United states General Accounting OfIke 13 

GAO Testimony 

For Release The Future of DOE's Uranium Enrichment 

on Delivery 

Expected at 

lo:00 a.m. EST 

Wednesday 

August 10, 1988 

Program 

Statement of 

Keith 0. Fultz, Senior Associate Director 

Resources, Community, and Economic 

Development Division 

Before the 

Subcommittee on Energy and Power 

Committee on Energy and Commerce 

House of Representatives 

1 i 

’ !lull I / Ill11111

1 

136509 
SUMMARY STATEMENT 

The Department of Energy's (DOE) uranium enrichment program 

faces a bleak financial future unless the Congress takes some 

action to address its many problems --the most significant is the 

sizable amount of previously incurred costs. At the end of fiscal 

year 1987, these costs totaled about $9 billion. For the last 

year I the Congress has considered a number of proposals to 

restructure the enrichment program as a government corporation to 

allow it to operate in a more business-like manner. However, 

because of uncertainties due to domestic uranium miners' litigation 

over possible restrictions on DOE's enrichment of foreign uranium 

ore, some of the proposals--including H.R.4489, H.R.4934, and 

H.R.4975--would provide financial support for the domestic uranium 

mining industry. 

Ingeneral, we see merit to the Congress' restructuring the 

enrichment program as a government corporation subject to the 

Government Corporation Control Act, but we have some concerns with 

other aspects of the legislative proposals. First, the P roposals would require the new corporation to repay only $364 mil ion in 

past costs, and most of this would be used to clean up uranium mill 

tailings and/or purchase uranium ore. In 1986 DOE began pricing 

its enrichment services to recover about $3.4 billion. Since the 

lower cost recovery amount ignores DOE'S pricing strategy and the 

productive capability of the existing enrichment facilities, we 

strongly support a higher cost repayment figure. 

Second, the proposals would require the corporation to 

establish a fund to decommission only two of the three enrichment 

plants and do not transfer the Oak Ridge plant to the new 

corporation. The Oak Ridge plant's decommissioning costs-- 

estimated to be about $1 billion --will remain DOE's responsibility. 

We have long supported the concept that decommissioning costs 

should be paid by the current beneficiaries of the services 

provided. However, DOE has not collected even $1 to decommission 

any of its three plants. In an October 1987 report, we recommended 

that the Conqress require DOE to recover such costs. 

Last, H.R.4489 and H.R.4975 would establish a fund to clean 

up uranium mine sites. H.R.4489 would also impose fees on 

utilities based on the amount of foreign ore used in their nuclear 

power plants, and H.R.4975 would also provide for the purchase of 

at least $750 million or uranium ore from domestic producers. The 

exact amount of ore will be determined through a competitive bid 

process. However, DOE already has a uranium ore inventory of about 

53,000 metric tons that it uses to meet defense production needs 

and optimize production costs. This inventory will not be depleted 

for at least 10 years. Thus, H.R.4975 will substantially increase 

an already sizable stockpile of uranium.