-18-

Treatment of purchasers of petroleum products

In the case of a purchaser, the specified percentage is
multiplied by the amount of domestically produced crude oil
and natural gas liquids it purchases, during the portion of
any fiscal ygar to which the bill applies, for purposes of
refinement. In this case, the bill only applies to initial
purchases of such crude gil or natural gas liquids for
purposes of refinement.1

Exception for exports

The bill provides certain exceptions for exported
petroleum products to the Reserve set-aside requirement.
Generally, these exceptions are realized through the granting
of credits to such persons, which credits may be used to
offset the persons' required contribution amounts.

Title to contributed petroleum products

Under the bill, a person providing petroleum product to
the ‘Reserve as a:result of ‘the bill's requirements retains
title to such product stored in the Reserve. The bill
specifies that such a person may freely transfer title to the
stored petroleum product. In addition, the Energy Department
is authorized to allow the title holder the use of such
petroleum product as collateral in any financial transaction
involving the title holder.

Effects of a drawdown on the Reserve

The bill provides that the stored petroleum product may
not be withdrawn or distributed from the Reserve except as

15 in determining the amount of petroleum product that is to
be provided for storage in the Reserve by an importer for any
fiscal year, or portion thereof, the amount of petroleum
product imported by such importer during the period of any
drawdown and distribution of the Reserve occurring during
such fiscal year is not taken into account.

16 For purposes of this provision of the bill, the term
"refinement" means the processing of crude oil or natural gas
liquids, including the use of such crude oil or natural gas
liquids as fuel, by a refinery or petrochemical plant.

17 In determining the amount of petroleum product that is to
be provided for storage in the Reserve by a purchaser for any
fiscal year, or portion thereof, the amount of crude oil or
natural gas liquids purchased by such purchaser during the
period of any drawdown and distribution of the Reserve
occurring during such fiscal year is not taken into account.



-12-

is to be indexed for future inflatign, by an index to be
determined by the Energy Secretary.

Financing of the uranium enrichment fund

The source of annual deposits to the UEDD Fund generally
will come from certain primary sources specified under the
bill. Included among those primary sources are funds received
by the Treasury as proceeds from the leasing of gaseous
diffusion uranium enrichment facilities and related property,
royalty payments from licensing atomic vapor laser isotope
separation technology (AVLIS), contributions to the Fund by
foreign utilities that purchase enriched uranium from the
Energy Department, or by their governments, and interest
earnings and proceeds from the disposition of debt
instruments held by the Fund. However, in the event that
funding from these primary sources are insufficient to
provide the annual mandated contribution to the UEDD Fund,
the bill authorizes the Energy Secretary to make a special
assessment on the owners of certain domestic utilities to
fund the required balance of the annual deposit. Owners
subject to the special assessment are:those owners who in the
past have purchased fuel from the DOE.

The rate of assessment is to be determined by dividing
the remaining required balance of the annual deposit by the
total purchase of separative work units (the service of
enriching uranium) purchased by domestic utilities from the
DOE prior to the date of enactment. The total tax assessment
of each utility is then computed as the amount of separative
work units purchased from the DOE in the past by a domestic
utility multiplied by the rate of assessment determined as
described above.

The bill also directs the Energy Secretary to
periodically review and determine the adequacy of revenue for
the UEDD Fund and alter collections of the special
assessment.

Issues

.As a result of the presence of radon gas and other
radioactive materials, uranium mill tailings present a

5 the bill {Title X) provides for separate use of assets in
the UEDD Fund to cover costs of decontamination,
decommissioning, and reclamation of active uranium and
thorium processing sites.

6 the special assessment applies to the past purchases of
public power corporations or authorities as well as to the
purchases by investor-owned utilities.


-22-

contributions to the Reserve, eliminating concerns about
differential burdens being imposed on different entitses
based on their utilization of different types of oil.

In any event, the requirement that oil be stored in the
Reserve will impose costs on society that must be borne by
some entity. To the extent that the market for refined
petroleum products is competitive, the costs will be passed
on to the consumer of these products in the form of higher
prices. In this case, importers and refiners will be made no
worse off by the proposal. To the extent that the market for
refined petroleum products has significant non-competitive
aspects, profits in the industry will be greater than those
that could be earned in other activities, and firms in the
industry will bear a portion of the cost of the set-aside
program in the form of reduced profits.

The bill requires that importers provide for storage in
the Reserve of an amount of petroleum product equal to a
percentage, to be determined by the Energy Department, of the
amount of petroleum product they import into the United
States. A similar requirement applies to purchasers for
refinement of crude oil and natural gas liquids. Although
not clear, it appears that the bill requires the set aside of
petroleum product to be based on a specified percentage of
the total volume of the product imported or purchased during
a fiscal year. Alternatively, the bill's set-aside
requirement could be based on the total value of such
imported or purchased product.

The issue of whether the set-aside amount is based on
volume or value raises some issues for consideration,
especially when coupled with the provision of the bill which
allows, but does not require, the Energy Department to
specify the grades of crude oil which must be contributed to
the Reserve. For example, consider two purchasers of
domestically produced crude oil for refinement. The first
refiner purchases a high grade of oil for $20 per barrel.

The second refiner purchases a lower grade of oil for $10 per
barrel. Assume both refiners purchase the same volume of oil
during a fiscal year. .Further assume that the Energy
Department determines for that fiscal year that the set aside
percentage is one percent of oil purchased. If the amount of
product to be set aside were based on value, each refiner
would have to contribute one percent of its purchased crude

21 Taken to the logical conclusion, this line of reasoning
argues for an excise tax of X cents per barrel of oil (or
refined product), with the proceeds used to purchase oil to
be stored in the Reserve. By using a single medium of
exchange (dollars) for all transactions and fixing the size
of the tax, administrative costs are reduced.



II. SUMMARY OF PROVISIONS

Tax-Exempt Bond Financing of Facilities for Local Furnishing
Of Electricity or Gas (sec. 732 Of the Bill)

H.R. 776 authorizes the Federal Energy Regulatory
Commission ("FERC") to order electric utilities to provide
wheeling ‘services to independent power producers. These FERC
orders also may require the utilities to enlarge their
transmission systems to comply. If wheeling activities
pursuant to these orders were conducted using bond-financed
facilities, or if the utility (viewed in light of both its
wheeling and other activities) became a net exporter of
electricity, the present-law local furnishing exception for
tax-exempt bond financing could be violated. To prevent such
an occurrence, the bill modifies present law to provide that
no disqualification will result from wheeling activities
conducted pursuant to a FERC order authorized under the bill.

