FY 1997.

6. Property, Plant and Equipment, Net (in millions)

Acquisition Accumulated Net Book

 Cost Depreciation Value

Land and land rights $500 ($4) $496

Structures and facilities 28,859 (16,922) 11,937

ADP software 78 (63) 15

Equipment 16,035 (10,143) 5,892

Natural resources 11 (2) 9

Construction work in process 3,700 3,700

 Total property, plant, and equipment $49,183 ($27,134) $22,049

Nuclear materials include weapons and related components, including those in the custody of the Department

of the Defense under Presidential Directive, and materials

used for research and development purposes.

Stockpile materials are recorded at historical costs in

accordance with Statement of Federal Financial Accounting Standard No. 3, except for certain nuclear materials

which have been identified as surplus or excess to DOE’s

needs. These nuclear materials are recorded at their net

realizable value.

7. Regulatory Assets and Related Public Debt

DOE’s power marketing administrations record certain

assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for the Effect of

Certain Types of Regulation. The provisions of SFAS No.

71 require that regulated enterprises reflect rate actions of

the regulator in their financial statements, when appropriate. These rate actions can provide reasonable assurance

of the existence of an asset, reduce or eliminate the value

of an asset, or impose a liability on a regulated enterprise.

The Bonneville Power Administration (BPA) has acquired

all or part of the generating capability of five nuclear

power plants as well as several hydroelectric projects. The

government’s contracts with these utilities require BPA to

pay all or part of the annual projects’ budgets, including

debt service, whether or not all the projects are completed. Because these projects’ current and future costs

can be recovered through BPA’s electricity rates, the

Statement of Financial Position includes a regulatory

asset and related debt of $7,106 million for these contracts. BPA has also recorded a $91 million asset and

related debt for the unpaid balance of its share of

estimated decommissioning costs for Trojan’s nuclear

plant.

8. Custodial Assets (in millions)

 Funds in Accounts Petroleum

 Treasury Investments Receivable Reserve Total

Petroleum Pricing Violation Escrow Fund $597 $174 $771

Oil held in Strategic Petroleum Reserve for DOD $106 106

Other custodial assets $37 4 41

 Total custodial assets $37 $601 $174 $106 $918
Notes to the Financial Statements

47

Petroleum Pricing Violation Escrow Fund

Pursuant to the Emergency Petroleum Allocations Act of

1973, DOE is responsible for recovering oil pricing

overcharges and making restitution to injured parties.

Monies received are invested in Treasury securities and

certificates of deposit with minority financial institutions

pending disbursement to injured parties or returned to

Treasury.

term debt exceeds the rate which could be obtained

currently. As a result, the fair value of BPA’s long-term

debt, based on discounting future cash flows using rates

offered by Treasury as of September 30, 1996, for similar

maturities, exceeds carrying value by approximately $209

million. BPA’s policy is to refinance debt that is callable

when associated benefits exceed costs of refinancing.

Oil Held in Strategic Petroleum Reserve for DOD

The FY 1993 Defense Appropriations Act authorized

DOE to acquire, transport, store, and prepare for ultimate

drawdown of crude oil for the Department of Defense

(DOD). The crude oil purchased with DOD funding is

commingled with DOE stock and is held for DOD’s

future use.

Other Custodial Assets

Other custodial assets include funds in various Treasury

deposit and special receipt accounts which are not

available to fund DOE’s operations.

9. Debt (Intragovernmental)

To finance its capital programs, the Bonneville Power

Administration is authorized to issue to Treasury up to

$3,750 million of interest-bearing debt with terms and

conditions comparable to debt issued by U.S. government

corporations. A portion ($1,250 million) is reserved for

conservation and renewable resource loans and grants. At

September 30, 1996, $2,456 million of this debt was

outstanding. The average interest rate of BPA’s long10. Appropriated Capital Owed to Treasury

Appropriated capital owed to Treasury represents the

balance of appropriations provided to DOE’s power

marketing administrations for construction and operation

of power projects which will be repaid to Treasury. The

amount owed also includes accumulated interest on the

net unpaid Federal investment in the power projects. The

Federal investment in these facilities is to be repaid to

Treasury within 50 years from the time the facilities are

placed in service or are commercially operational.

Replacements to Federal investments are generally to be

repaid over their expected useful service lives. There is

no requirement for repayment of a specific amount of

Federal investment on an annual basis.

Each of the power marketing administrations, except the

Bonneville Power Administration, receives an annual

appropriation to fund operation and maintenance expenses. These appropriations totaled $300 million in

FY 1996. These appropriated funds are repaid to Treasury from the revenues generated from the sale of power

and transmission services. To the extent that funds are

not available for payment, such unpaid annual net deficits

become payable from the subsequent years’ revenues prior

to any repayment of Federal investment. DOE treats these

appropriations as a borrowing from Treasury, and as

such, the Statement of Operations and Changes in Net

Position does not reflect these funds as a financing source.

DOE’s financial statements do not reflect the Federal

investment in power generating facilities owned by the

U.S. Department of Defense, Army Corps of Engineers;

the U.S. Department of Interior, Bureau of Reclamation;

and the U.S. Department of State, International Boundary

and Water Commission. DOE’s power marketing

administrations are responsible for collecting and remitting to Treasury revenues resulting from the sale of

hydroelectric power generated by these facilities.

11. Governmental Accounts Payable (in millions)

Accrued payroll and benefits $748

Accounts payable and other accrued expenses 3,230

Petroleum Pricing Violation Escrow Fund balance payable to injured parties 719

Contract holdbacks 56

Other 134

 Total $4,887
DOE’s FY 1996 Consolidated Financial Statements

48

12. Deferred Revenues and Other Credits (in millions)

Nuclear Waste Fund deferred revenues $8,205

Advances 160

Petroleum Pricing Violation Escrow Fund 52

Total deferred revenues and other credits $8,417

Nuclear Waste Fund revenues are accrued based on fees

assessed against owners and generators of high-level

radioactive waste and spent nuclear fuel and interest

accrued on investments in Treasury securities. These

revenues are recognized as a financing source as costs are

incurred for Nuclear Waste Fund activities. Annual

adjustments are made to defer revenues that exceed the

Nuclear Waste Fund expenses. The FY 1996 deferred fee

adjustment totaled $962 million.

13. Environmental Liabilities (in millions)

Legacy wastes and surplus facilities:

 FY 1996 BEMR mid-range estimate $226,950

 Adjustments:

 Additional decommissioning liability for Y-12 weapons plant 2,253

 Portion attributable to future operations (20,547)

 FY 1996 legacy waste expenditures (6,518)

 Adjusted BEMR liability $202,138

 Dispositioning of excess plutonium 2,100

 Dispositioning of excess highly enriched uranium waste 592

 Deactivation and decommissioning of inactive naval reactors facilities 833

 Nuclear Waste Fund disposal fees 1,071

 Total legacy waste and surplus facilities liability $206,734

Stabilization, deactivation and decommissioning of active facilities 22,139

 Total environmental liabilities $228,873

 Amount funded by current appropriations (1,165)

 Total unfunded environmental liabilities $227,708

During World War II and the Cold War, the United States

developed a massive industrial complex to research,

produce, and test nuclear weapons. The nuclear weapons

complex included nuclear reactors, chemical processing

buildings, metal machining plants, laboratories, and

maintenance facilities that manufactured tens of thousands of nuclear warheads and conducted more than one

thousand nuclear explosion tests.

At all sites where these activities took place, some

environmental contamination occurred. In this regard,

the treatment and storage of radioactive and chemical

waste resulted in contamination of soil, surface water, and

groundwater and an enormous backlog of waste and

dangerous materials. The environmental legacy derived

from the process of producing nuclear weapons includes

thousands of contaminated areas and buildings and large

volumes of waste and special nuclear materials requiring

treatment, stabilization, and disposal. Approximately

one-half million cubic meters of radioactive high-level,

mixed, and low-level waste must be stabilized, safeguarded, and dispositioned, including a quantity of

plutonium sufficient to fabricate thousands of nuclear

weapons.

DOE’s environmental liability is estimated at almost $229

billion. This estimate includes the cost of addressing

existing (legacy) wastes and those facilities that have been

declared surplus now or will be surplus prior to October

1998. In addition, DOE’s environmental liabilities

include stabilization, deactivation, and decommissioning

costs related to facilities that are still operating and

currently have no scheduled shutdown date.

Legacy Wastes and Surplus Facilities

Baseline Environmental Management Report Estimate

DOE manages one of the largest environmental programs

in the world -- with more than 150 sites in more than 30

states and Puerto Rico. The primary focus of the program

is to reduce health and safety risks from radioactive waste

and contamination resulting from production, development, and testing of nuclear weapons.

As required by the FY 1994 National Defense Authorization Act, DOE prepares an annual Baseline Environmental Management Report (BEMR) on the

activities and potential costs required to address the
Notes to the Financial Statements

49

waste, contamination, and surplus nuclear facilities that

are the responsibility of DOE’s Office of Environmental

Management (EM).

The FY 1996 BEMR base-case estimate of the life-cycle

costs for DOE’s environmental management program

ranges from $189 to $265 billion in constant 1996

dollars, with a mid-range estimate of $227 billion. The

estimate begins in FY 1996 and ends in approximately

2070, when environmental activities are projected to be

substantially completed. The mid-range estimate represents the life-cycle costs for all site specific activities and

projects identified in the Baseline Report. The upper and

lower ranges were estimated using a probabilistic analysis

of each site’s evaluation of levels of confidence in their

base-case estimates.

During the latter part of FY 1996, DOE embarked on a

new vision for addressing the legacy of the Cold War and

disposing of nuclear materials and waste. The vision is

the clean up of most of the Environmental Management

nuclear sites (except for some waste streams at a small

number of sites) within 10 years, while complying with

compliance agreements and other legal obligations as they

evolve over the 10-year period. Strategically, the 10-year

plan, which may result in cost savings from the BEMR

estimate, will be accomplished through: receipt of stable

annual appropriations; enhanced assessment and

remediation strategies; use of innovative technologies;

accelerated disposal of inventoried waste; shared use of

waste treatment and disposal capabilities; reduced cost of

on-site treatment and disposal capabilities; retention of

institutional control; reinvestment of savings back into the

program; and program efficiencies.

Notwithstanding this new direction, estimates associated

with the 10-year plan have not replaced the BEMR

estimate in the FY 1996 financial statements, as the 10-

year site cleanup plans and related estimates are still

being refined and verified.

In FY 1996, DOE’s environmental liability related to the

BEMR estimate totaled more than $202 billion, which

was based on the BEMR mid-range estimate less net

adjustments of $25 billion. These adjustments included

the following:

• a reduction of $20,547 million representing the

amount included in the mid-range estimate for costs

associated with processing future waste from ongoing

operations;

• a reduction of $6,518 million representing the cost of

cleanup activities performed by DOE during

FY 1996; and

• an increase of $2,253 million for additional

decommissioning costs at the Y-12 weapons plant

which were omitted from the FY 1996 BEMR

estimate in error.

The BEMR cost projections currently exceed budget

availability. The projected budget target (as of October

1995), based on larger Federal budget realities, indicates

that the environmental management program will be

funded at approximately $5.5 billion in annual funding

(in current dollars) by the year 2000. After accounting for

inflation, this number equates to $4.9 billion in constant

1996 dollars. The difference between the assumed

funding for the base case estimate and the funding target

amounts to $27 billion over a 25-year period. This

shortfall could necessitate delays or shifts of work scope

in the environmental program that may result in

significant cost growth in out years.

Estimating the cost of DOE’s environmental cleanup

liability requires making assumptions about future

activities and is inherently uncertain. The future course

of DOE’s environmental management program will

depend on a number of fundamental technical and policy

choices, many of which have not been made. Ultimately,

these decisions will be made on the basis of fulfilling

Congressional mandates, regulatory direction, and

stakeholder input.

The cost and environmental implications of alternative

choices can be profound. For example, many

contaminated sites and facilities could be restored to a

pristine condition, suitable for any desired use; they could

also be restored to a point where they pose no near-term

health risks to surrounding communities but are

essentially surrounded by fences and left in place.

Achieving pristine conditions would have a higher cost

but may or may not warrant the costs and potential

ecosystem disruption or be legally required.

The following key assumptions were used in estimating

the environmental liability:

• DOE has identified approximately 10,500 potential

release sites from which contaminants could migrate

into the environment. Although virtually all of these

sites have been at least partially characterized, final

remedial action and/or regulatory decisions have not

been made for most sites. Site specific assumptions

regarding the amount and type of contamination and

the remediation technologies that will be utilized

were used in estimating the environmental restoration

costs. These site specific assumptions are described

in Volumes II and III of the 1996 Baseline Report.

• The Waste Isolation Pilot Plant will open in 1998. In

addition, the first geological repository for high-level

radioactive waste will open in 2010. At that time, it
DOE’s FY 1996 Consolidated Financial Statements

50

will accept spent nuclear fuel from commercial

utilities. In 2016, the repository will begin accepting

defense high-level waste and will begin accepting

DOE-owned fuel shortly thereafter.

• Only existing technologies, such as pumping and

treating groundwater, are assumed to be available for

estimating cleanup costs. Estimates were based on

remedies considered technically and environmentally

reasonable and achievable by local project managers

and appropriate regulatory authorities.

• Environmental cleanup will be considered

substantially complete when all sites have been

remediated and when wastes generated from previous

activities and from remediation and stabilization

activities are safely disposed.

• Projects with no current feasible remediation

approach are excluded from the estimate. The cost

estimate would be higher if some remediation were

assumed for these areas for which complete cleanup

is not technically feasible with existing technologies.

However, because no effective remedial technology

could be identified, no basis for estimating cost was

available. Significant projects excluded are:

- nuclear explosion test areas (e.g., Nevada Test

Site);

- large surface water bodies (e.g., Clinch and

Columbia rivers); and

- most groundwater (even with treatment, future

use will remain restricted).

• Costs related to the disposition of depleted uranium

hexafluoride (UF-6) are excluded from the estimate.

DOE is assessing strategies for long-term

management of approximately 560,000 metric tons of

depleted UF-6 and plans to issue a draft

programmatic environmental impact statement in

FY 1998. DOE estimates that, as of

September 30, 1996, the cost of depleted UF-6

disposition will range from $1.3 billion to $3.1

billion, with a probable cost of $1.4 billion, excluding

adjustments for inflation after September 30, 1995.

However, the extent to which DOE’s stockpile of

depleted UF-6 will require disposal is dependent on

restrictions on the use of this material for military

purposes and on other alternative uses.

In addition to the assumptions and exclusions identified

above, other factors affect the certainty of the BEMR

estimate. Individual project cost estimates include

anticipated productivity gains. While DOE was

successful in reducing costs through productivity savings

in FY 1996, the extent to which such reductions will

continue is uncertain. The length of the remediation

program is also sufficient to introduce a variety of

uncertainties into any cost and schedule estimate. In

addition to the above factors, the BEMR estimate was

calculated in constant FY 1996 dollars rather than future

cash flows, and potential cost increases caused by future

inflation could result in costs that are substantially higher

than the recorded liability.

The base-case cost estimate was constructed with data

provided primarily by the field offices and sites. The cost

and schedules were based on meeting existing compliance

agreements, including milestones for as long as they were

established, consistent with existing Federal, State and/or

local statutes and/or regulations. Information included

cost and schedule estimates for environmental restoration;

nuclear material and facility stabilization; and waste

treatment, storage, and disposal activities at each

installation. It also includes costs for related activities

such as landlord responsibilities, program management,

and legally prescribed grants for participation and

oversight by Native American tribes and regulatory

agencies.

More detailed information concerning DOE’s

methodology for estimating the environmental

management program costs can be found in the 1996

Baseline Environmental Management Report available to

the public from the U.S. Department of Commerce,

Technology Administration, National Technical

Information Service, Springfield, VA 22161. (703) 487-

4650.

Dispositioning of excess plutonium

The Nuclear Weapons Council declared and the Secretary

of Energy announced that 38.2 metric tons of weapons

grade plutonium are excess to national security needs.

DOE has considered a variety of disposition

methodologies for this excess material. In December

1996, DOE selected a preferred alternative for the storage

and disposition of the excess plutonium. The preferred

alternative is to reduce, over time, the number of locations

where the various forms of plutonium are stored, while

the preferred alternative for disposition is to pursue a

strategy that allows for immobilization of excess

plutonium in glass or ceramic forms and burning of the

excess material as mixed oxide fuel in existing reactors.

DOE recorded a $2.1 billion unfunded liability in

FY 1996 to recognize the estimated cost in constant 1996

dollars of the preferred alternative. A formal record of

decision regarding the storage and disposition

methodology was announced by the Secretary of Energy

in January 1997.
Notes to the Financial Statements

51

Dispositioning of excess highly enriched uranium waste

The Nuclear Weapons Council declared and the Secretary

of Energy announced that 174.3 metric tons of DOE’s

highly enriched uranium (HEU) were excess to national

security needs. Most of this material will be blended for

sale as low-enriched uranium (LEU) and used over time

as commercial nuclear reactor fuel to recover its value.