Uranium Enrichment Fund and Assessment (Titles X and XI of

the Bill)

Title XI of H.R. 776 establishes a Uranium Enrichment
Decontamination and Decommissioning Fund ("UEDD Fund").
Annual deposits of $500 million (indexed for inflation) are
to be made into the UEDD Fund until such time as the balances
in the UEDD Fund are sufficient to finance the
decommissioning and decontamination of DOE's uranium
enrichment facilities.

Annual deposits to the UEDD Fund generally will come
from certain primary sources specified in the bill. In the
event funding from these primary sources is insufficient to
provide the annual mandated contribution to the UEDD Fund,
however, the bill authorizes the Secretary of Energy to make
a special assessment on the owners of certain domestic
utilities to fund the required balance of the annual deposit.
Utilities subject to. the special assessment are those
utilities who in the past have purchased fuel from the DOE.
The rate of assessment is determined by dividing the
remaining required balance of the annual deposit by the total
purchase of separative work units (the service of enriching
uranium) purchased by domestic utilities from the DOE prior
to the date of enactment. The total tax liability of each
utility is then computed as the amount of separative work
units purchased from the DOE by a domestic utility multiplied
by the rate of tax determined as described above.

Strategic Petroleum Reserve (Title XIV of the Bill)

Title XIV of H.R. 776 establishes a mechanism for


-19-

provided in section 161 of the Energy Policy and Conservation
Act. When the petroleum product stored in the Reserve
under the bill is distributed as a result of a drawdown on
the Reserve, the Energy Department is required to provide for
the payment to each importer or purchaser, or to such
person's assignee, of the amount received for the sale of the
petroleum product stored in the Reserve as a result of
actions taken by such importer or purchaser. In carrying out
this requirement, the Energy Department will consider the
first amount of petroleum product withdrawn from the Reserve
to be the petroleum product stored in the Reserve under this
provision of the bill (to the extent thereof). The Energy
Department also must provide for the payments to importers
and purchasers to be made on the basis of the order in which
such persons provided for the storage of petroleum product in
the Reserve. That is, sales of the Reserve's petroleum
product attributable to the set-aside program will be
determined to be made on a first-in-first-out ("FIFO") basis.
According to the report of the Energy and Commerce Committee,
in allocating proceeds received from the drawdown, the Energy
Department will take into account the cash equivalent value
of the oil gn which ‘the recipient's oil storage requirement
was based.+

Assessment for .storage costs

The bill also authorizes the Energy Department to assess
and collect charges, beginning in the 1993 fiscal year, from
each importer and purchaser who has petroleum product stored
in the Reserve under the set-aside program. The amount of the
charges assessed to any such person for any fiscal year is
equal to the estimated net present vahye of the cost of
constructing, leasing (if necessary), maintaining, and
administering facilities necessary for the storage of an
amount of petroleum product equal to the amount of petroleum
product to be stored in the Reserve during such fiscal year
by such person under the bill's requirements. The net
present value estimate is computed using the 10-year period
beginning with the first day of the fiscal year with respect
to which the assessment is made.

18 See 42 U.S.C. 6241, as amended by the bill.

19H, Rept. No. 102-474, Part 1, 102d Cong., 2d Sess., at
218.

20 the bill provides that if, at any time during the
implementation of the Reserve set-aside program, there is
insufficient storage capacity in the Reserve, the Energy
Secretary shall, using amounts appropriated from the SPR Fill
and Construction Fund, lease facilities necessary to provide
sufficient. storage capacity.


-25-

bill gives the Congressional appropriators the flexibility of
using those monies for purposes of obtaining or maintaining
storage space for the Reserve. This being the case, it
appears that whereas a person contributing petroleum product
to the Reserve receives title to such product, a person
contributing cash in lieu of petroleum product may not
receive title to petroleum product (if any) purchased by the
Fund with such cash. If the Fund does purchase petroleum
product with the cash, it appears that title to the product
is not passed to the person, and any proceeds from the
eventual disposition of the product by the Reserve would be
the property of the Federal Government.

A further issue raised by the bill involves the tracking
of ownership of the petroleum product held by the Reserve and
the determination by the Federal Government upon drawdown of
the Reserve of which owners’ products have been disposed of.
Under the bill, when the petroleum product stored in the
Reserve under the set-aside provisions is distributed as a
result of a drawdown on the Reserve, the Energy Department
must provide for the payment to each importer or purchaser
(or. such person's assignee) of the amount received for the
sale of the petroleum product stored in the Reserve as a
result of actions taken by such importer or purchaser. The
Reserve will contain a cumulative amount of petroleum
product--only a portion of which will have been contributed
to it under the bill's set-aside program. In determining
which petroleum product in the Reserve has been stored there
under the set-aside program, the Energy Department is to
consider the first amount of petroleum product withdrawn from
the Reserve (to the extent of the total amount of the
petroleum product stored therein under the set-aside program)
to be the petroleum product stored in the Reserve under the
program. Thus, the Energy Department would treat all of the
set-aside petroleum product as being disposed of from the
Reserve before petroleum product obtained by the Reserve from
any other source.

In addition, the bill provides that the.Energy
Department must provide for the payments to importers and
purchasers to be made on a first-in, first-out (FIFO) basis.
That is, petroleum product disposed of from the Reserve is
treated as coming first out of the petroleum product that has
been in the Reserve for the longest period of time under the
set-aside program. The bill does not provide any further
guidance as to how the sale of Reserve petroleum product is
to be administered. An issue that might arise involves the
various grades of crude oil and refined products that are
maintained in the Reserve. For example, assume that the
Reserve contains three grades of crude oil: a low grade, a
medium grade, and a high grade. Further assume that the
person who holds title to the crude oil that has been in the
Reserve the longest under the set aside program originally
contributed low-grade oil to the reserve. It.is unclear


-21-

this, it is necessary to determine whether the parties that
actually make the payments of the tax or fee are the entities
which actually bear the economic burden of the tax or fee.