Material that cannot be economically recovered will be

blended to LEU for disposal as low-level waste. At least

26.1 metric tons of the excess HEU will be disposed of as

waste. DOE recorded a $592 million unfunded liability in

FY 1996 for the disposition of the HEU estimated to be

waste.

Deactivation and decommissioning of inactive naval

reactors facilities

Deactivation and decommissioning liabilities totaling

$833 million for inactive naval facilities represent

anticipated remediation costs for those facilities at the

Pittsburgh and Schnectady Naval Reactors Offices that

have ceased operations. The methodology used for

estimating the environmental liabilities for these facilities

was similar to the approach used in estimating the

liabilities for active facilities, in that experiences of

similar types of facilities further along in the

decommissioning process were used as a basis for

determining the estimate.

Nuclear Waste Fund Fees

The Nuclear Waste Policy Act of 1982 established DOE’s

responsibility to provide for permanent disposal of the

nation’s high-level radioactive waste and spent nuclear

fuel. The Act requires that owners and generators of

nuclear waste pay the full cost of the program and, to that

end, establish a fee which DOE must collect and annually

assess to determine its adequacy.

To date, no agreement has been reached for payment of

fees and interest to the Nuclear Waste Fund (NWF) for

DOE’s defense high-level waste share of costs. As of

September 30, 1996, DOE has paid or funded $527

million of its share of costs. DOE has recorded a $1,071

million unfunded liability of as of September 30, 1996, for

the balance owed to the NWF.

Stabilization, deactivation, and decommissioning of

active facilities

Environmental liabilities for active facilities represent

anticipated remediation costs for those facilities that are

conducting ongoing operations but will ultimately require

stabilization, deactivation, and decommissioning. The

total estimated remediation cost was accrued up front

rather than being allocated over the lives of the assets, as

the cost will not be recovered through user charges. DOE

recorded a $22,139 million liability which is considered

the best cost estimate within the $13.8 billion to $37.8

billion range for expected environmental costs at 32 sites.

This estimate is not based on costs determined by

remediation/feasibility studies performed at the active

sites. Rather, similar BEMR site conditions were used as

a basis for the estimate. In this regard, BEMR cost

models and data were used to extrapolate stabilization,

deactivation, and decommissioning costs for

contaminated active facilities and structures not included

in the BEMR.

14. Pension and Other Actuarial Liabilities (in millions)

Contractor pension plans $204

Contractor postretirement benefits other than pensions 5,896

Federal employees’ workman’s compensation benefits 54

Contractor disability and life insurance plans 18

 Total actuarial liabilities $6,172

Less funded actuarial liabilities (37)

 Total unfunded actuarial liabilities $6,135

Most of DOE’s contractors have defined benefit pension

plans under which they promise to pay specified benefits

to their employees, such as a percentage of the final

average pay for each year of service. DOE’s cost under

the contracts include reimbursement of annual contractor

contributions to these pension plans. DOE’s contractors

also sponsor postretirement benefits other than pensions

(PRB) consisting of predominantly postretirement health

care benefits. In the past, these costs were recognized on

a pay-as-you-go or cash basis. Since DOE approves the

contractors’ pension and postretirement benefit plans and

is ultimately responsible for funding the plans, the

responsibility for any related liabilities rests with DOE.

DOE also reimburses the Department of Labor for Federal

employees’ workman’s compensation benefits. The

Department of Labor’s actuarial estimate of DOE’s

unfunded liability for future workman’s compensation

benefits as of September 30, 1996, was $54 million. DOE

also reimburses its major contractors for employee

disability insurance plans. The actuarial liability as of

September 30, 1996, for these plans was $18 million.
DOE’s FY 1996 Consolidated Financial Statements

52

Contractor Pension Plans

DOE adopted SFAS No. 87, Employers’ Accounting for

Pensions, beginning in FY 1996 for contractor employees,

for whom DOE has a continuing pension obligation. As

of September 30, 1996, DOE has prepaid pension costs of

$84 million and accrued pension costs of $204 million

which are included in these statements. DOE has a

continuing obligation for a variety of contractorsponsored pension plans (51 qualified and 6

nonqualified). In this regard, benefit formulas consist of

final average pay (36 plans), career average pay (8 plans),

dollar per month of service (12 plans), and one defined

contribution plan with future contributions for retired

employees. Twenty-nine of the plans cover nonunion

employees only, 16 cover union employees only, and 12

cover both union and nonunion employees.

For qualified plans, DOE’s current funding policy is for

contributions made to a trust during a plan year for a

separate defined benefit pension plan to not exceed the

greater of: (1) the minimum contribution required by

Section 302 of the Employee Retirement Income Security

Act (ERISA) or (2) the amount estimated to eliminate the

unfunded current liability as projected to the end of the

plan year. The term “unfunded current liability” refers to

the unfunded current liability as defined in Section

302(d)(8) of ERISA. For nonqualified plans, the funding

policy is pay-as-you-go.

Plan assets generally include cash and equivalents, stocks,

corporate bonds, government bonds, real estate, venture

capital, international investments, and insurance

contracts.

Assumptions and methods

In order to provide consistency among the various DOE

contractors, certain standardized actuarial assumptions

were used. These standardized assumptions include the

discount rates and an expected long-term rate of return on

plan assets, salary scale, and any other economic

assumption consistent with an expected long-term

inflation rate of 3.5 percent for the entire U.S. economy

with adjustments to reflect regional or industry rates as

appropriate. In most cases, ERISA valuation actuarial

assumptions for demographic assumptions were used.

The following specific assumptions and methods were

used in determining the pension estimates:

The weighted average discount rate of 7.5 percent was

used, and the average long-term rate of return on assets

was 8.5 percent in determining the net periodic pension

cost for FY 1996. The weighted average discount rate

used to determine the vested benefit obligation, accrued

benefit obligation, and projected benefit obligation as of

September 30, 1996, was 7.75 percent. The average rate

of compensation increase was 5 percent.

Straight line amortization of unrecognized prior service

cost over the average remaining years of service of the

active plan participants and the minimum amortization of

unrecognized gains and losses were used. The transition

obligation was amortized over the greater of 15 years or

the average remaining service.

Table 1 sets forth the vested benefit obligation, accrued

benefit obligation, projected benefit obligation, plan

assets, and a reconciliation of the funded status to the

prepaid/(accrued) pension cost after minimum liability.

Table 2 sets forth the components of net periodic pension

cost for FY 1996.

Table 1

September 30, 1996 (in millions)

Vested Benefit Obligation ($8,748)

Accrued Benefit Obligation (9,310)

Projected Benefit Obligation:

 Projected Benefit Obligation (11,142)

 Plan Assets 14,185

 Funded Status $3,043

 Unrecognized Transition Obligation/(Asset) (1,696)

 Unrecognized Prior Service Cost -

 Unrecognized (Gain)/Loss (1,347)

 Prepaid/(Accrued) Pension Cost -

 Adjustment required to reflect minimum liability (120)

 Prepaid/(Accrued) pension cost after minimum liability ($120)

Total Prepaid Pension Cost after minimum liability $84

Total (Accrued) Pension Cost after minimum liability (204)

Table 2

FY 1996 (in millions)

Net Periodic Pension Cost:

 Service Cost $376

 Interest Cost 810

 Actual Return on Plan Assets (1,743)

 Net Amortization and Deferral 646

 Impact of Curtailment or Special Termination Benefits* 31

Total Net Periodic Pension Cost $120

* Income of $.5 million for a curtailment at the National Renewable Energy

Laboratory and expense of $16.8 million for curtailment at Lockheed

Martin Energy Systems were recognized in FY 1996. A loss for

curtailments at Westinghouse Hanford (now Fluor Daniel Hanford), was

not included in the net periodic pension cost since the curtailment loss was

offset against the unrecognized gain. However, costs were recognized for

special termination benefits of $14 million.

In the interest of brevity, information regarding all defined benefit plans is

summarized in a single table. Assets of one plan are not available to satisfy

liabilities of another plan.
Notes to the Financial Statements

53

Contractor Postretirement Benefits Other Than

Pensions (PRB)

DOE adopted SFAS No. 106, Employers’ Accounting for

Postretirement Benefits Other Than Pensions, beginning

in FY 1994 for contractor employees for whom DOE has

a continuing obligation. SFAS No. 106 requires that the

cost of PRB be accrued during the years that the

employees render service. As of September 30, 1996,

DOE has an accrued PRB liability of $5,896 million.

Prior to FY 1994, PRB costs, consisting of predominantly

retiree health care, were recognized as expenses when

claims were paid. Generally, the PRB plans are

unfunded, and DOE’s funding policy is to fund on a payas-you-go basis. There are 8 contractors, however, that

are prefunding benefits in part as permitted by law.

DOE’s contractors sponsor a variety of postretirement

benefits other than pensions. Benefits consist of medical

(35 contractors), dental (14 contractors), life insurance

(23 contractors), and Medicare Part B premium

reimbursement (4 contractors). Thirty-one of the

contractors sponsor a traditional indemnity plan, a PPO,

an HMO without a gatekeeper, or similar plan. Eleven of

these also have a point of service plan, an HMO with a

gatekeeper, or similar plan. Four additional contractors

have only a point of service plan, an HMO with a

gatekeeper, or similar plan.

Assumptions and methods

In order to provide consistency among the various DOE

contractors, certain standardized actuarial assumptions

were used. These standardized assumptions include

medical and dental trend rates, discount rates, and

mortality assumptions.

The following specific assumptions and methods were

used in determining the PRB estimates:

The medical and drug trend rates for a point of service

plan, an HMO with a gatekeeper, or similar plan for

under age 65, grade from 8.0 percent in 1995 down to 5.5

percent in 2002 and later and, for over age 64, grade from

7.25 percent in 1995 down to 5.5 percent in 2002 and

later. For a PPO, a traditional indemnity plan, an HMO

without a gatekeeper, or similar plan, the trend rates for

under age 65 grade from 13.0 percent in 1995 down to 6.5

percent in 2002 and later and, for over age 64, grade from

11.5 percent in 1995 down to 6.5 percent in 2002 and

later. The dental trend rates at all ages grade down from

8.0 percent in 1995 to 5.5 percent in 2002 and later.

The weighted average discount rate of 7.5 percent was

used, and the average long-term rate of return on assets

was 7.33 percent in determining the net periodic

postretirement benefit cost for FY 1996. The weighted

average discount rate used to determine the accumulated

postretirement benefit obligation as of September 30,

1996, was 7.75 percent. The rate of compensation

increase was the same rate as each contractor used to

determine pension contributions.

Straight line amortization of unrecognized prior service

cost over the average remaining years of service to full

eligibility for benefits of the active plan participants and

the minimum amortization of unrecognized gains and

losses were used. DOE chose immediate recognition of

the transition obligation existing at the beginning of FY

1994.

Table 3 sets forth the components of the accumulated

postretirement benefit obligation, plan assets, and a

reconciliation of the funded status to the accrued

postretirement benefit liability. Table 4 sets forth the

components of net periodic postretirement benefit cost for

FY 1996. Table 5 sets forth the effect of a one percentage

point increase in the assumed health care cost trend rates

for each future year.

Table 3

September 30, 1996 (in millions)

Accumulated Postretirement Benefit Obligation:

 Fully eligible actives ($708)

 Other actives (1,918)

 Retirees (2,263)

Total APBO ($4,889)

Plan assets 116

Funded status ($4,773)

Unrecognized prior service cost (93)

Unrecognized (gain)/loss (1,030)

Accrued postretirement benefit liability ($5,896)

Table 4

FY 1996 (in millions)

Net Periodic Postretirement Benefit Cost:

 Service cost $181

 Interest cost 352

 Actual return on plan assets (8)

 Net amortization and deferral (54)

 Impact of curtailment* (1)

Total Net Periodic Postretirement Benefit Cost $470

* Income of $1.3 million was recognized in FY 1996 for curtailment at Princeton Plasma Physics Laboratory. Also, a loss for curtailments resulting from a

special early retirement program at Westinghouse Hanford (now Fluor Daniel Hanford) was not included since the loss was included as an offset to the

unrecognized gain.

Table 5

Trend Rate Sensitivity (in millions )

Base 1% Trend

 Valuation Increase

Service Cost plus Interest Cost for health care benefits $ 493 $ 595

APBO as of Sep. 30, 1996 for health care benefits 4,409 5,145
DOE’s FY 1996 Consolidated Financial Statements

54

15. Other Governmental Liabilities (unfunded) (in millions)

Environment, safety, and health compliance activities $1,152

United States Enrichment Corporation 352

Uranium/thorium reimbursements 241

Capital leases 141

Accrued annual leave of Federal employees 87

Other unfunded liabilities 68

 Total other governmental liabilities $2,041

Environment, Safety and Health Compliance Activities

DOE accrued a $1,152 million estimated liability in

FY 1996 for those activities necessary to bring its

facilities and operations into compliance with existing

environmental, safety, and health (ES&H) laws and

regulations (e.g., Occupational Safety and Health Act;

Clean Air Act; Safe Drinking Water Act). Types of

activities included in the estimate relate to the following:

upgrading site wide fire and radiological programs;

nuclear safety upgrades; industrial hygiene and industrial

safety; safety related maintenance; emergency

preparedness programs; life safety code improvements;

and transportation of radioactive and hazardous materials.

The estimate covers corrective actions expected to be

performed in FY 1997 and beyond for programs outside

the purview of DOE’s Environmental Management (EM)

Program. ES&H activities within the purview of the EM

program are included in the environmental liability

estimate.

A DOE assessment conducted during FY 1996 identified

additional ES&H vulnerabilities at 13 sites where highly

enriched uranium is stored or handled. An estimate of

the liability related to these vulnerabilities is not

available. Therefore, these statements do not reflect the

costs to address corrective actions needed at these sites.

United States Enrichment Corporation (USEC)

DOE has entered into an agreement with USEC that

requires DOE to fund certain costs associated with the

gaseous diffusion plants leased by USEC. DOE’s

unfunded liabilities for these costs as of September 30,

1996, totaled $352 million for nuclear safety upgrades to

the plants, security, and processing costs for highly

enriched material sold to USEC and decommissioning

costs for the plants supplying electrical energy to the

gaseous diffusion plants.

Uranium/Thorium Reimbursements

The Energy Policy Act of 1992, as amended by the

Uranium Mill Tailings Radiation Control Act, provides

that DOE’s Uranium Enrichment Decontamination and

Decommissioning (D&D) Fund will reimburse licensees

operating uranium or thorium processing sites for the cost

of environmental cleanup at those sites, subject to

maximum reimbursements of $350 million for uranium

licensees and $65 million for the thorium licensee, plus

adjustments for inflation. Of the total liability of $250

million at September 30, 1996, $241 million was not

funded by appropriations of the D&D Fund.

Capital Leases

DOE’s contractors lease facilities, machinery, equipment,

and other assets. The assets under capital leases are

recorded under the lesser of the present value of minimal

lease payments or the fair value of the assets. Unfunded

capital lease liabilities totaled $141 million as of

September 30, 1996, and generally reflected lease

agreements in effect prior to FY 1993. Subsequent capital

leases, except for telecommunications and certain

computer leases, are required to be funded by current

appropriations.

16. Contingencies

DOE is a party in various administrative proceedings,

legal actions and tort claims which may ultimately result

in settlements or decisions adverse to the Federal

government. DOE has accrued contingent liabilities

where losses are determined to be probable and the

amounts can be estimated.

Other significant contingencies exist where a loss is

reasonably possible, or where a loss is probable and an

estimate cannot be determined. In some cases, a portion

of any loss that may occur may be paid from Treasury’s

Judgment Fund. The following are other significant

contingencies:

• Toxic Releases from DOE’s Facilities - DOE’s

contractors are defendants in a number of class action

suits arising from alleged environmental

contamination of air, water, and soil affecting

communities surrounding various DOE facilities.

Collectively, in the most significant cases involving

facilities at Portsmouth and Mound, Ohio; Rocky

Flats, Colorado; Hanford, Washington; and
Notes to the Financial Statements

55

Brookhaven, New York, the claimants seek in

excess of $3.5 billion in damages. DOE’s

contractors are vigorously contesting all of these

cases, but an evaluation of the likely outcome of

these claims cannot be estimated at this time.

• Human Radiation Experiments - DOE and its

contractors are the defendants in a number of

individual and class action suits, as well as

administrative claims, arising from past human

radiation experiments sponsored or carried out by

the Federal government. In the aggregate, the

claimants seek more than $1 billion in damages.

Due to the preliminary nature of these matters, an

evaluation of the likely outcomes of these claims

cannot be estimated at this time. While the cases

will be vigorously contested, possibilities of

settlement will also be pursued.

• U.S. v. Yankee Atomic Electric Company - This is

an appeal (and cross appeal) from a decision of the

Court of Federal Claims ordering the refund of

special assessments totaling $2.9 million paid by

Yankee into the Uranium Enrichment

Decontamination and Decommissioning Fund.

DOE is appealing the lower court’s adverse

decision and believes it will ultimately prevail in

this action. Should Yankee prevail against DOE in

this matter, Yankee will not pay future assessments

amounting to more than $10 million. In addition,

the validity of substantially all past and future

assessments against domestic utilities, totaling

$2,432 million, would be in question.

• Compliance with the Nuclear Waste Policy Act -

DOE has acknowledged that it will not have a

high-level nuclear waste repository on line by the

January 31, 1998, date specified in the Nuclear

Waste PolicyAct (NWPA) of 1982, as amended.

In May 1995, various utilities, states, and state

public utility commissions filed a petition (Indiana

Michigan Power Co. v. DOE) challenging DOE’s

final interpretation that it was not unconditionally

obligated under the NWPA to accept spent nuclear

fuel and high-level radioactive waste by

January 31, 1998, in the absence of a repository

constructed and licensed under the Act. On

July 23, 1996, the U.S. Court of Appeals

concluded that the NWPA creates an obligation for

DOE, in return for the utilities’ obligation to pay

fees under the Act to start disposing of spent

nuclear fuel no later than January 31, 1998,

regardless of the availability of a repository or

interim storage facility. The court noted that DOE

has not yet defaulted on its statutory or contractual

obligations with the utilities and found it

premature to determine an appropriate remedy or

how the disposal obligation might be met in the

absence of a repository. DOE decided not to seek a

review of the decision by the U.S. Supreme Court

and is reviewing options on how to proceed. DOE

has not estimated the potential financial impacts of

the court’s decision,and no provision has been

made for any loss in the financial statements.

In addition to the suit described above, on

January 31, 1997, a coalition of 46 State agencies and a

coalition of 36 entities filed petitions in the U.S. Court

of Appeals for the District of Columbia Circuit seeking

review of DOE’s alleged breach of its duty to begin

disposal of spent nuclear fuel beginning

January 31,1998. While the lawsuits do not seek

monetary damages, the coalitions seek to suspend future

payments to the Nuclear Waste Fund, and place their

payments in an escrow fund until DOE commences

disposing of the spent nuclear fuel. DOE will

vigorously defend the suits, but it is premature to

predict what effect these lawsuits will have on DOE’s

financial statements.

• Natural Resource Damage Claims - DOE is

disclosing a contingency for potential natural

resource damage (NRD) claims filed under the

Comprehensive Environmental Response,

Compensation, and Liability Act. Such liabilities

could result from potential claims filed against

DOE for natural resource injuries, primarily those

remaining at DOE facilities after cleanup.

Although any estimate of such liability is by

necessity extremely speculative, the Administration

recently estimated the range of DOE’s potential NRD

liability from about $1 billion to over $2 billion.

Notwithstanding the potential for such claims, there

neither are currently pending claims against DOE nor

have there been any successful NRD claims against

DOE. DOE’s practice of addressing natural resource

injuries during the remedy selection process should

limit the exposure to potential NRD claims. DOE has

initiated other efforts as well that are intended to

minimize the potential for NRD claims. These efforts

include: creating site-specific advisory boards at its

facilities; ensuring participation of interested parties in

the remedial planning process; and forming natural

resource trustee councils at facilities where there is

sufficient interest. In view of the foregoing, DOE

currently considers estimating its potential NRD

liability speculative, and any potential payment less

than probable but reasonably possible. Therefore, DOE

has not recognized such a liability in its financial

statements to date.

• In FY 1995, the Tenaska Washington Partners

(Tenaska) and Chase Manhattan Bank (Chase) filed suit
DOE’s FY 1996 Consolidated Financial Statements

56

against the Bonneville Power Administration (BPA)

for breach of contract and lost revenues. In June

1996, BPA reached a settlement which resulted in a

payment of $115 million by BPA to Chase.

Currently, BPA and Tenaska are in binding

arbitration to resolve Tenaska’s suit. BPA believes

that the factual and legal assertions by Tenaska in

support of its $1,125 million claim are without merit.

However, BPA believes that arbitration could result

in an award from the Tenaska case in excess of $115

17. Unexpended Appropriations (in millions)

 Appropriated Special Trust

 Funds Funds Funds Total

Unobligated

Available $1,838 $24 $1,862

Unavailable 561 3 564

 Total unobligated $2,399 $27 $2,426

Undelivered orders 6,301 74 $12 6,387

Unfilled customer orders (1,807) (1,807)

Funded environmental liabilities (1,139) (26) (1,165)

 Total unexpended appropriations $5,754 $75 $12 $5,841

18. Revenues and Related Costs from Goods and Services Provided (in millions)

 Revenues from Costs of Goods Net

 Goods and and Services Revenues

 Services Provided Provided (Losses)

Public

 Power marketing administrations $3,372 $2,463 $909

 Sale of oil from the Naval Petroleum Reserves 412 161 251

 Sale of oil from the Strategic Petroleum Reserve 325 494 (169)

 Reimbursable and cooperative work 109 110 (1)

 Other 80 71 9

 Total public $4,298 $3,299 $999

Intragovernmental

 Reimbursable work - defense related 767 767 0

 Reimbursable work - non defense related 478 478 0

 Services performed for the U.S. Enrichment Corporation 525 525 0

 Power marketing administrations 119 90 29

 Other 69 22 47

 Total intragovernmental $1,958 $1,882 $76

 Total $6,256 $5,181 $1,075

Power Marketing Administrations

DOE’s power marketing administrations market

electricity generated primarily by Federal hydropower

projects. Preference for the sale of power is given to

public bodies and cooperatives. Revenues from selling

power and transmission services are used to repay

Treasury annual appropriations and maintenance costs,

repay the capital investments with interest, and assist

capital repayment of other features and certain projects.

million. There are defenses available to BPA that

could result in a lesser award. Any monetary award

received by Tenaska in arbitration will be offset by

the $115 million paid by BPA to Chase in settlement

of Chase’s claim, plus interest accruing on this

amount. In the event that Tenaska obtains an award

in arbitration that is less than the amount BPA paid

to Chase, Tenaska will owe BPA the difference.

BPA’s minimum liability for this matter has been

accrued in DOE’s financial statements.

Sale of Oil from the Naval Petroleum Reserves

Crude oil, natural gas, and liquid gas products produced

from the Naval Petroleum Reserves are sold to public

customers at bid prices. Proceeds from these sales and

royalties from leased acreage are returned to Treasury.

DOE’s share of FY 1996 production at the Naval

Petroleum Reserves totaled 40 million barrels of oil

equivalent.

The Naval Petroleum Reserves’ lands were withdrawn

from public sale in the early 1900’s by the U.S.
Notes to the Financial Statements

57

Government. Therefore, no value has been recorded for

the crude oil and gas reserves underlying these lands, and

no costs are reflected for the depletion of the reserves.

Sale of Oil from the Strategic Petroleum Reserve

During FY 1996, DOE sold 17.9 million barrels of oil

from the Strategic Petroleum Reserve. The first sale

consisted of 5.1 million barrels and the proceeds of $97

million were retained by DOE to offset the costs of

decommissioning Weeks Island. The second sale

consisted of 12.8 million barrels, and the proceeds of

$228 million were returned to Treasury.

Reimbursable and Cooperative Work

DOE performs work for other Federal agencies and

private companies on a reimbursable work basis and on a

cooperative work basis. Whereas reimbursable work is

generally not DOE’s direct mission, but part of the

customer’s mission, cooperative work is part of DOE’s

direct mission. Reimbursable work is financed by funds

of Federal agencies ordering the work or by cash advances

from non-Federal customers, and DOE receives no

appropriated funds for such work or services. Cooperative

work, however, is financed by funds appropriated to DOE

that may be used in a cooperative effort with one or more

Federal or non-Federal participants. Authorities for DOE

to perform reimbursable work include the Economy Act of

1932, the Atomic Energy Act of 1954, Intergovernmental

Cooperation Act of 1968, Department of Energy

Organization Act of 1990, and Intergovernmental

Personnel Act of 1970. Authorities for performance of

cooperative work include Public Law 98-438, the Energy

Reorganization Act of 1974, section 107(a), and

Public Law 95-224, the Federal Grant and Cooperative

Agreements Act of 1977.

Services Performed for the U.S. Enrichment Corporation

(USEC)

USEC leases DOE’s gaseous diffusion plants. While

DOE does not receive payment from USEC for the lease,

USEC does pay for all services provided by DOE or its

contractors. Most of the reimbursements are for the cost

of providing electricity to operate the gaseous diffusion

plants.

19. Other Revenues and Financing Sources (in millions)

Nuclear Waste Fund $674

Federal Energy Regulatory Commission 190

Petroleum Pricing Violation Escrow Fund 84

Uranium Enrichment Decontamination and Decommissioning Fund 51

Other 20

 Total $1,019

Nuclear Waste Fund

The Nuclear Waste Policy Act of 1982 requires DOE to

assess fees against owners and generators of high-level

radioactive waste and spent nuclear fuel to fund the costs

associated with management and disposal activities under

Titles I and II of the Act. Fees assessed in FY 1996

totaled $641 million. An additional $33 million was

earned from the net gains from activities related to the

investment in Treasury securities.

Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission assesses

most of its administrative program costs as an annual

charge to each regulated entity. These revenues are

returned to Treasury when collected.

Petroleum Pricing Violation Escrow Fund

DOE recognized $84 million in revenues in FY 1996

from oil overcharge reimbursements that were deferred in

prior years pending a determination of how to distribute

funds from the Petroleum Pricing Violation Escrow Fund.

In FY 1996, DOE determined that these funds were not

needed to settle claims from injured parties and returned

the funds, along with $6 million in accrued interest, to

Treasury.

Uranium Enrichment Decontamination and

Decommissioning Fund

Revenue from assessments against domestic utilities is

recognized when such assessments are authorized by

legislation. Revenue recognized includes known

adjustments for transfers between utilities and other

reconciliation adjustments. Increases in current and

future assessments due to changes in the Consumer Price

Index are recognized in each fiscal year as such changes

occur.
DOE’s FY 1996 Consolidated Financial Statements

58

20. Receipts Transferred to Treasury and Other Agencies (in millions)

Power marketing administrations ($732)

Naval Petroleum Reserves (440)

Strategic Petroleum Reserve (228)

Federal Energy Regulatory Commission (187)

Petroleum Pricing Violation Escrow Fund (90)

Other (14)

 Total ($1,691)

21. Other Expenses (in millions)

Nuclear materials expense $1,128

Other expenses 493

 Total other expenses $1,621

and up to 7,000 metric tons of natural uranium to the

United States Enrichment Corporation (USEC). USEC

will transfer uranium hexaflouride to DOE for sale to

Russia and others. The net book value of materials to be

transferred by DOE to USEC exceeds the estimated

revenues to be generated from the sale of uranium

hexaflouride by $89.1 million. This amount was recorded

as a liability on DOE’s financial statements.

Other expenses consist primarily of write-offs of

abandoned projects and adjustments resulting from

physical inventories of property, plant, and equipment.

Power Marketing Administrations

Each of the power marketing administrations, except for

the Alaska Power Administration, is responsible for

collecting and remitting to Treasury revenues attributable

to the hydroelectric power projects owned and operated by

the U.S. Department of Defense, Army Corps of

Engineers; the U.S. Department of Interior, Bureau of

Reclamation; and the U.S. Department of State,

International Boundary and Water Commission.

Revenues collected on behalf of these agencies totaled

$732 million in FY 1996.

Naval Petroleum Reserves

Proceeds from the sale of crude oil, natural gas, and liquid

gas products produced from the Naval Petroleum

Reserves, totaling $412 million in FY 1996, were

returned to Treasury. An additional $28 million

representing the joint interest costs at the Naval

Petroleum Reserves in California reimbursed to DOE by

Chevron USA, Inc. was also returned to Treasury.

The $1,128 million nuclear materials expense relates

primarily to the ongoing dismantlement of that portion of

the nuclear weapons stockpile which the Nuclear

Weapons Council has declared excess to national security

needs. Also included in this amount is a $154 million

write-off of an estimated 26.1 metric tons of excess highly

enriched uranium that is to be converted to waste. In

addition, the nuclear material expense includes an

estimated loss of $89.1 million related to the nuclear

materials inventory transfers mandated by Public Law

104-134, the United States Enrichment Corporation

Privatization Act of 1996. This law requires DOE to

transfer up to 50 metric tons of highly enriched uranium

22. Unfunded Liability Adjustments (in millions)

Adjustments to legacy waste and surplus facilities unfunded liability:

 Increase in Baseline Environmental Management Report estimate $11,347

 FY 1996 appropriations for legacy waste activities (6,056)

 Excess plutonium environmental liability expense 2,100

 Excess highly enriched uranium liability expense 592

 Environmental liability expense for naval reactors legacy wastes 833

 Decrease in NWF fee liability (27)

 Net increase in legacy waste and surplus facilities unfunded liability $8,789

Unfunded actuarial liability expense 357

Other net changes in unfunded liabilities (95)

 Total net unfunded liability expenses $9,051
Notes to the Financial Statements

59

23. Prior Period Adjustments (in millions)

Stabilization, deactivation, and decommissioning of active facilities ($22,072)

Unfunded environment, safety, and health compliance activities liability (1,152)

Write-down of legacy waste facilities & equipment (1,592)

Reclassification of power marketing administrations’ invested capital (3,797)

Nuclear materials variance (1,912)

Correction of erroneously capitalized expenditures (387)

Excess nuclear materials valuation 431

Other 59

 Total ($30,422)

Stabilization, deactivation, and decommissioning of

active facilities

DOE accrued $22,072 million for estimated unfunded

environmental liabilities during FY 1996 for those

facilities that are conducting ongoing operations but will

ultimately require stabilization, deactivation, and

decommissioning. This brought the total estimated

unfunded environmental liability for active facilities to

$22,139 million.

Unfunded environment, safety, and health compliance

activities liability

DOE accrued a $1,152 million estimated liability in

FY 1996 for those activities necessary to bring its

facilities and operations into compliance with existing

environmental, safety, and health laws and regulations.

The estimate covers corrective actions expected to be

performed in FY 1997 and beyond for programs outside

the purview of DOE’s Environmental Management (EM)

Program. ES&H activities within the purview of the EM

program are included in the environmental liability

estimate.

Write-down of legacy waste facilities & equipment

DOE changed its capitalization practices related to

environmental management processing facilities and

equipment during FY 1995. DOE implemented the

guidance of the Financial Accounting Standards Board

(FASB) Emerging Issues Task Force Issue 90-8,

Capitalization of Costs to Treat Environmental

Contamination. This guidance requires the expensing of

facilities and equipment that treat, store, or dispose of

existing environmental wastes generated by past

operations (legacy waste facilities and equipment). An

estimate of DOE’s legacy waste facilities and equipment

resulted in a write-down of property, plant, and

equipment and a charge to expense of $3 billion during

FY 1995. Analysis performed during FY 1996 resulted in

an additional write-down of $1,592 million of legacy

waste facilities and equipment.

Reclassification of power marketing administrations’

invested capital

DOE reclassified the beginning FY 1996 invested capital

balance for the power marketing administrations. The net

position balance was reclassified to an intragovernmental

liability, “Appropriated Capital Owed to Treasury,”

during FY 1996.

Nuclear materials variance

DOE wrote-off a nuclear materials production variance of

$1,912 million in FY 1996. This variance resulted from

prior-years’ differences between standard and actual

production costs for nuclear materials that DOE is no

longer producing.

Correction of erroneously capitalized expenditures

DOE wrote-off $387 million from construction work in

process for costs that were erroneously capitalized in prior

years. These costs related to scientific efforts to determine

various technologies for the construction of a tritium

production reactor. The program was in the preliminary

design phase when it was terminated, and the costs should

have been expensed when incurred.

Excess nuclear materials valuation

DOE reduced the value of the nuclear materials stockpile

in FY 1995 based on materials that were declared excess

to national security needs. During further analysis

conducted in FY 1996, it was discovered that some of this

material had a valid non-defense use within DOE. This,

coupled with refinements in the estimate used in

FY 1995, resulted in an increase of $431 million in the

nuclear materials stockpile in FY 1996.
DOE’s FY 1996 Consolidated Financial Statements

60

24. Other Matters

Fast Flux Test Facility

Based on a decision to shut down DOE’s Fast Flux Test

Facility (FFTF) and a determination that there was no

future mission for the facility, it was written off in

FY 1995. However, consideration of the FFTF for a role

in the production of tritium prompted an announcement

by the Secretary of Energy in January 1997 that DOE is

placing the FFTF in a “hot standby” condition. In

response to this decision, DOE will return approximately

$160 million net book value ($421 million acquisition

value and $261 accumulated depreciation) to property,

plant, and equipment in FY 1997.