A large part of the cost of the set-aside requirement to
importers and purchasers is the loss of the ability to freely
transfer the oil to other parties through market sales. This
cost can in principle be measured by the cost of carrying an
asset (oil stored in the Reserve) that cannot be immediately
sold at market value and transformed into cash. One can
think of this as the implicit interest that could be earned
on the value of the oil stored in the reserve. In addition,
importers and refiners must pay the storage costs for oil
stored in the Reserve. This requirement imposes an
out-of-pocket cost on these parties. Since it is unclear how
long the oil contributed to the Reserve will be stored there
and what the future price path of oil will be, one cannot be
sure what value will be given to a claim on oil stored in-the
Reserve. It is certain that oil stored in the Reserve will
be less valuable than oil stored elsewhere that could be sold
on demand. The size of the difference between these two
assets might be relatively large. Presumably, a market to
trade claims on oil stored in the Reserve will arise if the
proposal is implemented, providing an objective measure of
the loss in value caused by storage in the Reserve. Traders
may find the claims on oil stored in the Reserve a valuable
hedge, since the Reserve likely will be drawn down only in
times when oil is relatively scarce and the market price is
relatively high. At this time, though, it is difficult to
predict what the market value of these claims might be in the
absence of such a market.

The size of the administrative and compliance costs
imposed by the storage requirement will depend on how the
technical issues discussed in detail below are resolved. To
the extent that a streamlined process of determining the
amounts and types of oil to be contributed to the Reserve can
be developed, the administrative costs can be minimized. For
example, it might be desirable to designate a single point in
the production chain as the point at which liability for
contributions to the Reserve is determined. One possibility
is the point at which imported or domestic crude oil enters a
refinery or where refined petroleum is imported into the
United States. Another administrative cost of the proposal
might be the uncertainty surrounding the size of the required
contribution to the Reserve. In particular, the Secretary of
Energy is charged with determining the size of the required
contribution percentage on an annual basis. To the extent
the required contribution percentage changes from year to
year, affected parties may find themselves subject to
uncertainty about the size of the contributions in coming
years. This uncertainty imposes a cost of on the affected
parties. Similarly, it might be desirable to designate a
single type or grade of crude oil as a benchmark for


~16-

into the United States dur jag an average 90-day period during
the fiscal year concerned. The Energy Department will
request funds to cover the estimated costs of expanding the
Reserve from the Appropriations Committees, and will carry
out the petroleum product set-aside program only if money is
appropriated for the Reserve.

Filling the Reserve

In general

The bill requires the Secretary of Energy to establish
and implement, beginning March 31, 1993, a program in the
manner provided in the bill for the filling of the Reserve at
an average rate of 150,000 barrels of petroleum product per
day during the portion of fiscal year 1993 in which the bill
is in effect and during each fiscal year thereafter until the
specified Reserve quantity is reached. During this period,
any oil leased from foreign governments by the Federal
Government, or obtained by any other means, and stored in the
Reserve will be subtracted from the 150,000 barrel per day
requirement. The bill: provides that in establishing and
implementing the set-aside program, the Energy Department
will provide guidance specifying that the requirement for
filling the Reserve shall be placed upon two categories of
persons--importers of crude oil and petroleum products
(herein referred to as "importers")2 and persons who
purchase crude oil or natural gas liquids produced
domestically for purposes of refinement (herein referred to
as “purchasers").

Under the bill, importers and purchasers are required to
provide for the storage in the Reserve of an amount of
petroleum product equal to a specified percentage of the
amount of their crude oil or petroleum product. The
specified percentage is to be determined periodically by the
Energy Department as the percentage that would be sufficient,
if applied uniformly to all importers and purchasers, to
satisfy the fill rate for the Reserve as set .forth in the

ill.

19 the present capacity of the Reserve is about 1 billion
barrels. Oil currently stored in the Reserve is about 600
million barrels.

11 the bill defines the term importer by reference to Part B
of Title I of the Energy Policy and Conservation Act (42
U.S.C. 6231 et. seq.). That statute defines the term
“importer" as any person who owns, at the first place of
storage, any petroleum product imported into the United
States (42-U.8.C. 6232(2)).



-8-

generation of much more electricity than can be used by
customers in the local market. Federal energy policy
generally has been favorable to IPPs, causing them to become
increasingly important providers of electricity. The bill
recognizes the increased prominence of IPPs in many areas
through the provision permitting FERC orders to utilities for
the provision of wheeling services. This would permit. IPPs
to generate electricity for ultimate sale to customers far
outside the local area where the generation occurs.

Conversely, permitting “local furnishing" utilities to
continue tax-exempt bond financing while undertaking
extensive wheeling activities extends the local furnishing
exception to utilities that are essentially a part of a
regional power system. To the extent this occurs, the policy
justification for the local furnishing exception is obscured.


-5-

III. DESCRIPTION OF PROVISIONS

A. Tax-Exempt Bond Financing of Facilities for
Local Furnishing of Electricity or Gas
(sec. 732 of the Bill)

Present Law

in general

Interest on State and local government bonds generally
is excluded from income for purposes of the regular
individual and corporate income taxes if the proceeds of the
bonds are used to finance direct activities of these
governmental units (Code sec. 103). Present law also
excludes the interest on certain State and local government
bonds ("private activity bonds") when a governmental unit
incurs debt as a conduit to provide capital financing for
private parties if the financed activities are. specified in
the Code. Tax-exempt private activity bonds may not be
issued to finance activities not specified in the Code.

Private activity bonds are bonds (1) more than 10
percent of the proceeds of which satisfy a private business
use and payment test, or (2) more than five percent ($5
million, if less) of the proceeds are used to finance loans
to persons other than State or local governmental units. A
special restriction reduces the private business use and
payment limits to five percent in the case of private
business activities that are unrelated to direct governmental
activities also being financed with a bond issue.

Interest on the following private activity bonds
qualifies for the above-mentioned exclusions from income:

Ne

) Exempt-facility bonds;

) Qualified mortgage and qualified veterans' mortgage
bonds
Qualified small-issue bonds;
Qualified student loan bonds;
Qualified redevelopment bonds; and
Qualified 501(c)(3) bonds.

AUB wW

Exempt-facility bonds are bonds the proceeds of which
are used to finance the following: airports, docks and
wharves, mass commuting facilities or high-speed intercity
rail facilities; water, sewage, solid waste, or hazardous
waste disposal facilities; facilities for the local
furnishing of electricity or gas; local district heating or
cooling facilities; and certain low-income rental housing
projects.