Disposition of Depleted Uranium Generated by the U.S.

Enrichment Corporation

Pursuant to Section 3109(a)(3) of the U.S. Enrichment

Corporation (USEC) Privatization Act of 1996, DOE will

assume the reponsibility for disposal of depleted uranium

generated by USEC between July 1, 1993, and the

privatization date. This responsibility is dependent on

formal establishment of a private corporation to receive

the assets and obligations of USEC and continue its

business operations, as well as execution of a

Memorandum of Agreement between the Office of

Management and Budget (OMB) and USEC to implement

the requirements of Section 3109 of the Act.

As of September 30, 1996, the private corporation had not

been established, nor had negotiations between OMB,

USEC, and DOE been finalized. Further, DOE’s draft

environmental impact statement scheduled for issuance in

FY 1998 may identify potential alternative uses for

depleted UF-6, which could impact the amount of USEC

generated depleted uranium requiring disposal.

Accordingly, no provision for the cost of disposal is

included in these financial statements.
Consolidating Schedules

61

The Department of Energy is funded by multiple appropriations and receipt accounts which are grouped as follows for

purposes of reporting consolidating schedules of financial position and operations and changes in net position:

Energy and Water Development Committee Appropriations

Federal Energy Regulatory Commission:

0212 Salaries and Expenses, Federal Energy Regulatory Commission

5105 Payments to States Under Federal Power Act

5230 Federal Energy Regulatory Commission

Power Marketing Administrations:

0304 Operation and Maintenance, Alaska Power Administration

4045 Bonneville Power Administration Fund

0302 Operation and Maintenance, Southeastern Power Administration

5653 Continuing Fund, Southeastern Power Administration

0303 Operation and Maintenance, Southwestern Power Administration

5649 Continuing Fund, Southwestern Power Administration

6772 Contract Holdbacks, Southwestern Power Administration

0305 Construction, Rehabilitation, Operation, and Maintenance, Western Area Power Administration

5068 Construction, Rehabilitation, Operation, and Maintenance, Western Area Power Administration

5069 Emergency Fund, Western Area Power Administration

5178 Falcon and Amistad Operation and Maintenance Fund

Other DOE Programs:

0206 Geothermal Loan Guarantee and Interest Assistance Program

0222 General Science and Research Activities

0224 Energy Supply, Research Activities

0226 Uranium Supply and Enrichment Activities

0228 Departmental Administration

0236 Expenses, Office of the Inspector General

0240 Weapons Activities

0243 Materials Production and Other Defense Programs

0244 Defense Nuclear Waste Disposal

4180 Expenses, Isotope Production and Distribution Program Fund

5226 Uranium Supply and Enrichment Activities

5227 Nuclear Waste Disposal Fund

5231 Uranium Enrichment Decontamination and Decommissioning Fund

6425 Payments by Alleged Violators of Department of Energy’s Regulations

6427 Low-Level Radioactive Waste

8575 Advances for Cooperative Work

Interior and Related Agencies Committee Appropriations

0213 Fossil Energy Research & Development

0214 Fossil Energy Construction

0215 Energy Conservation

0216 Energy Information Administration

0217 Economic Regulation

0218 Strategic Petroleum Reserve

0219 Naval Petroleum and Oil Shale Reserves

0233 Strategic Petroleum Reserve Petroleum Account

0234 Emergency Preparedness

0235 Clean Coal Technology

5154 Clean Coal Technology

5180 Alternative Fuels Production
DOE’s FY 1996 Consolidated Financial Statements

62

Consolidating Schedules of Financial Position

for the Fiscal Year Ended 1996

(in millions)

ASSETS

Agency Assets

 Intragovernmental

 Fund Balance with Treasury (Note 2) $42 $500

 Investments (Note 3)

 Accounts Receivable (Note 4) 15

 Governmental

 Investments (Note 3)

 Accounts Receivable, Net (Note 4) 2 342

 Stockpile Materials (Note 5)

 Strategic Petroleum Reserve

 Nuclear Materials

 Property, Plant, and Equipment, Net (Note 6) 22 5,305

 Regulatory Assets (Note 7) 7,197

 Other Agency Assets 1,123

 Total Agency Assets $66 $14,482

Custodial Assets (Note 8) 3 4

 Total Assets $69 $14,486

LIABILITIES

Liabilities Covered by Budgetary Resources

 Intragovernmental Liabilities

 Accounts Payable $3 $296

 Debt (Note 9) 2,456

 Appropriated Capital Owed to Treasury (Note 10) 3,797

 Governmental Liabilities

 Accounts Payable (Note 11) 17 247

 Debt (Note 7) 7,197

 Deferred Revenue and Other Credits (Note 12) 3 42

 Funded Environmental Liabilities (Note 13)

 Total Liabilities Covered by Budgetary Resources $23 $14,035

Governmental Liabilities Not Covered by Budgetary Resources

 Environmental Liabilities (Note 13)

 Pension and Other Actuarial Liabilities (Note 14) 31

 Other Governmental Liabilities (Note 15) 8 1

 Total Liabilities Not Covered by Budgetary Resources $8 $32

 Total Liabilities $31 $14,067

NET POSITION

Unexpended Appropriations (Note 17) $24

Invested Capital 22 22

Cumulative Results of Operations 429

Future Funding Requirements (8) (32)

 Total Net Position $38 $419

 Total Liabilities and Net Position $69 $14,486

Federal Energy

Regulatory

Commission

Power Marketing

Administrations

Energy and Water Development
Consolidating Schedules

63

$7,380 $2,989 $10,911

6,402 6,402

1,785 4 ($1,116) 688

72 72

4,183 141 4,668

15,224 15,224

24,264 24,264

15,061 1,661 22,049

 7,197

486 31 1,640

 $59,633 $20,050 ($ 1,116) $93,115

 805 106 918

 $60,438 $20,156 ($ 1,116) $94,033

 $1,363 $230 ($1,116) $776

 2,456

 3,797

4,214 409 4,887

 7,197

8,372 8,417

1,165 1,165

 $15,114 $639 ($ 1,116) $28,695

227,397 311 227,708

 6,089 15 6,135

 1,900 132 2,041

$235,386 $458 $235,884

$250,500 $1,097 ($ 1,116) $264,579

$3,216 $2,601 $5,841

39,753 16,917 56,714

 2,264 (3) 2,690

 (235,295) (456) (235,791)

 ($190,062) $19,059 ($170,546)

$60,438 $20,156 ($ 1,116) $94,033

Other DOE Programs Eliminations Consolidated

Appropriations

Interior and Related

Agencies Appropriations
DOE’s FY 1996 Consolidated Financial Statements

64

Consolidating Schedules of Statement of Operations and Changes in Net Position

for the Fiscal Year Ended 1996

(in millions)

REVENUES AND FINANCING SOURCES

Appropriated Capital Used $153 $22

Revenues from Goods and Services Provided (Note 18)

 Public 3,372

 Intragovernmental 119

Interest

Other Revenues and Financing Sources (Note 19) 190 7

Less Receipts Transferred to Treasury & Other Agencies (Note 20) (187) (732)

Nuclear Waste Fund Deferred Revenue Adjustment (Note 12)

Total Revenues and Financing Sources $156 $2,788

EXPENSES

Program Expenses

 Energy Resources 22

 Science and Technology

 National Security

 Environmental Quality

 Management and Other Activities 146

Cost of Goods and Services Provided (Note 18)

 Public 2,463

 Government 90

Depreciation

Other Expenses (Note 21) 10

Estimated Unfunded Liability Adjustments (Note 22)

Total Expenses $156 $2,575

Shortage of Revenues and Financing Sources Over Total Expenses $0 $213

CHANGES IN NET POSITION

Net Position, Beginning Balance, as Stated $60 $4,154

Prior Period Adjustments (Note 23) (3,948)

Net Position, Beginning Balance, as Adjusted $60 $206

Non Operating Changes (22)

Excess (Shortage) of Revenues and

 Financing Sources Over Total Expenses 0 213

Net Position $38 $419

Federal Energy

Regulatory

Commission

Power Marketing

Administrations

Energy and Water Development
Consolidating Schedules

65

 Other DOE Programs Eliminations Consolidated

$17,580 $2,502 ($350) $19,907

190 736 4,298

 1,839 1,958

 572 (52) 520

 905 26 (109) 1,019

 (103) (669) (1,691)

 (1,098) 136 (962)

$19,885 $2,595 ($375) $25,049

717 1,781 (25) $2,495

2,417 2,417

4,375 2 4,377

6,565 (350) 6,215

404 87 637

180 656 3,299

1,792 1,882

1,833 74 1,907

1,604 7 1,621

9,127 (76) 9,051

$29,014 $2,531 ($375) $33,901

 ($9,129) $64 $0 ($8,852)

($152,112) $20,521 ($127,377)

(26,126) (348) ($30,422)

($178,238) $20,173 $0 ($157,799)

(2,695) (1,178) ($3,895)

(9,129) 64 0 (8,852)

($190,062) $19,059 $0 ($170,546)

Appropriations

Interior and Related

Agencies Appropriations
DOE’s FY 1996 Consolidated Financial Statements

66

Supplemental Financial and Management Information

Program expenses are summarized in the Consolidated Statement of Operations and Changes in Net

Position by business line. The following supplemental financial and management information provides

a more detailed breakdown of the expenses for each business line. Program performance measures

that were not reported in the overview are included for each business line.

SCIENCE AND TECHNOLOGY ACTIVITIES - provide science and tools needed to develop

energy technology options, to understand the health and environmental implications of energy activities, and to understand the fundamental nature of energy and matter; provide large scale facilities

required in natural sciences to ensure U.S. leadership in the search for knowledge; and apply research

and development competencies to help ensure the availability of scientific talent.

(in millions)

Energy Research

Biological and Environmental Research $384

Fusion Energy 266

Basic Energy Sciences 762

High Energy Physics 492

Nuclear Physics 210

General Science Program Direction 9

Laboratory Technology Transfer 38

Multiprogram Energy Labs - Facility Support 7

SBIR/SBTT 95

Superconducting Super Collider 80

University Science Education 46

Other Energy Research 16

Subtotal $2,405

Science and Technical Information 12

TOTAL $2,417

Energy Research

Biological and Environmental Research - fundamental science in the pursuit of understanding the

consequences to health and the environment of energy production, development, and use, including

DOE’s support of the national Human Genome and Global Climate Change programs, and providing

unique national user facilities for the scientific community.

Fusion Energy - research and development needed for an economically and environmentally attractive

fusion energy source, namely advancing plasma science, developing fusion science, technology, and

plasma confinement innovations, and pursuing fusion energy science and technology as a partner in

the international effort.

Basic Energy Sciences - fundamental research on materials sciences, chemical sciences, geosciences,

biosciences, mathematical sciences, high performance computing and communications, information

infrastructure, and engineering sciences that underpins the DOE missions in energy and the environment, that advances energy related basic science on a broad front, and that provides unique national

user facilities for the scientific community.
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High Energy Physics - research to understand the nature of matter and energy at the most fundamental level, as well as the basic forces which govern all processes in nature, that requires accelerators

and detectors utilizing state-of-the-art technologies in many areas, including fast electronics, high

speed computing, superconducting magnets, and high power radio-frequency devices.

Nuclear Physics - research to understand the structure and properties of atomic nuclei and the fundamental forces between the constituents that form the nucleus. Nuclear processes determine essential

physical characteristics of our universe and the composition of the matter that forms it.

General Science Program Direction - program management and administration, including personnel

and related costs.

Laboratory Technology Transfer - facilitates transfer of technology from Departmental laboratories.

Multiprogram Energy Labs - Facility Support - operation and maintenance of multiprogram laboratories including related management, corrective action, and disposition activities.

Small Business Innovative Research/Small Business Technology Transfer (SBIR/SBTT) - DOEsupported research and development of energy related technology that will significantly benefit U.S.

businesses, including a pilot technology transfer program initiative.

Superconducting Super Collider - expenditures are for the orderly termination of this activity.

University Science Education - provides assistance in science education (precollege through

postdoctoral), including reactor fuel assistance, scientific instrumentation, and technology transfer.

Other Energy Research - energy research analysis of technology initiatives, independent advisory and

oversight of DOE research and development (R&D) and national laboratories, and program management and administration of Energy Research Energy Supply R&D programs.

Science and Technical Information - advances energy and nuclear defense technologies and safeguards U.S. economic and military security through effectively controlling and overseeing the dissemination of DOE’s scientific and technical knowledge.

Performance Measures

Initiating Science-Based Programs to Find New Methods for Environmental Cleanup

Initiating science-based programs to find new cost-effective methods for environmental clean-up of

DOE sites.

Goals:

Developing a 10-year program plan for bioremediation

research and implementing the first phase by March 1996

for clean-up of national laboratory and nuclear weapons

production sites.

FY 1996 Results:

The Natural and Accelerated Bioremediation Research

Program plan was published in September 1995 in hard

copy and on the World Wide Web. The program management structure has been developed, and the first solicitations for research proposals were issued in March 1996,

with awards made in July.
DOE’s FY 1996 Consolidated Financial Statements

68

Initiating a basic research program effort by September

1996 through an Office of Energy Research (ER) and

Office of Environmental Management (EM) partnership

in order to provide less costly and more effective cleanup

technologies.

ER initiated and provided funding for a pilot research

program in support of basic science needs identified by

program managers in EM. After full external peer

review, 9 research awards were made in February 1996.

Investigating the Causes of Global Climate Change

Continue to provide strong support to the interagency effort to investigate the natural and human

causes of global climate change phenomena and reduce U.S. greenhouse gas emissions.

Goals:

Success will be measured in FY 1996 by collecting and

analyzing data on atmospheric conditions to enable

better assessments, damage prediction, and mitigation for

ecosystems by:

- designing, building, and testing an Atmospheric

Radiation and Cloud Station (ARCS) in the Western

Pacific by September 1996 to collect critical cloud

and radiation data;

- completing atmospheric radiation measurements by

June 1996 to verify enhanced absorption of solar

radiation by clouds to improve the accuracy and

predictive capability of global climate models;

- completing preparations to measure the absorption

of CO2 from the atmosphere by March 1996; and

- implementing experiments that quantify effects of

changes in weather and air pollution on forests by

June 1996.

FY 1996 Results:

The first ARCS for the Tropical Western Pacific is being

deployed in Papua, New Guinea, and data from the

measurements taken at the ARM Southern Great Plains

Site in Oklahoma to test the hypothesis of enhanced

absorption of solar radiation by clouds are being analyzed. Continuous measurement of CO2

 fluxes between

forests and the atmosphere were taken at two sites in the

U.S., and a preliminary plan was drafted to expand

measurements at other U.S. locations. The site was

prepared and equipment purchased for a large-scale field

exposure facility to be used to measure the responses of

an aspen forest to elevated levels of ozone.

Continuing Peaceful Uses of the Atom

Continue cooperative efforts begun in 1973 for fundamental properties of matter, magnetic confinement fusion, nuclear reactor safety, environmental restoration, and nuclear waste management under

the Peaceful Uses of Atomic Energy Agreement (PUAE).

Goals:

Continuing cooperation with Russia under the PUAE,

even if the agreement is not formally extended.

Working with the State Department, National Security

Council, and the Office of the Vice President to:

- develop an interagency strategy by December 1995

for renewal of the PUAE agreement;

- extend the PUAE umbrella agreement for one year

period beginning January 1996; and

- extend the four cooperative agreements under the

PUAE for their full terms.

FY 1996 Results:

The U.S. has continued cooperation with Russia under

the PUAE, and three of the four cooperative agreements

under the PUAE were signed in Vienna on September 16

by Secretary O’Leary and Russian Minister of Atomic

Energy Viktor Mikhailov. These agreements are on:

magnetic confinement fusion; environmental restoration

and waste management; and nuclear reactor safety. We

are working with Embassy Moscow in efforts to get the

fourth Memorandum of Cooperation (MOC) on fundamental properties of matter signed.

The interagency strategy for renewal of the PUAE has

been developed. The PUAE umbrella agreement has been

extended as well as three of the four MOCs. DOE is now

working to extend the fourth cooperative agreements

under the PUAE.
Supplemental Financial and Management Information

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Restructuring the Fusion Energy Research Program

Preserve the fusion energy science base and maintain fusion as a U.S. energy option for the future.

Goals:

Success will be measured in FY 1996 by incorporating

the Fusion Energy Advisory Committee (FEAC) recommendations and finalizing the strategy by February 1996

to restructure the fusion energy research program to

emphasize fusion energy science.

FY 1996 Results:

DOE has prepared a strategic plan for the restructured

Fusion Energy Sciences Program which incorporates the

FEAC recommendation that the fusion program be a

science-based research program focusing on innovative

solutions for and alternative approaches to fusion energy.

The plan is in the final stage of concurrence.

Advancing the State-of-the-Art in High Performance Computing

Advance the state-of-the-art in high performance computing and apply these capabilities to DOE and

national priorities, such as national security, environmental cleanup, world leadership in science and

technology, and economic productivity.

Goals:

Completing a road map for development and deployment

of advanced communications and computing technologies

to create “National Collaboratives,” as envisioned in the

DOE 2000 initiative to improve research productivity.

Developing computational software, in collaboration with

Electric Power Research Institute and others, for the

President’s National Information Infrastructure initiative,

to improve energy supply and demand management for

utility companies.

FY 1996 Results:

Based on the feedback from workshops, as well as other

outreach activities, a small working group is refining the

road map, with the effort completed in FY 1996 and

initial projects beginning in FY 1997. A grant is in place

to develop a system of remote acquisition, central

analysis, and distribution of energy information to a level

of detail not previously available. Two additional grants

have been initiated to improve electric utility service to

customers. The road map for DOE 2000 initiative and a

detailed execution plan for the first year are completed.

Competition for the second phase of “Grand Challenges”

program was undertaken to apply lessons learned in first

phase and address significant new science problems

related to the Department’s missions. Competition

awards were granted in early FY 1997.

An effort was established at Lawrence Berkeley National

Laboratory to develop a prototype system that permits

remote monitoring and control of multiple commercial

buildings from a single control center. Two grants have

also been initiated with utilities during FY 1996 to

address fundamental electric utility issues that will

improve customer interaction.

Expanding Access to Global Science Through the Information Infrastructure

Facilitate open access to the Department’s programmatic, scientific, and technical information by

providing better communications with U.S. industry, academia, the scientific community, and the

public. Capitalize on interagency and international collaborations to benefit the United States.

Goals:

Creating the following four new mechanisms for public

access to global energy-related information, resulting in

a 20 percent increase in service to customers, measured

by surveys and programmed feedback for each product

through:

- listing of DOE scientific and technical information

resources in a centralized government directory,

- the Openness Initiative Information, to be available

through open systems networks by March 1996,

- electronic delivery of formerly printed products by

June 1996, and

- 30 percent increase in full text electronic access to

R&D information by September 1996.

FY 1996 Results:

By capitalizing on international and interagency collaborations and implementing Web-based and other electronic dissemination options for providing access and

delivery, the Department supported U.S. interests by

increasing service to its customers during FY 1996 by 90

percent, averaging an additional 27,000 accesses per

month over the FY 1995 baseline.
DOE’s FY 1996 Consolidated Financial Statements

70

Diversifying America’s Science Workforce

Work with minority educational institutions to diversify and develop an effective scientific and technical workforce.

FY 1996 Results:

In FY 1996, the Department supported minority educational insitutions through grants and cooperative agreements in the amount of $50 million.

Partnerships with minority educational institutions were

continued and new ones established, including:

- An undergraduate cooperative education program in

engineering was established at Howard University to

advance the number of students pursuing degrees and

careers in engineering.

- The Chair of Excellence Professorship in Nuclear

Physics and Engineering at Morgan State University

is to facilitate innovative research in nuclear physics

and increase the number of minority nuclear physicist

professionals.

- The Hemispheric Center for Environmental Technology was established at Florida International University to research, develop, and demonstrate innovative

environmental technologies.

- The Southwest Center for Environmental Excellence

and Opportunity was established at the Albuquerque

Technical Vocational Institute to enable communities

to participate in Departmental clean-up and waste

management activities.

- The Puerto Rico Renewable Energy and Efficiency

Center was established at the University of Puerto

Rico-Mayaguez to conduct applied research and

development to adapt and validate renewable energy

and energy efficiency technologies.

Educating Young Scientists

Use the science and technology at the national laboratories to increase knowledge, analytical thinking,

and research capabilities of faculty and students through hands-on experience.

Goals:

Success will be measured by the participation of 5,000

undergraduate, graduate, postdoctoral students, and

faculty in DOE science education programs at our

national laboratories in FY 1996 that results in 40

percent of the participants showing an increase in

knowledge and skills as measured by surveys developed

in collaboration with other Federal agencies.

Goals:

Increasing awards to Historically Black Colleges and

Universities, Hispanic-serving institutions, Native

American, and other minority institutions from over $58

million in FY 1995 to over $100 million.

Showcasing research accomplishments and forging at

least three cooperative research and development

agreements and partnerships with minority educational

institutions.

FY 1996 Results:

During FY 1996, DOE was able to accommodate over

5,000 students and faculty at its laboratories. Progress on

the evaluation of the program’s effectiveness has been

slowed but is currently underway in conjunction with the

National Science Foundation. DOE will be unable to

accomplish measurement of the increase in knowledge

because of funding-induced delays.
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NATIONAL SECURITY ACTIVITIES - effectively support and maintain a safe, secure, and

reliable enduring stockpile without underground nuclear testing; safely dismantle and dispose of

excess weapons; and provide technical leadership for national and global nonproliferation activities.

(in millions)

Weapons Activities

Stockpile Stewardship $1,366

Stockpile Management 1,573

Weapons Program Direction 122

Subtotal $3,061

Nonproliferation and National Security

Verification and Control Technology 349

Nuclear Safeguards and Security 93

Security Investigations 37

Emergency Management 21

Fissile Materials Disposition 62

Worker and Community Transition 84

International Nuclear Safety and Security 1

Naval Reactors 669

Subtotal 1,316

TOTAL $4,377

Weapons Activities

Stockpile Stewardship - research, development, and engineering support necessary to maintain a safe

and reliable U.S. nuclear weapons stockpile which requires sustaining core competencies, nuclear

weapons laboratories, and the Nevada Test Site.

Stockpile Management - physical maintenance of the U.S. nuclear weapons stockpile, including:

continual surveillance and retirement and disposal of weapons; pursuing a dual-track new tritium

source; maintaining a worldwide nuclear/radiological accident response capability; and providing

safeguards/security oversight for special nuclear materials.

Weapons Program Direction - management and administration of weapons activities, including

personnel, site, and contractual costs.

Nonproliferation and National Security

Verification and Control Technology - conduct Comprehensive Test Ban research and development,

including arms control treaty verification, intelligence collecting, and processing; support Presidential

arms control and nonproliferation initiatives; and provide intelligence support in assessing nuclear

threats.

Nuclear Safeguards and Security - provide direction and training for protection of nuclear weapons,

nuclear materials, classified information, and facilities, including related technology development and

directing classification and declassification activities.

Security Investigations - support of background investigations for both Federal and contractor personnel at DOE facilities.
DOE’s FY 1996 Consolidated Financial Statements

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FY 1996 Results:

The final Programmatic EIS was published in November

Emergency Management - control and direction to ensure comprehensive and integrated planning,

preparedness, and response capability for emergencies involving DOE operations or facilities.

Fissile Materials Disposition - provide safe, secure, environmentally sound, and inspectable long-term

storage of weapons-usable fissile materials; disposal of surplus highly enriched uranium and plutonium; and technical support for U.S. initiatives to reduce foreign surplus of weapons-usable plutonium.

Worker and Community Transition - mitigate adverse impact on workers and communities resulting

from restructuring, including local economic assistance for job-base conversion.

International Nuclear Safety and Security - reduction of national security and environmental threats

related to unsafe and aging nuclear facilities worldwide; assist in Soviet designed nuclear power plant

safety upgrades; and promote international cooperative nuclear safety research and development.

Naval Reactors - design, development, testing, and production of safe, long-lived, militarily-effective

nuclear power plants for U.S. Navy ships and submarines, including over 120 operating reactors in

nine different operational classes.

Performance Measures

Replacing Underground Testing with Science

Redirect the DOE weapons programs to maintain confidence in the enduring stockpile through the

science-based Stockpile Stewardship Program.

Goals:

Developing the Accelerated Strategic Computing Initiative (ASCI) Implementation Plan by April 1996 to

improve simulation capabilities.

Demonstrating the Los Alamos Neutron Scattering

Center’s (LANSCE) concept of fast neutron radiography

of weapons systems to detect small scale (2-3 mm) defects

by September 1996.

Developing a new annual certification process with the

National Security Council.

Completing an integrated program plan for stockpile

stewardship and management by March 1996.

Conducting enhanced nonnuclear experiments on existing

stockpile weapons and improving predictive techniques to

repair or replace aging weapons.

FY 1996 Results:

The ASCI Implementation Plan was approved in August

1996. Delay will not impact the overall schedule for

completing ASCI.

The LANSCE demonstration was completed on schedule

in September 1996.

The new annual certification process was completed. The

first annual report is expected to be submitted in November 1996.

An integrated program plan for stockpile stweardship and

management was submitted to Congress in April 1996.

The enhanced nonnuclear experiments were completed.

Maintaining Reliability of the Future Stockpile

Develop a replacement source for tritium to ensure the U.S. nuclear weapons stockpile remains

reliable.

Goals:

Publishing the final Programmatic Environmental Impact
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1995, and the ROD was completed in December 1995 as

planned.

The contract for the accelerator design was awarded in

September 1996.

Release of the request for proposal has been rescheduled

to FY 1997 to provide additional time to understand and

resolve issues associated with government-owned commercial reactors. Rescheduling will not impact the

overall ability of the commercial light water reactor path

to deliver tritium as required in FY 2005.

Determining the Future Size and Scope of the Nuclear Weapons Complex

Decide on the appropriate size and scope of the nuclear weapons complex.

Goals:

Issuing the draft Programmatic EIS for stockpile stewardship and management in February 1996.

Issuing the final Programmatic EIS for stockpile stewardship and management in June 1996.

Issuing the ROD on stockpile stewardship and management in August 1996.

FY 1996 Results:

The draft Programmatic EIS for stockpile stewardship

and management was issued on schedule in February

1996.

The final Programmatic EIS for stockpile stewardship

and management was issued in November 1996. The

delay reflects the need to accomplish litigation risk

assessment associated with document.

The ROD on stockpile stewardship and management was

signed in December 1996.

Statement (EIS) in November 1995 and the Record of

Decision (ROD) in December 1995 in support of a new

tritium production source.

Selecting a prime contractor for the accelerator design

by September 1996.

Issuing a request for proposal for supplying tritium

through commercial reactors or irradiation services.

Designing and Choosing a Potential Site for the National Ignition Facility (NIF)

Design and select a site for an above-ground experimental physics facility to simulate on a small scale

the conditions during a nuclear weapons detonation in order to maintain confidence in the enduring

nuclear weapons stockpile. Decide whether to request funding to proceed with the construction of

the facility.

Goals:

Completing the nonproliferation assessment by December

1995.

Finishing the preliminary design by September 1996.

Deciding on the specific site for construction of the NIF

as part of the ROD for stockpile stewardship and management.

FY 1996 Results:

The Nonproliferation Assessment was completed on

schedule in December 1995.

The Title I Design for the NIF building is making expected progress. A three month delay in FY 1996 funding

caused a one month delay in completion of design for

laser equipment. We will continue to maintain the

schedule to support the start of site production activities

in March 1997.

The ROD for Stockpile Stewardship and Management,

including a decision on a specific site for construction of

NIF at Lawrence Livermore National Laboratory, was

signed in December 1996.
DOE’s FY 1996 Consolidated Financial Statements

74

Goals:

Expanding MPC&A upgrades at the 26 facilities

currently underway, adding additional facilities to be

upgraded, and including Russian-manufactured personnel security equipment in these upgrades.

Initiating MPC&A training for Russian national

regulatory authorities from each region and beginning

procurement of equipment for the Russian nuclear

regulatory authority inspections by May 1996.

Developing the foundation for the preliminary design

for a national Russian nuclear materials accounting

system by July 1996.

Assisting Russia and NIS in Improving the Security of Nuclear Materials

Work with Russia and the Newly Independent States (NIS) to improve material protection, control,

and accounting (MPC&A) activities at nuclear facilities that contain weapons-usable nuclear material.

Develop with their scientists MPC&A equipment suitable for mass production and use in their nuclear

complexes. Work with national authorities in instituting and standardizing MPC&A activities (civilian and military).

FY 1996 Results:

MPC&A cooperation is now underway at over 40 locations in Russia, the NIS, and the Baltics. At most of these

sites, work has progressed from the initial site survey

done by DOE MPC&A teams to signing umbrella

agreements for individual work contracts to purchase,

deliver, and install MPC&A equipment. An expansion of

current operations to include all weapons-usable nuclear

material within each location is planned.

GAN and Minatom will use the Russian Methodological

Training Center (RMTC) at Obinsk to train operators,

instructors, and inspectors. Procurement of equipment

for laboratory training was completed in March 1996.

The laboratory became operational in May 1996. DOE

will continue to assist in defining requirements for

MPC&A equipment and procuring and providing training

in the use of the equipment for GAN inspectors.

The first joint meeting to design a national Russian

nuclear materials accounting system was held in Washington in February 1996. Two-week workshops were held

at Oak Ridge National Lab in April 1996 to review the

U.S. national MPC&A system. As a result of this workshop, the joint project team has begun the process of

defining requirements for the Russian national nuclear

materials accounting system. The work plan calls for a

preliminary requirements analysis to be completed by the

end of October 1996.

Limiting Weapons-Usable Fissile Materials Worldwide

Promote alternatives to the civilian use of plutonium (Pu). Eliminate the civilian use of highly enriched uranium (HEU). Reduce stockpiles of HEU and Pu. Initiate regional fissile material control

activities. Assist the shutdown of Russian Pu production reactors. Negotiate an international convention to end the production of fissile material for weapons purposes.

Goals:

Recommending a preferred alternative regarding the

acceptance of spent fuel from foreign research reactors

by October 1995, issuing the EIS in November 1995, and

issuing the ROD in January 1996.

Working with the German government to redesign the

planned FRM-II research reactor to use low enriched

uranium (LEU).

FY 1996 Results:

DOE issued a ROD regarding the acceptance of spent

research reactor fuel on May 13, 1996. The first spent

fuel shipments were received in September 1996.

DOE issued a report in January 1996 detailing its offer

to assist in the redesign of the FRM-II research reactor in

Germany. While not accepted by German officials, DOE

demonstrated that use of LEU in the FRM-II was feasible.
Supplemental Financial and Management Information

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Supporting the June 1994 Gore-Chernomydrin Commission agreement to shut down the Russian Pu production

reactors in Tomsk-7 and Krasnoyarsk-26 by the year

2000. Complete technical analyses on nuclear replacement power options by December 1995 and an analysis of

fossil fuel replacement power options by July 1996.

The technical analysis on nuclear replacement power

options and a core conversion feasibility study were

completed by December 1995. The analysis of fossil fuel

replacement power options for Zheleznogorsk was

completed in September 1996, and the analyses for Tomsk

and Seversk are expected to be completed by December

1996.

Strengthening the Nuclear Nonproliferation Regime

Promote adherence to the Nuclear Non-Proliferation Treaty. Increase the effectiveness and efficiency

of the International Atomic Energy Agency (IAEA). Conclude successful negotiation of a Comprehensive Nuclear Test Ban Treaty. Facilitate IAEA inspections of excess fissile materials. Promote

regional nonproliferation measures.

Goals:

Providing direct technical assistance for IAEA inspections in North Korea and Iraq.

Implementing 11 agreements for safeguards cooperation

between DOE and foreign governments or organizations

(Argentina, Australia, Brazil, EURATOM, France,

Germany, Japan, South Korea, United Kingdom, IAEA,

and ABACC).

Beginning IAEA inspections of excess plutonium at Rocky

Flats by December 1995, bringing the amount of excess

fissile material under IAEA safeguards to approximately

12 metric tons.

Placing 13 metric tons of U.S. highly enriched uranium

(HEU) hexafluoride (part of the 200 metric tons of U.S.

weapons-grade material declared excess by the President) under IAEA safeguards by the second quarter of FY

1996.

Blending at least four metric tons of weapons-grade

uranium down to commercial levels by September 1996.

FY 1996 Results:

U.S./DOE experts have participated as team members in

several IAEA inspections in Iraq, have served at the

Baghdad Monitoring Center, and are on detail to

UNSCOM and IAEA Action Team. Customized emergency diesel generators to provide emergency back-up

power for IAEA monitoring equipment were delivered to

Nyongbyon, North Korea in April 1996.

Safeguards cooperation between EURATOM and DOE is

on track. The safeguards agreement with Brazil was

completed. The feasibility safeguards system for South

Korean DUPIC process was confirmed. DOE is developing and testing remote monitoring systems which could

increase IAEA safeguards confidence and reduce inspection costs with 14 international partners.

The IAEA Rocky Flats inspection took place in December

1995. Monthly inspections are occurring. IAEA inspections at Oak Ridge and Hanford are continuing, in

addition to the inspection at Rocky Flats.

The 13 metric tons of excess HEU that is being blended

down at the Portsmouth Gaseous Diffusion Plant was

made eligible for IAEA safeguards in April 1996 and is

now expected to be placed under IAEA safeguards by

September 1997.

As of September 30, 1996, less than one metric ton of

uranium had been re-fed due to United States Enrichment

Corporation controls placed on the rate of HEU

refeeding to improve operations.