-4-

increasing the capacity of the nation's Strategic Petroleum
Reserve ("Reserve") by requiring importers and purchasers of
petroleum products to lend specified amounts of crude oil and
other petroleum products to the Federal Government until the
target quantity of the Reserve is reached. Under the bill,
importers and purchasers are required to provide for the
storage in the Reserve of an amount of petroleum product
equal to a specified percentage of the amount of their crude
oil or petroleum product. A person providing petroleum
product to the Reserve as a result of the bill's requirements
retains and may freely transfer title to the product stored
in the Reserve. An importer or purchaser may elect to
provide, in lieu of petroleum product, an amount equal to the
cash equivalent of the amount of petroleum product required
to be stored by it in the Reserve. The bill also authorizes
the Energy Department to assess and collect storage charges,
beginning in the 1993 fiscal year, from each importer and
purchaser who has petroleum product stored in the Reserve.

When the petroleum product stored in the Reserve under
the bill is sold as a result of a drawdown on the Reserve,
the Energy Department is required to provide for the payment
of the amount received for the sale to the importer or
purchaser, or to such person's assignee, who held title to
the petroleum product that was sold. In carrying out this
requirement, the Energy Department will consider the first
amount of petroleum product withdrawn from the Reserve to be
the petroleum product stored in the Reserve under this
provision of the bill (to the extent thereof). The Energy
Department also must provide for the payments to importers
and purchasers to be made on the basis of the order in which
such persons provided for the storage of petroleum product in
the Reserve.

Abandoned Mine Reclamation Fund

The bill as reported by the Committee on Interior and
Insular Affairs extends the coal reclamation fee through
September 30, 2010, and provides that $50 million of the
amounts in the coal reclamation fund in each fiscal year be
deposited in a new "Coal Industry Retiree Benefit Fund" (not
yet established).


-17-

The bill grants the Energy Department the authority to
provide that the petroleum product required to be stored in
the Reserve under this provision of the bill be limited to
grades of crude oil determined to be appropriate by the
Secretary. The importer or purchaser may elect to provide,
in lieu of petroleum product, an amount equal to the cash
equivalent of the amount of pgtroleum product required to be
stored by it in the Reserve.

Beginning with fiscal year 1993 and continuing until the
quantity of refined petroleum product in storage is 50
million barrels, the Energy Department will provide that 12
percent by volume of the petroleum product added to the
Reserve during any fiscal year shall be refined petroleum
product stored in a refined petroleum product reserve or
reserves located in Petroleum Administration for Defense
District 1A or 1B. The bill grants the Energy Department
authority to provide that the refined petroleum product
required to be stored in the Reserve be limited to refined
petroleum pyoduct determined to be appropriate by the
Secretary.

Treatment of importers of petroleum products

In determining the amount of petroleum product to be
contributed to the Reserve by an importer, the specified
percentage is multiplied by the amount of its petroleum
product which satisfies two requirements. First, the
petroleum product must be entered into the United States for
the purpose of consumption, use, or warehousing during the
portion of any fiscal year for which the bill is effective.
Second, the petroleum product must be owned by the jgporter
at the first place of storage in the United States.

12 According to the Report of the Committee on Energy and
Commerce, the crude oil to be provided is equal, at current
or projected consumption levels, to just less than one
percent of the total annual volume of petroleum imported or
the amount purchased to refine. (H.. Rept. No..102-474, Part
1, 102d Cong., 2d Sess., at 218.)

13° amounts of cash payments received in lieu of petroleum
products are to be deposited in the U.S. Treasury in the "SPR
Fill and Construction Fund" as established by the bill and
may be obligated and expended by the Energy Department as
provided under the bill.

14 the Energy Secretary may provide for the acquisition by
lease or purchase of refined petroleum product storage
facilities using amounts in the SPR Fill and Construction
Fund. The Secretary may not construct facilities for the
storage of. refined petroleum products.


-7-

furnishing requirement, the IRS stressed that the facilities
“have not been designed differently, sized larger, built
sooner, or constructed in a more costly fashion that is
reasonably required solely for serving" the local furnishing
service area. (See, Ltr. 8319017.)

Explanation of Provision

As reported by the Committee on Energy and Commerce,
H.R. 776 authorizes the Federal Energy Regulatory Commission
("PERC") to order electric utilities (including those
qualifying under the local furnishing exception) to provide
wheeling services to independent power producers. These FERC
orders also may require the utilities to enlarge their
transmission systems to comply. If wheeling activities
pursuant to these orders were conducted using bond-financed
facilities, or if the utility (viewed in light of both its
wheeling and other activities) became a net exporter of
electricity, the local furnishing exception could be
violated. To prevent such an occurrence, the bill modifies
present law to provide that no disqualification will result
from wheeling activities conducted pursuant to a FERC order
authorized under the bill.

Issues

Tax-exempt bond financing provides a Federal subsidy to
certain gas and electric utilities. Two classes of these
utilities may utilize tax-exempt financing for their
facilities: municipally-owned gas and electric utilities and
privately-owned gas and electricity utilities that satisfy
the "local furnishing" standard. The presumed original
intent of the so-called "local furnishing exception" was to
permit below-market financing for those utilities whose
operations are constrained to smaller geographic areas and
that, in certain cases, may not be able to access national
capital markets. In addition, the local furnishing exception
may also allow qualifying utilities to operate with a similar
cost structure to comparable municipally-owned utilities in
nearby jurisdictions.

The bill's provision affecting the local furnishing
exception states that a utility will not be disqualified from
the exception due to wheeling activities undertaken pursuant
to FERC orders. This provision will protect the status of
utilities currently qualifying for the local furnishing
exception from possible disqualification due to wheeling
activities in response to FERC orders. However, the
provision may also provide certain utilities with the
incentive to engage in relatively large amounts of wheeling
activities, for which the utility receives a fee.

The operation of non-utility independent power producers
{IPPs) in particular local areas could result in the


-23-

oil to the Reserve for that year. Because the oil bought by
the first refiner cost twice as much as the oil bought by the
other, the first refiner would be required to contribute
twice as much product, by value, to the Reserve as would the
other refiner.

If the set aside were computed on a volume basis, each
purchaser would be required to set aside for the Reserve one
percent of the total volume of crude oil purchased during the
fiscal year. Since in the example each refiner purchased a
like volume of oil, each would be required to loan an equal
volume to the Reserve. If the Energy Department did not
exercise its authority to specify the grade or grades of oil
that must be contributed to the Reserve, then each refiner
might contribute the grade of oil it purchased.

Alternatively, if the Energy Department were to specify
that oil contributed to the Reserve must be at least of the
grade purchased by the first refiner (the $20 per barrel
oil), then the refiner of the low-grade oil would be required
to acquire an amount of this high-grade oil sufficient to
meet its set aside requirement (or it could make a
cash-equivalent payment). In this case, the amount of oil it
is required to contribute would be equal to two percent,
measured by value, of its total purchases of crude oil for
the fiscal year, while the purchaser of the high-grade oil
would be required to set aside only one percent, measured by
value, of the oil it purchased during the year.

Issues might also arise under a volume-based set-aside
concept if the Energy Department chose not to specify the
minimum standards for product to be contributed to the
Reserve. In the above example it was assumed that the
purchaser of the higher-grade oil might contribute the
requisite volume of that grade of oil to the Reserve. This
might not necessarily be the case, however. Without a
provision specifying a minimum grade of oil, that purchaser
might obtain the requisite volume of a lower, less expensive
grade of oil which it could contribute to the Reserve.
Similarly, a company that purchases both high- and low-grades
of crude oil.during a fiscal year might. contribute as much of
its. low-grade oil to the Reserve as allowed absent rules
precluding this result. The bill requires the Energy
Department to establish and implement rules for the set-aside
program. The bill and legislative history provide no
specifications as to how to allocate the product to be
contributed among the various grades of product produced,
imported, or available during the year.

Another issue raised by the bill involves the
requirement that a person purchase domestically produced
crude oil or natural gas liquids for refinement in order for
the set-aside liability to arise. Such a requirement might
favor, for example, a fully integrated company or group of


DESCRIPTION OF REVENUE-RELATED PROVISIONS
OF H.R. 776
("COMPREHENSIVE NATIONAL ENERGY POLICY ACT")

Scheduled for a Hearing
before the
HOUSE COMMITTEE ON WAYS AND MEANS

on April 28, 1992

Prepared by the Staff
of the
JOINT COMMITTEE ON TAXATION
April 27, 1991
JCX-15-92


~10-
50 percent of the enriched uranium used by western countries.

Uranium mill tailings

Uranium mill tailings are the wastes remaining after
uranium has been extracted from uranium ore. Mill tailings
contain low concentrations of naturally occurring radioactive
materials and emit radon gas.

In 1978, Congress enacted the Uranium Mill Tailings
Radiation Control Act. That law requires that the mill
tailings at 24 designated inactive sites” be cleaned up by
DOE with the Federal Government paying 90 percent of the cost
and the State where the site is located paying the remainder.

Present law makes the cleanup of active sites the
responsibility of the site owner. The Nuclear Regulatory
Commission and the Environmental Protection Agency are to
develop regulations to provide for the reclamation of these
sites. Posting of a bond to ensure that the operator will
have adequate resources to clean up each site isa
requirement .to obtain an operator's license.

Tax-related aspects

Under special tax rules (Internal Revenue Code secs. 468
and 468A), certain costs of coal mine and waste disposal site
reclamation and nuclear power plant decommissioning may be
deducted prior to the time that the reclamation or
decommissioning work is performed. These provisions are an
exception to the general rule which prohibits the accrual of
an expense prior to the time economic performance occurs
(sec. 461(h)).

A taxpayer that is required to decommission a nuclear
power plant may elect to deduct certain contributions that
are made to a nuclear decommissioning fund. A nuclear
decommissioning fund is a segregated fund the assets of which
are to be used exclusively to pay nuclear decommissioning
costs, taxes on fund income, and certain administrative
costs. The assets of a nuclear decommissioning fund that are
not currently required for these purposes must be invested in
(1) public debt securities of the United States, (2)
obligations of a State or local government that are not in

3 These sites were defined in the Act and were no longer
producing uranium at the time of enactment.

4 tn 1981, in an amendment to the national security and
military applications provisions of the Nuclear Energy
Authorization Act, Congress expressed an interest in
assisting in the reclamation of active sites.



-9-

B. Uranium Enrichment Fund and Assessment
(Titles X and XI of the Bill)

Background and Present Law

Uranium mining and enrichment

Uranium (U235) is the fuel used in commercial and
military nuclear reactors. Uranium ore has insufficient
amounts of U235 to be useful to commercial or military
nuclear reactors. To create nuclear fuel, the amounts of
U235 must be concentrated; that is, the uranium must be
enriched. At present, enriched uranium used by western
countries comes from four sources: the U.S. Department of
Energy ("DOE"); Eurodif (a consortium established by the
French, Italian, Spanish and Belgian governments); Eurenco (a
consortium established by the British, Dutch, and West German
governments); and the former Soviet Union. No private firms
enrich uranium. Users of uranium fuel generally provide the
uranium to be enriched. The users generally are charged for
the process of enriching in terms of "separative work units."

Congress makes annual appropriations to DOE to fund
construction, operation, and research activities related to
uranium enrichment. DOE has uranium enrichment facilities in
Oak Ridge, Tennessee; Paducah, Kentucky; and Portsmouth,
Ohio. These facilities only enrich uranium for commercial
and military nuclear reactors. DOE operates separate
facilities to produce weapons-grade plutonium. The facility
in Oak Ridge currently is out of production due to
insufficient demand, and is in the process of being
decommissioned. Construction was begun on a gas centrifuge
enrichment plant next to the existing plant in Portsmouth,
but it was not completed.

Prior to the 1950s, the United States imported most of
its uranium ore from abroad. To spur domestic mining, the
Atomic Energy Commission ("AEC") instituted a program of
purchase and price guarantees and bonuses. In 1967, the AEC
stopped buying foreign uranium. In 1970, having built up a
sufficiently large stockpile, the AEC stopped buying uranium
altogether. The Atomic Energy Act permits DOE to impose
import restrictions if they are necessary to ensure the
viability of the domestic uranium industry. The Atomic
Energy Act does not specifically permit charges on foreign
uranium.

Prior to 1964, all enriched nuclear material in the
United States was owned by the Federal Government. In 1964,
Congress amended the Atomic Energy Act to permit private
ownership of enriched uranium for foreign and domestic
utilities. DOE enriches foreign uranium for both domestic
and foreign utilities. DOE currently produces approximately


~6-

Exempt-facility bonds for the local furnishing of
electricity or gas

The exempt-facility bond exception for facilities for
the local furnishing of electricity or gas is limited to
bonds used by electric or gas systems the service area of
which does not exceed either (1) twg contiguous counties or
(2) a city and a contiguous county. Property eligible for
financing under the exception includes depreciable property
and land used to "produce, collect, generate, transmit,
store, distribute, or convey electric energy" in a qualified
service area. (Treas. reg. sec. 1.103-8(f)(2)(iii).)