Controlling Nuclear Exports

Assist the international community in effectively controlling exports and establishing responsible

supplier policies. Implement U.S. statutory licensing requirements for nuclear export controls.

Encourage adherence to the Nuclear Suppliers Guidelines. Strengthen multilateral supplier initiatives.

Foster transparency through automated information sharing and analysis. Advance nonproliferation

objectives through technology security.
DOE’s FY 1996 Consolidated Financial Statements

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Goals:

Adopting the Nuclear Suppliers Group (NSG) Information

Sharing System at the April 1996 Nuclear Suppliers

Group Plenary Meeting in Buenos Aires.

Enlisting new signatories to the Nuclear Suppliers

Guidelines: China, Brazil, Ukraine, and Turkey by April

1996.

Completing technical reviews of three non-sensitive fuel

cycle technologies which trigger multilateral nuclear

export controls and seeking formal adoption of a revised

list at the May 1996 meeting of the Nonproliferation

Treaty Exporters Committee (NTEC).

During FY 1996, expanding to four additional countries

training in strategic material identification and illicit

trafficking prevention in order to improve export control

systems in Russia, the other Newly Independent States,

and Eastern Europe.

FY 1996 Results:

NSG agreed that the implementation of a DOE developed

information sharing system should continue to be

encouraged. The NSG has requested an implementation

plan by October 1996.

In April 1996, Ukraine and Brazil were admitted to the

NSG. Contacts with the Chinese were unfruitful.

The U.S. presented its final review of the Trigger List

technologies concerning nuclear reactors, non-nuclear

materials, and fuel fabrication to the NTEC for adoption.

Final adoption took place in October 1996.

In March 1996, in conjunction with U.S. Customs

Service, Czech and Slovak Republics border enforcement

personnel were trained in nonproliferation. Conducted

assessments in Poland and Hungary with U.S. Customs of

country laws and enforcement training to interdict

smuggling of strategic, sensitive nuclear and nuclear

dual-use commodities.

Enhancing the Safety of Soviet-Designed Reactors

Increase the safety of Soviet-era nuclear power plants in countries of Central and Eastern Europe and

the Newly Independent States.

Goals:

Success will be measured in FY 1996 by the Department

continuing to increase the operational safety of Sovietdesigned nuclear power plants and enhancing the safety

cultures in the countries that operate them by:

- Completing draft emergency procedures for all four

types of Soviet-era nuclear plants,

- Improving training of power plant operators by

providing training simulators for five nuclear power

plants and training 150 plant staff through seven

operator exchange visits by the end of FY 1996,

- Assisting the nuclear regulator in Ukraine by

completing the training on licensing dry casks for

spent fuel storage by June 1996 and in Russia by

providing key U.S. DOE safety documentation for

large research reactors and fuel cycle facilities and

by completing several technical workshops by

October 1996, and

FY 1996 Results:

Ninety percent of the emergency procedures have been

drafted. Some of the remaining drafts are contingent

upon completing additional analytical calculations.

Technology transfer, which is the essential element of the

project, has been completed. Western-style procedures,

which will improve the capability of plant operators to

prevent or minimize accidents, have been successfully

implemented at the Novovoronezh nuclear plant in

Russia.

Six contracts for simulators were completed, and one

simulator was provided to the Russian manufacturer for

subsequent delivery to the Khmelnytskyy nuclear plant in

Ukraine. 150 plant operators were trained through

operator exchange visits. In addition, eleven operator

and maintenance pilot training programs and six special

training courses have been developed and implemented.

As of October 1996, 800 staff members from Sovietdesigned nuclear plants had been trained.

Training of the Ukrainian nuclear regulator on licensing

of dry casks for spent fuel storage was completed. The

safety documentation was provided, and six technical

workshops were held.
Supplemental Financial and Management Information

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The Department has provided emergency power and

water supplies, fire detection and fire-fighting equipment,

isolation valves, and other safety equipment at five of the

oldest, least-safe, nuclear power plants.

Assisting in the Shutdown of the Chornobyl Nuclear Power Plant

Facilitate the closure of the Chornobyl nuclear power plant in Ukraine and reduce safety risks during

the plant’s remaining operating period.

Goals:

Providing improved fire safety and other safety equipment, completing a joint U.S./Ukrainian risk assessment

of operating Chornobyl Unit 3, and preparing a preliminary decommissioning plan for Units 1 through 3.

Establishing the International Nuclear Safety and

Environmental Research Center at Slavutich, Ukraine,

near Chornobyl by April 1996 to coordinate nuclear

safety research.

Transferring dry cask spent fuel storage technology,

including three casks and a transporter, to Ukraine and

evaluating Ukraine’s spent fuel management and disposal

requirements and options by September 1996.

FY 1996 Results:

Fire safety and other safety equipment was provided by

September 1996. A draft assessment of risks to Unit 3

due to a potential collapse of Unit 4 was completed in

September 1996. A preliminary decommissioning plan

for Units 1, 2, and 3 is being prepared.

In April 1996, the newly-named International Chornobyl

Center on Nuclear Safety, Radioactive Waste, and

Radioecology was established. Since the Center’s

inception, the U.S. and Ukraine have implemented a

number of projects associated with reactor safety,

hazards management, spent fuel and low-level radioactive waste management, and data collection and analysis

for safety assessments.

All hardware, except for cask liners, has been shipped to

the Zaporizhzhya nuclear plant in Ukraine. A detailed

work plan for developing Ukrainian spent fuel management and disposal requirements was completed.

Managing Workforce Restructuring

Assure fair treatment of workers and communities affected by changing DOE missions through a

cost-effective workforce restructuring process that allows an average cost per separation of $25,000.

The workforce restructuring since 1994 will result in a total savings of $3 billion per year.

Goals:

Limiting the involuntary separation of prime contractor

employees due to workforce restructuring to 20-33

percent by sponsoring voluntary separation, transfers,

and retraining.

Ensuring reemployment of at least 60 percent of separated workers seeking new jobs by sponsoring community-based businesses, career assistance programs,

further education, and retraining programs.

Ensuring that at least 66 percent of the affected workers

are satisfied with DOE’s workforce restructuring process.

Establishing a workforce planning system with a database

on workers’ abilities by September 1996.

FY 1996 Results:

Involuntary separations still comprise slightly over 25

percent of all separations. Given increasing budgetary

pressures, changing missions, and other DOE contractor

activities, it is uncertain whether the 33 percent performance measure is viable after FY 1996.

Results of DOE’s Displaced Worker Survey indicate that

64 percent of those seeking employment made use of

career assistance through outplacement centers, and 60

percent had obtained either full or part-time employment.

In DOE’s Displaced Workers Survey for FY 1995, over 62

percent were either satisfied or very satisfied with their

treatment.

Work is continuing on the Work Force Information

System (WFIS) which will contain a database on workers’

abilities. The WFIS should be fully operational by midFY 1997.

- Improving performance of safety systems at four

nuclear power plants by installing fire detection

systems and removing fire hazards by installing DC

power supplies and by providing an emergency water

supply system by September 1996.
DOE’s FY 1996 Consolidated Financial Statements

78

Establishing a Departmental policy for the treatment of

contractor employees affected by organizational changes

such as contract reform, privatization, and outsourcing.

The Office of Worker and Community Transition’s role on

establishing a Departmental policy has been superseded

by the Department-wide Privatization Working Group

(PWG). The Office is represented on the PWG and

provides input on workforce activities.

ENVIRONMENTAL QUALITY ACTIVITIES - understand and reduce environmental, safety,

and health risks and threats and develop the technologies and institutions required for solving domestic and global environmental problems.

(in millions)

Environmental Management

Environmental Restoration $1,451

Waste Management 2,353

Nuclear Materials and Facilities Stabilization 1,443

Science and Technology Development 366

Landlord Functions 96

Program Planning and Management 101

Uranium Enrichment Decontamination and Decommissioning 279

Subtotal $6,089

Environment, Safety, and Health (ES&H)

ES&H Activities - Non-Defense 81

ES&H Program Direction - Non-Defense 46

ES&H Activities - Defense 56

ES&H Program Direction - Defense 12

Subtotal 195

Civilian Radioactive Waste Management 345

Net Change in Funded Environmental Liability (414)

TOTAL $ 6,215

Environmental Management

Environmental Restoration - in accordance with Federal and State laws and other legal agreements,

protects human health and the environment from risks posed by inactive, surplus DOE facilities and

contaminated areas; remediation activities, including both cleaning-up or containment of contamination including soil, ground water, and surface water; and the decommissioning of contaminated

facilities including reactors and chemical processing buildings.

Waste Management - encompasses safe treatment, storage, and disposal of waste from operations.

The different categories of waste by this program include high-level, transuranic, mixed transuranic,

low-level, mixed low-level, uranium mill tailings, hazardous, sanitary, and special case waste.

Nuclear Materials and Facilities Stabilization - consists of: stabilizing, consolidating, and storing

special nuclear materials, including plutonium and highly enriched uranium prior to final disposition;

deactivating surplus facilities to a safe and low maintenance condition while awaiting final decommissioning; and managing spent nuclear fuel, including treatment and storage. Integral to these functions

is continuous surveillance and maintenance, which is required for safety and security.
Supplemental Financial and Management Information

79

Science and Technical Development - research and development of new more effective and less

expensive technological remedies to the environmental and safety problems of the Environmental

Management Program. The new technologies are necessary to reduce risks to humans and the environment, reduce cleanup cost, and resolve significant related problems for which no solutions currently exist.

Landlord Functions - crosscutting, site-wide infrastructure support, such as electrical systems, laboratory support, road maintenance and upgrades, fire protection, quality assurance, safety and environmental monitoring, sanitary sewer systems, laundry services (for contaminated clothing and materials), utilities, and site security at installations where environmental management activities are performed.

Program Planning and Management - national planning, management, and oversight of the Environmental Management Program performed at Headquarters. The functions include establishing policy,

program reviews, budget preparation, Federal and Congressional liaison, safety oversight, performance tracking, and coordinating national stakeholder interactions.

Uranium Enrichment Decontamination & Decommissioning (D&D) - consists of remedial action and

other related environmental clean-up activities at sites leased and operated by the United States

Enrichment Corporation, including DOE facilities at these sites, and, additionally, provides for partial

reimbursement of remediation costs attributable to other uranium and thorium purchased by the

Federal government.

Environment, Safety, and Health (ES&H)

ES&H Activities - Non-Defense - provides Departmentwide technical support in areas of nuclear

safety, occupational health and safety, environmental compliance, and health studies, including the

National Environmental Policy Act (NEPA), Radiation Effects Research Foundation (RERF), safety

assistance, and environmental compliance implementation assistance.

ES&H Program Direction - Non-Defense - management and administration of non-defense activities,

including associated personnel, travel, and support costs.

ES&H Activities - Defense - provides independent oversight and technical assistance for environment, safety, health, safeguards, and security at the Department’s defense related facilities, including

related oversight and health studies.

ES&H Program Direction - Defense - management and administration of defense related activities,

including associated personnel, travel, and support costs.

Civilian Radioactive Waste Management (CRWM) - development and management of a permanent

Federal disposal facility for spent nuclear fuel from civilian reactors and high-level radioactive waste

from atomic energy defense activities in a manner that assures public and worker safety and protects

the environment.

Net Change in Funded Environmental Liability - annual adjustment made to account for the net

change between beginning and ending balances in DOE’s funded environmental liabilities. During
DOE’s FY 1996 Consolidated Financial Statements

80

FY 1996, the funded environmental liability decreased by $414 million, representing expenditures

made by DOE in excess of the FY 1996 appropriation for environmental quality activities.

Performance Measures

Making Progress on Mixed Waste Treatment

Continue working with state and Environmental Protection Agecy regulators to reach agreements and

implement plans to treat sites with low level mixed waste.

Goals:

Reaching agreements at seven remaining sites by December 1995.

Meeting the 130 milestones for FY 1996 for waste

characterization and treatment activities, including:

- awarding a contract for privatized treatment of

certain waste streams at the Oak Ridge Reservation

and the Hanford site,

- requesting proposals for an advanced mixed waste

treatment facility at the Idaho National Engineering

Laboratory,

- starting operations of the Consolidated Incineration

Facility (CIF) at the Savannah River Site, and

- treating more than 180,000 cubic meters of mixed

waste.

FY 1996 Results:

DOE has completed its activities related to the remaining

seven agreements. Four agreements have been signed.

The Department submitted all Site Treatment Plans to the

regulators. The regulators bear responsibility and control

the schedule for finalizing Plans and orders for the

remaining three sites.

Low-level mixed waste sludge has been successfully

treated during a technology and process qualification

Phase I at Oak Ridge. A contract to demonstrate the

reliability, safety, and cost-effectiveness of the QuantumCEPtm technology for processing DOE’s mixed waste was

awarded in the fourth quarter of FY 1996. The broad

spectrum contract will be awarded in the fourth quarter of

FY 1997. Hanford awarded the mixed waste contract in

November 1995. Treatment of 30,000 drums begins in the

year 2000. The contractor is pursuing the Resource

Conservation and Recovery Act permit.

A feasibility assessment for the Advanced Mixed Waste

Treatment Privatization project at Idaho was completed in

1995. A Request for Proposals was released in January

1996. A contract was awarded in December 1996.

Preliminary startup testing and a pre-trial burn at the CIF

at the Savannah River Site was conducted in late 1995. A

number of problems were identified during that process

which required the schedule for startup of the CIF to be

modified. Physical modifications necessary to operate

CIF were completed in December 1996, and the facility is

currently in the startup testing phase.

Through FY 1996, the Department tracked to a baseline

inventory of 85,423 cubic meters of low-level mixed waste

(LLMW). Through September 30, 1996, LLMW additions

to inventory were 17,214 cubic meters, reductions were

33,763 cubic meters, and disposed was 8,690 cubic

meters. The current inventory is 59,710 cubic meters of

LLMW, a 30 percent reduction in inventory.
Supplemental Financial and Management Information

81

Shutting Down and Cleaning Up Surplus Non-Weapons Nuclear Reactor Sites

Safely deactivate surplus nuclear facilities, including the Fast Flux Test Facility (FFTF) reactor in

Washington and the Experimental Breeder Reactor-II (EBR-II) in Idaho, and prepare wastes for

interim storage and ultimate disposition.

Goals:

Completing critical steps to deactivate the FFTF by:

- washing and packaging 56 of 382 FFTF spent fuel

assemblies into interim storage casks and placing the

casks in secure storage by September 1996, and

- removing fresh fuel and eliminating unneeded

security at the FFTF by September 1996, thus saving

$500,000 annually.

Completing critical steps to deactivate the EBR-II by:

- completing 86 percent of the EBR-II fuel removal by

September 1996. All fuel will be removed from the

reactor by December 1996, and

- completing modification of the Sodium Processing

Facility by September 1996 to stabilize coolant

drained from the EBR-II.

FY 1996 Results:

Washed and packaged 63 of 382 FFTF spent fuel assemblies into interim storage casks and placed the casks in

secure storage.

Because of the Department’s on-going consideration of

the FFTF as a potential tritium supply source, the fresh

fuel was not removed from the facility, and the associated

safeguards and security were not eliminated as scheduled

in the shutdown program.

89 percent of EBR-II fuel was removed by the end of

September 1996.

The Sodium Processing Facility at Argonne National

Laboratory -West was completed in November 1996.

Ensuring Environmental Justice

Implement the Department’s plan to reduce disproportionate negative impacts of our operations and

facilities on low-income and minority communities by accelerating waste management, pollution

prevention, and environmental remediation activities.

Goals:

Increasing the removal of organic solvents from soil and

groundwater within the “A/M” area of the Savannah

River Site by 74 percent by September 1996.

Initiating construction of an interim cap to prevent the

migration of contaminants from the Old Burial Ground at

the Savannah River Site by September 1996.

Initiating clean up activities near the East Fork Poplar

Creek community at the Oak Ridge Site by April 1996.

Implementing an environmental justice communications

strategy plan for affected communities.

FY 1996 Results:

By deploying three new technologies (mechanical soil

vapor extraction, barometric pumping and pure phase

extraction), a 75 percent increase in the removal of

organic solvents was achieved, and over 90,000 pounds

of organic solvents were removed from soil and groundwater within the “A/M” area of the Savannah River Site.

Construction of an interim cap over the Old Burial

Ground to prevent migration of contaminants was

initiated early due to expeditious regulatory review and

approval of the proposed action at the Savannah River

Site.

Phase I of the cleanup near the East Fork Poplar Creek

community at the Oak Ridge Site is in process, and Phase

II, which involves the cleanup of 25,000 cubic yards of

soil, will be initiated in May 1997 with completion

scheduled for September 1997.