The local furnishing exception does not apply to
facilities that are an integral part of the regional
supplying of electricity, e.g., long-line transmission.

(See, H. Rept. 90-1533, 90th Cong., 2d Sess., at 38.) The
Treasury Department's regulations interpreting this exception
provide, however, that an otherwise qualifying facility will
not be ineligible solely because the system of which it is a
part is interconnected with other utility systems for ‘the
emergency transfer of power.

Further, the.Internal Revenue Service ("IRS"), ina
series of ruling letters, has provided specific,
nonprecedential guidance to several utilities regarding the
extent to which nonemergency interconnections with other
utility systems are permitted. (See, e.g., Ltrs. 8915021,
8508051, and 8319017 (supplemented by Ltrs. 8322009 and
8429091).) These ruling letters make three significant
factual points regarding the extent to which local furnishing
utilities may be interconnected with other utilities.

First, each of these ruling letters specified that,
despite limited outbound electricity transfers, the systems
involved, even after taking into account any wheeling
activities, were net importers of electricity. Second, in
Ltr. 8915021, certain transmission activities for the benefit
of other utilities ("wheeling") on dedicated facilities were
held not to disqualify.a local furnishing system because the
cost of. the facilities used were borne by the recipient of
the wheeled electricity, not the local furnishing utility or
its ratepayers. Third, in holding that certain incidental
interconnections not involving dedicated facilities such as
those described in Ltr. 8915021 did not violate the local

2 section 644 of the Tax Reform Act of 1984 {P. L. 98-369)
expanded the exception further to include the Long Island
Lighting Company and the Bradley Lake hydroelectric facility
system in Alaska, based on activities engaged in by those
systems as.of the date of that Act's enactment.


-20-

The bill provides that the storage charges are to be
paid by the end of the fiscal year for which they are
assessed. The amount of storage charges received under this
provision are to be deposited in the SPR Fill and
Construction Fund and may be obligated and expended by the
Energy Department as provided in the bill.

Establishment of the SPR Fill and Construction Fund

The bill provides for the establishment of an SPR Fill
and Construction Fund (the "Fund") in the U.S. Treasury.
Contributions to the Fund will come from either of two
sources: (1) cash-equivalent payments made by importers and
purchasers under the Reserve set-aside program or (2) storage
charges paid by importers and purchasers. Such amounts
received by the Fund may be obligated and expended, to the
extent provided in appropriation Acts, only for (1) the
purchase of petroleum product for the purpose of filling the
Reserve, and (2) the construction, leasing (if necessary),
maintenance, and administration of storage facilities of the
Reserve.

Authority to draw down the Reserve

Further, the bill grants additional authority for
drawing down the Reserve. Under the bill, the Reserve may be
drawn down if the President makes the determination that such
a drawdown would assist in relieving severe economic problems
directly related to a significant increase in the price of
petroleum product.

Issues

The operation of the bill's Reserve set-aside program
raises a number of issues. The bill leaves many of the
details of administering the program to the discretion of the
Energy Department. It is possible that some of the technical
issues presented herein might be clarified in regulations and
orders issued by that Department.

Once it is determined. that filling the Reserve is a
sufficiently high national priority that it be undertaken,
the question of funding must be addressed. In general, it is
desirable that the funding source be one which generates as
little efficiency loss to the economy as possible. One
aspect of efficiency loss is the economic activity deterred
by the imposition of a tax or fee. A second aspect of
efficiency loss is the administrative or compliance costs
imposed by a particular tax or fee scheme. A sometimes
competing concern is the distributional effect of a tax or
fee program. The distribution among entities of burdens of a
tax or fee program is often measured as a means of
determining whether a particular program is equitable, in
light of the benefits it provides. In order to accomplish



-26-

under the bill whether the proceeds of the first oil sold by
the Reserve during a drawdown would be attributed to that
person regardless of the grade of oil sold. That is, the
bill does not clarify whether all petroleum product held by
the Reserve under this program will be treated as fungible,
or whether inventories will be maintained and title holders
matched to the various types and grades of product that are
contributed to and maintained within the Reserve. 23

23 a similar arises as a result of the maintenance in the
Reserve of both crude oil and refined petroleum product.



-2-
I. LEGISLATIVE BACKGROUND

H.R. 776 ("Comprehensive National Energy Policy Act")
was reported by the House Committee on Energy and Commerce on
March 30, 1992 (H. Rept. 102-474, Part 1). Revenue-related
provisions of the bill (sec. 732, and Titles X, XI, and XIV)
were sequentially referred to the Committee on Ways and Means
for a period ending May 1, 1992.

Provisions of H.R. 776 were also referred to other
committees through May 1, 1992, as follows: Committee on
Foreign Affairs (Titles XII and XIII); Committee on
Government Operations (Title III); Committee on the Judiciary
(Titles VI and VII); Committee on Interior and Insular
Affairs (Titles VIII, IX, X, XI, and XIX); Committee on
Merchant Marine and Fisheries (Titles II, XVI, and XVII);
Committee on Public Works and Transportation (Titles I, IV,
and XVIII); and Committee on Science, Space, and Technology
(Titles VI, IX, XII, and XIII).

On April 8, 1991, the Committee on Interior and Insular
Affairs ordered reported H.R. 776 with amendments, including
an extension of the coal reclamation fee.


-13-

potential threat to the environment and public health.
Similarly, the radioactive materials used to make enriched
uranium fuel present a potential threat to the environment
and public health. Controlling these hazards through
reclamation and decontamination imposes costs on society.
Present law generally requires that the mining companies bear
these costs in the case of mine tailings (an exception is the
24 inactive mining sites designated for governmental clean-up
by the Uranium Mill Tailings Radiation Control Act of 1978).
H.R. 776 would cause the Federal Government directly to
assume some of the clean-up costs in the case of mine
tailings and require that utilities maintaining nuclear
facilities (through the special assessment) and the Federal
Government (through other payments into the UEDD Fund) share
those costs which relate to the decontamination and
decommissioning of the DOE's uranium enrichment facilities.

Under present law, the liability of the relevant mining
companies for future reclamation of mine tailings is
perceived as a cost of the mining business and is recovered
in the price charged for uranium ore. In this way, utilities
and the :Pederal Government ultimately share in-the cost of
reclamation to the extent that they consume uranium.
However, entities with no economic connection to the uranium
industry may bear none of these costs. Increased Federal
involvement in reclamation of mine tailings could lower the
cost to non-federal users of domestically mined uranium by
shifting some of the cost burden directly to the Federal
Government. On the other hand, the other funding sources of
the UEDD Fund may result in higher costs to the DOE in
providing enriched uranium for nuclear reactors, thereby
increasing the costs of uranium to domestic utilities. To
the extent the uranium industry is competitive, whatever
changes there may be in costs probably would be reflected in
the price the Federal Government and utilities would pay for
uranium. Most regulatory authorities permit utilities to
pass through increased fuel costs to the ultimate consumer.
If the creation and funding of the UEDD Fund results in
higher prices of nuclear fuel, it might result in higher
electricity costs for both individuals and businesses.

The special assessment which would be imposed by H.R.
776 is equivalent to an excise tax on the purchase of
enriched uranium fuel. However, this tax would be assessed
upon past, rather than current, purchases of uranium. As
such, it does not affect the current operating costs of
domestic utilities. In an unregulated and perfectly
competitive market, such a tax could not be passed on to
consumers or employees, but would rather be borne by the
owners of the utility as a form of windfall loss. However,
generation of electricity occurs in a non-competitive and
regulated market. Regulators may permit the tax to be passed
on to consumers as a fuel cost, or as an increased operating
cost, as part of the regulatory process. If the assessment


-15-

Cc. Strategic Petroleum Reserve (Title XIV of the Bill)
Present Law

There is no requirement under present law that specified
persons lend certain amounts of their crude oil or other
petroleum products to the Federal Government for the
Strategic Petroleum Reserve. In addition, there is no
provision under present law which assesses specified persons
for storage costs related to the Strategic Petroleum Reserve.

The Internal Revenue Code establishes an excise tax of 5
cents per barrel on domestic crude oil and imported petroleum
products (including imported crude oil) for the purpose of
funding the Oil Spill Liability Trust Fund. In addition, a
9.7 cents per barrel excise tax is imposed on domestic crude
oil and imported petroleum products for the purpose of
funding the Hazardous Substance Superfund. The excise taxes
on domestic crude oil are imposed on the operator of any
United States refinery receiving such crude oil, while the
taxes on imported petroleum products are imposed on the
person entering the product into the United States for
consumption, use, or warehousing. If domestic crude oil is
used in, or exported from, the United States before
imposition of the taxes on the operator of a refinery, the
taxes are imposed on the user or exporter of the oil.

Explanation of Provisions

In general

Title XIV of H.R. 776 as reported by Energy and Commerce
establishes a mechanism for increasing the capacity of the
nation's Strategic Petroleum Reserve (the “Reserve") by
requiring certain persons to lend specified amounts of crude
oil and other petroleum products to the Federal Government.
The target capacity of the Reserve as set forth in the bill
is the greater of one billion barrels of crude oil and
refined petroleum product or the number of barrels equal to
the net number of barrels of crude oil and refined petroleum
product estimated by the Secretary of Energy to be imported

9 the Strategic Petroleum Reserve is a Federal
Government-owned stockpile of oil stored in Louisiana and
Texas. Its purpose is to provide a short-term supply of oil
to protect American consumers against the shock to the
economy resulting from crises such as the 1990 Iragi invasion
of Kuwait and subsequent oil embargo. (Report of the
Committee on Energy and Commerce, H. Rept. No. 102-474, Part
1, 102d Cong., 2d Sess., at 148).


INTRODUCTION

The House Committee on Ways and Means has scheduled a
public hearing on April 28, 1992, on the revenue-related
provisions of H.R. 776 ("Comprehensive National Energy Policy
Act"), as reported by the House Committee on Energy and
Commerce on March 30, 1992. The revenue-related provisions
of the bill as reported (sec. 732, and Titles X, XI, and XIV)
have been sequentially referred to the Committee on Ways and
Means for a period ending May 1, 1992.

This document ,1 prepared by the staff of the Joint
Committee on Taxation, provides a description of the
revenue-related provisions of H.R. 776. Part I of the
document is a legislative background on H.R. 776. Part II is
a summary of the revenue-related provisions of the bill.
Part III is a description of the revenue-related provisions
of the bill as reported by the Committee on Energy and
Commerce, including present-law rules and issues related to
.the provisions referred to the Committee on Ways and Means.
Part III also includes a description of a provision relating
to extension of the coal reclamation fee as ordered reported
by the House Committee on Interior and Insular Affairs on
April 8, 1992.

1 this document may be cited as follows: Joint Committee on
Taxation, Description of Revenue-Related Provisions of H.R.
776 ("Comprehensive National Energy Policy Act") (JCX-15-92),
April 27, 1992.



-24-

companies related by common ownership (i.e., a company, or
group of related companies, that engages in both domestic
exploration and production of oil and gas as well as refining
of the oil and gas it produces). In this case, the refining
arm of the company might be able to obtain the oil and gas
for refinement without entering into a purchase transaction.
A literal reading of the bill would not impose a set-aside
requirement on the oil and gas obtained in this manner, thus
placing such a company (or companies) at a competitive
advantage vis-a-vis refiners who must purchase the oil and
gas they refine.

Congress addressed a similar issue in 1980 wheg it
enacted section 4611 of the Internal Revenue Code. +2

Section 4611 imposes a petroleum excise tax for the Oil Spill
Liability Trust Fund. The petroleum excise tax is imposed on
(1) petroleum products entered into the United States for
consumption, use, or warehousing or (2) crude oil received at
a United States refinery. It appears that the petroleum
excise tax generally is intended to be imposed.on the same
persons and on a similar basis as the Reserve set-aside
requirement. However., the imposition of the excise tax on
the basis of petroleum product imports and crude oil received
at refineries appears to avoid the issue of identifying
purchase transactions in order for liability to arise.

The bill specifies that each importer or purchaser
providing petroleum product under the bill will retain and
may freely transfer title to such petroleum product. If the
petroleum product to which the importer or purchaser holds
title is eventually sold from the Reserve, the title hoider
is entitled to the proceeds from such sale.