A prototype framework is being developed to enhance

intra-Departmental communications for environmental

justice. It includes health-related aspects of subsistencerelated risk communications with communities engaged in
DOE’s FY 1996 Consolidated Financial Statements

82

subsistence consumption through a tri-annual Subsistence

and Environmental Health Newsletter for which the

Spring and Summer editions have been disseminated, and

the Fall edition was distributed in October 1996.

Preventing Future Pollution

Implement pollution prevention programs that pay for themselves through productivity gains and the

avoidance of future waste management costs.

Goals:

Issuing pollution prevention performance measures and

waste reduction goals by March 1996 to be achieved by

the year 2000.

Ensuring that half of DOE’s purchases of Environmental

Protection Agency designated products contain recycled

or recovered materials.

Initiating 20 additional projects in FY 1996 that will

yield net savings of at least $30 million over a three year

period.

Completing analysis and issuing a report by March 1996

concerning the contamination resulting from each step of

nuclear weapons production to prevent future generation

of waste.

FY 1996 Results:

In May 1996, the Secretary issued her Departmental

pollution prevention goals and 1996 Pollution Prevention

Program Plan. The latter document contains performance measures.

DOE has issued a series of informational and guidance

memoranda to the field. DOE has stressed that 50

percent of DOE purchases include recycled or recovered

material. The roll-up of field performance data will

allow for the ultimate assessment as to whether this goal

has been achieved. Data will be available by January 15,

1997.

Twenty projects were initiated in March 1996 at a total

cost of $6 million. The total annual savings projected

from the implementation of these projects is $19.5

million.

A report entitled “Linking Legacies”, which concerns the

contamination resulting from each step of nuclear

weapons production to prevent future generation of

waste, was released at the January 15, 1997, Openness

Initiative Press Conference. The deadline of March 1996

was not met because of severe staff cutbacks and competing projects.

Reducing Serious Vulnerabilities

Complete Highly Enriched Uranium (HEU) Vulnerability Study to identify environment, safety, and

health (ES&H) vulnerabilities.

Goals:

Success will be measured by reducing the number of

unaddressed serious HEU vulnerabilities at DOE

facilities to zero.

FY 1996 Results:

Approximately 155 serious ES&H vulnerabilities were

identified by the Highly Enriched Uranium Vulnerability

Assessment, completed in FY 1996. Some were immediately fixed, and all are being addressed by corrective

action plans.

Institutionalize a Multi-Disciplinary Oversight Process

Institutionalize a multi-disciplinary, fully integrated oversight process for evaluating ES&H and

safeguards and security programs.

Goals:

Completing value-added, comprehensive oversight

evaluations, focusing on ES&H-management systems at

seven DOE sites.

FY 1996 Results:

Comprehensive, multi-disciplinary ES&H oversight

evaluations have been completed for seven DOE sites

during FY 1996.
Supplemental Financial and Management Information

83

ENERGY RESOURCES ACTIVITIES - encourage energy efficiency; advance alternative and

renewable energy technologies; increase energy choices for all consumers: assure adequate supplies of

clean, conventional energy; and reduce U.S. vulnerability to external energy supply disruptions.

(in millions)

Energy Efficiency and Renewable Energy

Solar and Renewable Resource Programs $296

Energy Efficiency Programs 885

Subtotal $1,181

Fossil Energy

Coal Research and Development (R&D) 165

Petroleum R&D 68

Gas R&D 124

Fossil Energy R&D Supporting Activities 61

Fossil Energy R&D Program Direction 12

Clean Coal Technology 251

Strategic Petroleum Reserve 159

Subtotal 840

Nuclear Energy

Nuclear Energy R&D 191

Termination Costs 71

Isotope Production and Distribution 27

Uranium Supply and Enrichment Services 107

Subtotal 396

Other 78

TOTAL $2,495

Energy Efficiency and Renewable Energy

Solar and Renewable Resource Programs - research and development of efficient, reliable, and environmentally sound renewable energy technologies for buildings, industrial, transportation, and utility

economic sectors, including related advanced energy systems utility grid integration.

Energy Efficiency Programs - research and development of energy efficiency technologies in buildings, industrial, transportation, and utility economic sectors and additionally providing technical and

financial support through grants to State and local governments and others.

Fossil Energy

Coal Research and Development - research and development (R&D) of coal technologies to meet

future national energy and environmental demands and to position the U.S. coal industry to respond

to growing export market opportunities while maintaining our national energy security.

Petroleum R&D - research and development of increased domestic oil production technology, enhanced processing and utilization technologies, and reservoir life extension.

Gas R&D - research and development of natural gas exploration, production, processing, and storage

technologies.
DOE’s FY 1996 Consolidated Financial Statements

84

FY 1996 Results:

Each of the five technologies is at least in laboratory

bench testing.

The final engine partnership with Chrysler was added in

March.

This goal was exceeded when the fifty-first city was added

in October.

Fossil Energy R&D Supporting Activities - crosscutting program activities, including environment,

safety and health, cooperative research, materials research, and related essential fuels programs.

Fossil Energy R&D Program Direction - program management and administration, including personnel and contract support costs.

Clean Coal Technology - joint Federal and private industry development of promising advances in

coal-based technologies and demonstration of commercial marketplace potential.

Strategic Petroleum Reserve - operation and maintenance of the U.S.’s emergency stored oil supply

at five sites in Texas and Louisiana.

Nuclear Energy

Nuclear Energy R&D - research and development of commercial nuclear power, including universities, space, and defense applications and international nuclear safety collaborations.

Termination Costs - complete, effective, and radiologically safe shutdown of formerly used Federal

nuclear research facilities.

Isotope Production and Distribution - production and distribution of radioactive and stable isotope

products and related services.

Uranium Supply and Enrichment Services - economically supplies safe, environmentally-sound

nuclear products and services and addresses crucial domestic and international uranium processing

issues.

Performance Measures

Designing and Delivering Cars of the Future

Lead the design team, of the multi-agency and industry Partnership for a New Generation Vehicle,

with the goal of developing an 80 mile-per-gallon family car. Deliver the individual technologies in

new car models as they are proven effective and demonstrate a prototype car of the future by 2004.

Goals:

Delivering fuel cell, battery, turbocharger, generator,

and diesel prototype technologies for demonstration,

testing, and pilot production.

Adding the final “engine” project partnership, and

completing the planned R&D team and portfolio needed

to design and build the prototype family car.

Adding 15,000 alternative fuel vehicles to the existing

27,000 car fleet in 50 Clean Cities, including 15 new

cities this year. The new vehicles will reduce annual oil

imports by an additional 4 million gallons, increasing the

program savings to 11 million gallons a year.
Supplemental Financial and Management Information

85

Boosting the Nation’s Production of Natural Gas and Oil

Improve the capability of the nation’s petroleum industry to produce additional supplies of secure,

domestic natural gas and oil, increasing U.S. gas and oil production by an average of 1 million barrels

per day (oil equivalent) during the 2001 - 2010 period.

Goals:

Demonstrating and/or transferring to industry, using

national lab expertise, at least six new geophysical

imaging technologies that will improve exploratory well

success rates from a current average of 40 percent to 50

percent.

Demonstrating at least five new data processing and

simulation methods for applying advanced computing

technology developed by national laboratories for other

government programs to improve domestic prospects for

producing natural gas and oil.

FY 1996 Results:

Prototype devices for five geophysical imaging technologies have been completed and are undergoing field trials,

and one technology has been commercialized. The

exploratory well success rate has improved to 48 percent

for the first four months of 1996, and continued improvements are expected as new geophysical technologies,

including those developed by DOE, are adopted by

industry. The total FY 1996 results will not be available

until the end of March 1997.

The five projects are expected to successfully complete

interim products with FY 1995 carry-over funds. However, continued progress toward the commitment to

increase U.S. oil and gas production by 1 million barrels

starting in 2001 is at risk because of major budget cuts

announced after publication of the Performance Agreement. Accomplishments to date include: computer code

that provides a three-fold acceleration for parallel

processing of subsalt seismic data; multiphase fluid

simulator for underbalanced drilling; publications on

prototype computer model to predict geopressured

reservoirs; prototype data server available on the

Internet; and synthetic seismic data sets for a subsalt

structure and an overthrust structure available for

industry use in calibrating processing systems.

Reducing U.S. Vulnerability to Energy Supply Disruptions

Ensure by the year 2000 the readiness of the Strategic Petroleum Reserve (SPR) to draw down 563

million barrels (MMB) of crude oil at a sustainable rate of 4.2 MMB/day within 15 days of receiving

direction from the President.

Goals:

Degasifying an additional 61 million barrels of inventory

to increase drawdown capability from 3.2 to 3.4 MMB/

day and inventory availability to 510 MMB.

FY 1996 Results:

After commitment/measures were put in place, final

decisions were made to move oil from Weeks Island and

to finance this and deficit reduction by selling oil. This

decision, coupled with a new requirement to degas 33

MMB of Weeks Island oil after moving it, reduced the

planned inventory available for drawdown at the end of

FY 1996 from 510 to 459 MMB, and the SPR total shown

in the commitment from 585 to 574 MMB. Since these

events were beyond program control, success is measured

below against the 459 MMB level.

An additional 68 MMB of inventory was degassified,

thereby exceeding the projected 61 MMB and increasing

drawdown capability from 3.2 to 3.4 MMB per day.

Inventory available for drawdown was 466 MMB versus

the revised success measure of 459 MMB.
DOE’s FY 1996 Consolidated Financial Statements

86

FY 1996 Results:

The Wabash River Coal Gasification Repowering Project

plant construction is complete, and commercial operation

began December 1, 1995. The Tampa Electric Integrated

Gasification Combined Cycle Project completed construction and commenced start up in August 1996.

The Milliken Clean Coal Technology Demonstration

Project conducted sulfur performance testing during

1996, and data evaluation is in progress. Construction

has been delayed on the Commercial Demonstration of

the NOxSO SO2

 / NOx Removal Flue Gas Cleanup System

due to a change in site/sponsor and the need to obtain

new financing. This project is expected to achieve SO2

reductions of 98 percent and NOx reductions of 70

percent.

Full scale testing of additives has been completed at six

power plants. 95-98 percent SO2

 removal was achieved

at five of the sites. Performance at the sixth site was 93

percent (up from a baseline of 86 to 89 percent). The

cost per additional ton of SO2

 oval ranged from $35 to

$70.

The first complete molten carbonate fuel cell plant

successfully began operation on April 25, 1996 in Santa

Clara, CA with a second plant scheduled to begin

operation by the end of CY 1996 in San Diego, CA.

Phase III (technology readiness testing) has been initiated with two manufacturers of utility-sized gas turbines

(General Electric and Westinghouse). This program is

accelerating the introduction of U.S. power generation

technology that complies with increasingly stringent

environmental standards.

Initiating an additional 22 percent of the infrastructure

life extension program, thereby completing nearly half of

the program.

Completing transfer or sale of 80 percent of 72 MMB of

oil from the Weeks Island storage site to a more geologically stable site ensuring the availability of this oil.

An additional 20 percent of the infrastructure life

extension program was initiated, bringing implementation

to 46 percent towards extending SPR facility and systems

capability with a high level of reliability and operating

cost efficiency to the year 2025.

The removal of approximately 88 percent of 72 million

barrels of oil from Weeks Island storage site was accomplished, thereby exceeding the 80 percent success

measure and ensuring the availability of this oil for

drawdown. Also included was the successful sale of 18

MMB to finance decommissioning and general budget

deficit reduction.

Developing the Clean, High Efficiency Power Plant of the 21st Century

Provide the nation’s electric power industry from 2000 to 2010 with a new generation of natural gas

 and coal power technologies that progressively reduce CO2 emissions by 30 to 50 percent, lower SO2

and NOx emissions to as little as 1/10th of the levels mandated by current Federal standards, and

produce electricity at costs 10 to 20 percent below today’s conventional plants.

Goals:

Continuing accomplishments in the Clean Coal Technology Demonstration Program, including:

- starting up the nation’s first two full commercialscale coal gasification combined cycle facilities,

both achieving 96 percent or greater SO2

 removal

and NOx reductions of at least 90 percent, and

- demonstrating the market readiness of two more

advanced pollution control retrofit technologies that

can remove up to 70 percent of NOx and SO2

pollutants.

Demonstrating a low-cost combustion gas additive that

increases SO2

 emissions removal from 92 percent to 98

percent in wet scrubbers and reduces cost from about

$300 to $50 to $100 per additional ton of SO2

 removed.

Beginning the test runs of the first two complete natural

gas molten carbonate fuel cell plants - one for utility

power generation, the other for onsite cogeneration -

that will lead to a 60 percent efficient market-ready fuel

cell system by the year 2000.

Moving two U.S. natural gas turbine technologies into the

large-scale component development stage, leading by the

year 2000 to a full-scale prototype of a 60 percent

efficient, ultra-low, NOx advanced gas turbine system.
Supplemental Financial and Management Information

87

Certifying the Next Generation of Nuclear Power Plants

Establish standardized designs and complete the testing and other activities necessary to receive

Nuclear Regulatory Commission (NRC) certification of the next generation of light water reactors

that will be simpler, safer, and less expensive to build and operate than existing plants.

Goals:

Supporting design certification by NRC for the Advanced

Boiling Water Reactor and for System 80+ by the end of

FY 1996.

By April 1996, completing testing and test analysis

reports for the AP-600 nuclear plant design that are

needed to support issuance by NRC of the Supplemental

Draft Safety Evaluation Report.

FY 1996 Results:

NRC issued Final Design Approval for the reactor in July

1994 and the Notification of Rule making in March 1995.

The NRC design certification process will extend into the

1997 calendar year but is expected to be completed

successfully. The Department’s role in providing design

certification is essentially completed. DOE will continue

to work with NRC and the industry to resolve remaining

concerns until the certification is granted.

Testing and test analysis reports were completed on

schedule.

Implementing International Climate Change Initiatives

Monitor and mitigate greenhouse gas emissions and achieve U.S. goals under the United Nations

Framework Convention on Climate Change’s Climate Change Treaty.

Goals:

Conducting an interagency evaluation of the second

round of the U.S. Initiative on Joint Implementation

(USIJI) proposals and awarding the winning proposals by

December 1995. These actions are estimated to reduce

carbon emissions by more than 5 million metric tons in

the developing countries by the year 2000.

Completing the first round of 56 climate change country

studies, which will produce each country’s greenhouse

gas emission inventories, risks associated with climate

change, and mitigation plans to reduce or capture

greenhouse gas emissions.

FY 1996 Results:

A second round of project selection in USIJI was completed, and seven new projects were selected. These

actions are estimated to reduce carbon emissions by more

than 5 million metric tons in the developing countries by

the year 2000.

All 56 country studies projects are complete, and draft or

final reports have been received from the participating

countries. These reports are serving as the basis for the

national communications of developing countries which

are due to the Convention next year. This program has

generated considerable good will and is cited by developing countries in almost every climate change fora. DOE

participated in the first three meetings of the Ad Hoc

Group on the Berlin Mandate, which is negotiating next

steps under the Convention.

Maximizing the Value of Federal Oil Fields

Maximize the value to the taxpayer of the Naval Petroleum and Oil Shale Reserves (NPOSR) by

divesting them to the private sector, subject to Congressional authorization before the end of FY

1998.

Goals:

Offer the government-owned and operated commercial oil

field at Elk Hills for sale to the private sector and

conduct a study of other NPOSR assets.

FY 1996 Results:

PL 104-106, which authorizes the sale of Elk Hills by

February 10, 1998, outlines the process for the determination of a fair market value of Elk Hills, as well as the

administration of the sale. Results to date include:

- CS First Boston was contracted to serve as the

investment banker to administer the sale. Petrie
DOE’s FY 1996 Consolidated Financial Statements

88

FY 1996 Results:

DOE intentionally delayed issuance of the Final EIS for

the molybdenum-99 initiative until April 1996. The ROD

was issued in September 1996, and the Department

revised the schedule for the overall project.

Sample quantities of molybdenum-99 were produced in

October 1996, on time under the revised schedule.

Prior to the sale, operating the Reserves in FY 1996 so as

to achieve net revenues in the range of $217 to $256

million to the Treasury.

Parkman was brought in to serve as the expert on

elements of the sale unique to the petroleum

industry.

- Ryder Scott Company was contracted to prepare a

reserves report of the Elk Hills field, describing in

detail the estimated volumes of oil, gas, and hydro

carbon liquids available for recovery.

- Netherland, Swell, & Associates, Inc. was contracted

to serve as the independent petroleum engineer in

order to prepare a recommendation on final equity

interest for each oil and gas zone at Elk Hills.

- Two additional contracts were awarded for legal

and administrative support services.

- Gustavson Associates was awarded contract to

conduct study of other NPOSR assets. The report

was completed.

FY 1996 operation of the Reserves achieved:

- Production of 40 million barrels of oil and equivalent gas.

- Net revenues of $241 million.

Improving Efficiency in Energy Intensive Industries

Work with the most energy-intensive industries to focus cooperative research, increase energy and

resource efficiency, and improve U.S. competitiveness resulting in over $20 billion of industry energy

cost savings by the year 2000.

Goals:

Signing partnership agreements with the metal castings

industry in October, chemical industry in June, glass

industry in September, and aluminum industry by September to achieve “Industrial Visions of the Future,” which

include economic, energy efficient, and environmentally

superior technologies.

Beginning four new technology road maps with industry

representatives teaming and cost-sharing with DOE

programs, researchers, and laboratories.

FY 1996 Results:

Metal castings and glass industry partnership agreements have been signed. The aluminum industry

agreement was signed in October. The chemical

industry agreement has been rescheduled for late winter.

Four technology road maps have begun in the metal

castings, glass, aluminum, and chemical industries.

Ensuring the Availability of Isotopes for Industry, Research, and Health Care

Ensure the timely, reliable, and cost-effective availability of isotopes for use in U.S. industry, research, and health care. Reduce dependence on foreign markets for molybdenum-99, which is used

in 15 million diagnostic medical tests per year in the U.S.

Goals:

Issuing the Environmental Impact Statement (EIS) and

reaching a Record of Decision (ROD) by March 1996 on

establishing a domestic source of molybdenum-99 production.

Demonstrating a domestic source capability for molybdenum-99 through production of at least 30 curies of

molybdenum-99 by September 1996.
Supplemental Financial and Management Information

89

Improving the on-time delivery rate for all deliveries

from 91 to 95 percent by January 1996. (Measure

revised for purpose of accuracy.)

Working with U.S. industry to identify, by the end of

September 1996, at least five specific activities now

conducted by the DOE Isotope Production and Distribution program that can be privatized within one year.

The Department’s on-time delivery rate reached 95

percent by January 1996.

The request for expressions of interest in privatization

was published in December 1995, and responses were

obtained by April 1996. Five activities for privatization

were identified on schedule. In addition, hot cell operations for the production of isotopes at Idaho National

Engineering Laboratory were commercialized on October

1, 1996. The privatization initiative is proceeding.

MANAGEMENT AND OTHER ACTIVITIES - encompasses crosscutting areas of the Department, including management and administration, regulation, and energy information.

(in millions)

Departmental Administration and Staff Offices $370

Inspector General 28

Economic Regulation

Hearings and Appeals $4

General Counsel Compliance Office 4

Subtotal 8

Energy Information Administration

National Energy Information Systems 79

Federal Energy Regulatory Commission 146

Other 6

TOTAL $637

Departmental Administration

Departmental Administration and Staff Offices - salaries and expenses for staff organizations including: the Office of the Secretary; Policy; Chief Financial Officer; Human Resources and Administration; Field Management; Congressional, Public, and Intergovernmental Affairs; General Counsel;

Economic Impact and Diversity; and Board of Contract Appeals.

Inspector General

Inspector General - in accordance with the Inspector General Act of 1978, conducts investigations,

audits, and inspections to detect and prevent fraud, abuse, and violations of law, and to promote

economy, efficiency, and effectiveness of DOE operations.

Economic Regulation

Hearings and Appeals - processes and resolves refund requests related to Emergency Petroleum

Allocation Act of 1973 regulatory program actions. Additionally, this office processes Freedom of

Information Act and Privacy Act appeals, conducts evidentiary hearings to determine employee

security clearance eligibility, and processes requests for exception from DOE regulations and orders.

General Counsel Compliance Office - administers enforcement activities resulting from Emergency

Petroleum Allocation Act of 1973 violations.
DOE’s FY 1996 Consolidated Financial Statements

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Energy Information Administration

National Energy Information Systems - functioning as an independent statistical/analytical agency,

develops and maintains a comprehensive energy database, publishes a wide variety of energy reports

and analyses as required by law and responds to energy information inquiries from DOE decision- and

policy-makers, the Congress, other government entities, industry, and the general public. Information

disseminated includes data on energy reserves, production, distribution, consumption, prices, technology, and related international economic and financial market information.

Federal Energy Regulatory Commission

Natural Gas and Oil Regulation - ensures that natural gas and oil pipelines provide reliable service at

just and reasonable rates, that rates appropriately respond to competitive market signals, and that the

infrastructure is developed in an environmentally acceptable way to serve new markets.

Hydropower Regulation - ensures water resource developments are safely constructed, operated, and

maintained consistent with environmental values and public interests, including project licensing, dam

safety, project compliance, and the investigation and assessment of headwater benefits.

Electric Power Regulation - regulates interstate transmission and sale of electricity by investor owned

utility companies and addresses related market-based issues such as mergers, wheeling, pooling, and

cogenerating.

Performance Measures

Improving Services to Customers and Stakeholders

Develop techniques to improve delivery of services and products to customers and stakeholders.

Goals:

Eliminating the 1993 and 1994 backlog of 208 Freedom

of Information Act (FOIA) cases.

Centralizing FOIA/Privacy Headquarters Operations to

ensure compliance with 10-day statutory response time.

FY 1996 Results:

In January 1996, the Freedom of Information Act (FOIA)/

Privacy Act Office announced its current backlog

reduction initiative, which targets completion of requests

received in 1993 and 1994 by the end of the fiscal year.

Of the 208 cases identified, 148 have been completed, 21

have been referred to other agencies, and 39 remain

pending within our program offices.

As part of the Strategic Alignment Initiative (SAI), it was

agreed that centralizing Headquarters FOIA/Privacy Act

processing activity into one office would improve customer service. However, in the face of congressionally

imposed budgetary constraints, a modified centralization

pilot was implemented on April 1, 1996. This pilot

utilized existing FOIA/Privacy Act staff augmented by

four detailees from program offices. Eight of twenty-two

program offices are participating in the pilot. Since the

pilot was implemented, 70 centralized requests have been

received. 42 requests are completed, and the average

processing time was 30 days. Interim/partial responses

have been forwarded for the remaining 28 requests.
Supplemental Financial and Management Information

91

Involving Stakeholders in the Policy Making Process

Assure that the business of DOE will be open to the full view and input of those whom it serves,

consistent with applicable laws, regulations, and contracts.

Goals:

Ensuring that Environmental Management (EM) decisions consider the input of site specific groups.

Completing a third national survey of DOE stakeholders’

attitudes, needs, and expectations of DOE by July 1996 to

assess the Department’s progress against the FY 1993

baseline.

FY 1996 Results:

DOE has undertaken two initiatives that ensure considering input from site-specific groups: Site-Specific

Advisory Boards (SSAB) and Public Participation in the

FY 1998 EM Budget. The SSABs provide EM with

advice on policy issues and help ensure that stakeholder

input is given fair and adequate consideration in EM

decisions. Nearly 70 percent of SSAB participants feel

that the SSABs have provided informed advice to DOE.

Also, all steps for involving the public in the FY 1998

budget formulation process have been completed on

time.

Two surveys (1992 & 1994) have shown remarkable

progress; this third survey will keep DOE focused on

continual improvement. The due date for completing

interviews for the Trust and Confidence Survey has been

postponed until December 1996/ January 1997 to be

consistent with the timing of the last two national

surveys.

Streamlining Management Structure

Reduce management layers and encourage employee empowerment.

Goals:

Increasing the worker to supervisor ratio to 11:1 from a

ratio of 7.9:1 in September 1995.

Decreasing the number of employees in senior level

positions (SESs, GS-15s, and 14s) by 194 from 5,568 at

the end of FY 1995.

FY 1996 Results:

As of September 28, 1996, DOE’s employee to supervisor

ratio was 8.5:1, improving from the end of FY 1995 ratio

of 7.9:1. It should be noted that, since FY 1993, DOE

has decreased its number of supervisors from 3,345 to

1,758 (47 percent).

As of September 28, 1996, the number of senior level

positions was 5,479, a reduction of 89 positions.

Recruiting, Rewarding and Retaining Technical Excellence

Use personnel tools to attract and retain technical excellence in managing defense nuclear facilities.

Goals:

Fully implementing the Technical Qualifications Program

by December 1995 to cover all 2,800 technical employees

involved in managing defense nuclear facilities.

Updating all Individual Development Plans for the

technical employees of defense nuclear facilities to

incorporate the Technical Qualifications Program

competencies.

FY 1996 Results:

The Office of Human Resources and Administration is

tracking the employees who meet the Technical Qualifications Standards. The Technical Qualification Program

was implemented May 31, 1996, across DOE at Defense

Nuclear Facilities.

Individual Development Plans for employees at defense

nuclear facilities have been updated to include Technical

Qualification Standards.
DOE’s FY 1996 Consolidated Financial Statements

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Increasing the technical to non-technical ratio for

defense nuclear related positions to 1:0.8 by December

1996, from a ratio of 1:0.85 in December 1995.

Critical unmet technical safety staffing needs have been

identified. Fifty-five positions (75 percent) will be filled

by December 1996. The technical to non-technical hiring

ratio will then be 1:0.8.

Providing Transition Assistance to Employees

Offer career transition assistance to minimize the impacts of downsizing on Department employees.

Goals:

Expanding services of the Career Management Resource

Center to provide transition assistance to Headquarters

employees by:

- Increasing the number of employees served by 20

percent from 3,235 in FY 1995 to 3,880 in FY 1996,

and

- Increasing the number of workshops to aid employees

in actions related to career transition by over 40

percent; from 22 workshops in FY 1995 to 36 in FY

1996.

Increasing Departmental field sites with transition

assistance services from 4 in FY 1995 to 13 in FY 1996 as

needed.

FY 1996 Results:

The Career Management Resource Center experienced a

26 percent increase in the number of visitations during

FY 1996 (4,085) when compared to the total for FY 1995

(3,235). The Center exceeded the success measure of

3,880 visitors for the fiscal year.

The number of workshops to aid employees in actions

related to career transition exceeded the target of 36 for

FY 1996. The number of these workshops increased from

22 in FY 1995 to 37 in FY 1996. The Career Center also

sponsored 22 workshops related to professional development.

As of October 15, 1996, 13 Department of Energy sites

reported that they had established career transition

services, and two more sites intend to establish such

services in FY 1997.

Setting a New High Standard in Contract Management

Establish a new legacy of improved contracting through the Department’s solicitations and negotiations, facilitating privatization activities, and ensuring translation of contract reform into Department

policies, procedures, and guidance.

Goals:

Selecting contractors and incorporating contract reforms

into contracts for four sites and for the 15 DOE facilities

whose contracts are to be extended in FY 1996.

Developing Departmental policy on privatization by April

1996.

Issuing a solicitation to privatize the treatment of tank

waste at Hanford by February 1996.

Publishing a proposed rule making by April 1996 which

reflects Departmental policies on competition, contractor

accountability, contractor fees, and make-or-buy decisions.

Reducing support service contracts to $610 million by

September 1996 from an FY 1994 baseline of $700

million.

FY 1996 Results:

Contract extensions, selections, and reforms have been

made at nine DOE facilities; DOE will compete three

contracts at Oak Ridge and close out contract work at

Pinellas and the Laboratory of Radiobiological and

Environmental Health; cooperative agreements were put

in place at the Inhalation Toxicology Research Institute

and Savannah River Ecology Laboratory; and a solicitation was issued at Mound.

The final draft of the DOE policy privatization is in final

review.

The solicitation was issued on schedule in February

1996.

The rule making was published in June 1996 in the

Federal Register which covers DOE policies on competition, contractor accountability, and make-or-buy decisions. The policy on contractor fees is still under

deliberation.

The savings for FY 1996 are $184 million; $94 million

more than the target.
Supplemental Financial and Management Information

93

Reducing Federal Regulations

Eliminate unnecessary prescriptive requirements as well as nonessential processes, reports, forms, and

directives.

Goals:

Reducing the number of DOE operations offices’ field

directives from 856 in FY 1995 to 290 in FY 1996; a 66

percent decrease. Overall, the number of directives will

have been reduced by 80 percent since this effort began

in FY 1993.

Achieving an additional 10 percent reduction in the

number of Headquarters directives from 156 in FY 1995

to 140 in FY 1996.

Reporting operational improvements realized as a result

of the directives reduction efforts.

FY 1996 Results:

In reducing their overall field directives inventory to 200,

the operations offices have exceeded the reduction goal.

This represents an 86 percent reduction from the FY 1993

baseline.

As of September 30, 1996, 22 Headquarters directives

were eliminated, representing a 14 percent reduction.

Operational impacts resulting from DOE directives

reduction efforts have been identified via a cross-cutting

DOE team, led by the Office of Human Resources and

Administration. Significant cost savings and delegations

of authority associated with the Department’s Work for

Others and environment, safety, and health compliance

programs are anticipated. The pilot of directives cost

impact model identified $114 million savings over 5

years.

Reducing the Oversight Burden on Field Activities

Improve the efficiency of DOE oversight of field offices, laboratories, and major contractors by

consolidating oversight visits and simplifying technical reviews.

Goals:

Improving the business management review process for

field activities by reducing the number of oversight visits

by 80 percent and associated costs by $10 million.

Improving the technical review oversight process for the

national laboratories by reducing the number of reviews

and overall cost of oversight.

Improving the program supported Environment, Safety,

and Health (ES&H) oversight process at six pilot laboratories and reducing associated costs by 30 percent.

FY 1996 Results:

The number of oversight visits at laboratories have

decreased 94 percent from 343 to 21, saving $7 million to

date. Data from non-laboratory contractors is pending;

savings in excess of $3 million are expected.

A pilot for Simplification of Technical Reviews of DOE

National Labs is being implemented during CY 1996 at

Argonne, Sandia, and National Renewable Energy

Laboratory. Joint planning of reviews by program and

laboratory managers with cognizance of program offices

will assist the improvement of review procedures.

Major accomplishments in FY 1996 include: reducing the

number of program supported ES&H oversight assessments; reducing costs by approximately 30 percent;

improving ES&H performance measures, and improving

feedback on performance.

Extending Use of DOE Lands and Facilities

Initiate comprehensive planning to integrate life cycle asset management goals of stakeholders and the

Department and to determine ways to broaden the use of DOE lands and facilities.

Goals:

Initiating comprehensive land use planning processes at

40 of the Department’s 50 major sites to set the context

FY 1996 Results:

Forty-two of the Department’s 50 major sites initiated

comprehensive land use planning processes to set the
DOE’s FY 1996 Consolidated Financial Statements

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for future use decisions and to reduce duplicative

planning efforts.

Completing at least ten major actions to make land and

facilities available for broader public use.

context for future use decisions and to reduce duplicative

planning efforts. Comprehensive land use planning is not

applicable at the remaining eight sites at this time.

DOE completed over 35 major actions to make land and

facilities available for broader public use.

Improving Management Practices at the Department of Energy’s Laboratories

Focus and clarify the missions of DOE laboratories to simplify oversight practices and adopt “best

business practices” to ensure efficient operations.

Goals:

Reducing laboratory operating cost by $264 million in FY

1996 towards the goal of reducing these costs by $1.6

billion over the next five years.

Establishing with the Laboratory Operations Board by

February 1996:

- a process to define the missions of each multiprogram laboratory, and

- a process to validate missions and privatization

options for each single program and special mission

laboratory.

FY 1996 Results:

DOE has reduced laboratory operating costs by $264

million. This reduction is reflected in the FY 1996 budget

request.

This measure was completed when the Laboratory

Operations Board Report, “Strategic Laboratory Missions Plan - Phase I,” was issued in June 1996.
Inspector General’s Report on Internal Control Structure

95
DOE’s FY 1996 Consolidated Financial Statements

96
Inspector General’s Report on Internal Control Structure

97
DOE’s FY 1996 Consolidated Financial Statements

98

Exhibit to Report on Internal Control Structure
Inspector General’s Report on Internal Control Structure

99

Exhibit to Report on Internal Control Structure
DOE’s FY 1996 Consolidated Financial Statements

100

Exhibit to Report on Internal Control Structure
Inspector General’s Report on Internal Control Structure

101

Exhibit to Report on Internal Control Structure
DOE’s FY 1996 Consolidated Financial Statements

102

Exhibit to Report on Internal Control Structure
Inspector General’s Report on Internal Control Structure

103

Exhibit to Report on Internal Control Structure
DOE’s FY 1996 Consolidated Financial Statements

104

Exhibit to Report on Internal Control Structure
Inspector General’s Report on Internal Control Structure

105

Office of Inspector General

Fiscal Year 1996 Audit Reports

Appendix to Report on Internal Control Structure
DOE’s FY 1996 Consolidated Financial Statements

106

Appendix to Report on Internal Control Structure
Inspector General’s Report on Compliance with Laws and Regulations

107
DOE’s FY 1996 Consolidated Financial Statements

108
109

U. S. Department of Energy

Reader Response Sheet

Consolidated Financial Statements for FY 1996

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document. Please take a few minutes to complete this sheet and send it to the following address:

Office of Financial Control and Reporting

Department of Energy

19901 Germantown Road, Room E-153, CR-42

Germantown, MD 20874-1290

Comments may also be faxed to the Office on (301) 903-5202.

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