In lieu of contributing petroleum product to the
Reserve, persons may elect to pay an amount of cash
equivalent to the value of petroleum product required to be
so contributed. The bill's provisions do not detail the
treatment applicable in the case of persons making
cash-equivalent payments. For example, the bill provides
that cash-equivalent payments shall be deposited in the SPR
Fill and.Construction.Fund and may be obligated and expended
by the Energy Department, to the extent provided in
appropriation Acts, only for (1) the purchase of petroleum
product for the purpose of filling the Reserve and (2) the
construction, lease, maintenance, and administration of
Reserve storage facilities. Thus, the bill does not mandate
that all cash-equivalent payments received by the Fund be
expended specifically for the petroleum product that would
have been required to be contributed by the importer or
purchaser absent the cash-equivalent payment. Instead, the

22 P.L. 96-510, sec. 211{a).



CONTENTS
Page
INTRODUCTION. cece ees c eee c eee recsercccssccceesene L
I. LEGISLATIVE BACKGROUND......eeeeecessesereee 2
Il. SUMMARY OF PROVISIONS.......eeeeeceeecseeces 3
III. DESCRIPTION OF PROVISIONS........ccceeeeeees 5
A. Tax-Exempt Bond Financing of Facilities
for Local Furnishing of Electricity or
Gas (Sec. 732 of the Bill)........eeee05. 5

B. Uranium Enrichment Fund and Assessment
(Titles X and XI of the Bill)............ 9

C. Strategic Petroleum Reserve
(Title XIV of the Bill)... ....eeeeeeeeeees 15

D. Abandoned Mine Reclamation Fund.......... 27


-27-
D. Abandoned Mine Reclamation Fund

Present Law

The Surface Mining Control and Reclamation Act of 1977,
as amended (30 U.S.C. 1232(b)), imposes a reclamation fee on
coal mining operaters, payable quarterly to the Secretary of
the Interior for deposit in the Abandoned Mine Reclamation
Fund ("Reclamation Fund"). The fee generally is the lesser
of (1) 35 cents per ton of coal produced by surface coal
mining and 15 cents per ton of coal produced by underground
mining, or (2) 10 percent of the value of the coal at the
mine. The fee for lignite is the lesser of 2 percent of the
value of the coal at the mine or 10 cents per ton.

The reclamation fee is scheduled to expire after
September 30, 1995 (as extended in the Omnibus Budget
Reconciliation Act of 1990).

Explanation of Provision

As reported by the Committee on Interior and Insular
Affairs, the bill extends the coal reclamation fee through
September 30, 2010, and provides that $50 million of the
amounts available in the Reclamation Fund in each fiscal year
be deposited into a new "Coal Industry Retiree Benefit Fund"
(yet to be established).


-1l-

default as to principal or interest, or (3) time or demand
deposits in a bank or an insured credit union located in the
United States. These investment restrictions are the same
restrictions which apply to black lung trusts that are
established under Code section 501(c)(21).

Owners of coal mines are assessed a fee to help pay for
the reclamation of abandoned mines. These fees provide the
amounts available for appropriation from the Abandoned Mine
Reclamation Fund. The current rates are 35 cents per ton for
surface mined coal and 15 cents per ton for underground mined
coal. These fees are scheduled to expire after September 30,
1995.

Under present law, four different Superfund taxes are
imposed: (1) a tax on petroleum; (2) a tax on listed
hazardous chemicals; (3) a tax on imported substances that
contain or use chemical derivatives of one or more of the
specified hazardous chemicals; and (4) an environmental tax
based on the amount of modified alternative minimum taxable
income of a corporation that exceeds $2 million. The
receipts from these taxes are deposited in the Hazardous
Substance Superfund. Amounts in this trust fund generally
are available for expenditures incurred in connection with
releases or threats of releases of hazardous substances into
the environment.

Under present law, there is no general Federal excise
tax or user fee imposed on the generation or sale of
electricity. However, to support the Nuclear Waste Fund,
there is a specific fee of 0.1 cent per kilowatt hour (kwh)
imposed by the Nuclear Waste Policy Act of 1982 on generation
of electricity from nuclear power.

The Nuclear Regulatory Commission currently assesses
other fees on the owners of nuclear power plants. Operators
of nuclear power plants are charged fees based upon the
number of staff hours required to inspect the facilities.
The fees recover the costs incurred in inspecting the
facilities, but do not recover all of the costs involved in
regulating nuclear power plants.

Explanation of Provisions

Uranium enrichment fund

Title XI of H.R. 776 as reported by the Committee on
Energy and Commerce establishes a new trust fund in the
Treasury, the Uranium Enrichment Decontamination and
Decommissioning Fund ("UEDD Fund"). Annual deposits of $500
million are to be made into the UEDD Fund until such time as
the balances in the UEDD Fund are sufficient to finance the
decommissioning and decontamination of DOE's uranium
enrichment facilities. The annual $500 million contribution


-14-

were altered, under the authority granted to the Energy
Secretary, to be imposed on current purchases, then as a cost
of fuel at least part of the tax might be passed forward to
consumers of electricity as part of fuel cost adjustment
clauses which are common in the regulated electric utility
market.

The proposed assessment would apply only to purchases of
domestically enriched uranium. On the one hand, this may be
appropriate because the cleanup costs to be funded by the
UEDD Fund relate to domestic facilities. However, DOE has
enriched uranium for foreign consumers in the past. It can
be argued that part of the clean-up costs arise from
enrichment activities for foreign use, but the bill only
would tax domestic use. In addition, applying the tax only
on the basis of domestic purchases may be perceived as
treating more favorably those utilities fhat purchased their
fuel in the past from foreign suppliers.

To the extent that the tax is based only on past
consumption and not current consumption, the relatively
unfavorable treatment of :domestic purchases should not affect
the current or future choice of fuel supplier. However, if
utilities perceive the tax to be an ongoing liability, an
economic incentive may be created to purchase fuel from
abroad. Increased demand for foreign nuclear fuel coud have
adverse effects on the domestic nuclear fuel industry.

Some may question the desirability of relying on foreign
sources of supply.

As noted above, the bill authorizes the Energy Secretary
to adjust collections of the special assessment to insure the
adequacy of the revenue for the UEDD Fund. The bill does not
specify whether the Secretary is to alter the base or the
rate of the assessment. This lack of specificity may create
undue uncertainty among taxpayers.

7 he bill is unclear as to how the special assessment would
be calculated in the case of a utility which has declared
bankruptcy and ceased operation subsequent to its purchase of
uranium from DOE.

8 Increased reliance on foreign suppliers also would have
the effect of shifting future potential environmental and
health damage abroad.