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94–543 PDF 2015

EXAMINING THE DEPARTMENT OF ENERGY’S 

EXCESS URANIUM MANAGEMENT PLAN 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

THE INTERIOR 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

APRIL 22, 2015 

Serial No. 114–18 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 
(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

JASON CHAFFETZ, Utah, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

CYNTHIA M. LUMMIS, Wyoming 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

RON DESANTIS, Florida 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

MARK WALKER, North Carolina 

ROD BLUM, Iowa 

JODY B. HICE, Georgia 

STEVE RUSSELL, Oklahoma 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

WILL HURD, Texas 

GARY J. PALMER, Alabama 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MATT CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

BRENDA L. LAWRENCE, Michigan 

TED LIEU, California 

BONNIE WATSON COLEMAN, New Jersey 

STACEY E. PLASKETT, Virgin Islands 

MARK DESAULNIER, California 

BRENDAN F. BOYLE, Pennsylvania 

PETER WELCH, Vermont 

MICHELLE LUJAN GRISHAM, New Mexico 

SEAN MCLAUGHLIN, Staff Director 

DAVID RAPALLO, Minority Staff Director 

BILL MCGRATH, Staff Director, Interior Subcommittee 

MELISSA BEAUMONT, Clerk 

SUBCOMMITTEE ON THE INTERIOR

Cynthia M. Lummis, Wyoming, Chairman 

Paul A. Gosar, Arizona 

Blake Farenthold, Texas 

Ken Buck, Colorado, Vice Chair 

Steve Russell, Oklahoma 

Gary J. Palmer, Alabama 

Brenda L. Lawrence, Michigan, Ranking 

Member 

Matt Cartwright, Pennsylvania 

Stacey E. Plaskett, Virgin Islands 

Jim Cooper 
(III) 

C O N T E N T S 

Page 

Hearing held on April 22, 2015 .............................................................................. 1 

WITNESSES 

Mr. John Kotek, Principal Deputy Assistant Secretary, Office of Nuclear 

Energy, U.S. Department of Energy 

Oral Statement ................................................................................................. 3 

Written Statement ............................................................................................ 5 

Mr. David Trimble, Director, Natural Resources and Environment, U.S. Government Accountability Office 

Oral Statement ................................................................................................. 10 

Written Statement ............................................................................................ 12 

Mr. Scott Melbye, Executive Vice President, Uranium Energy Corporation 

Oral Statement ................................................................................................. 31 

Written Statement ............................................................................................ 33 

APPENDIX 

ERI Slides, submitted by Ms. Lawrence ................................................................ 52 

Testimony of Mr. Frank Hahne, Uranium Barter, Manager Flvor-B&W Portsmouth LLC, submitted by Mrs. Lummis ............................................................ 57 

Energy Resources International Market Analysis Reports, submitted by Mrs. 

Lummis ................................................................................................................. 74 

(1) 

EXAMINING THE DEPARTMENT OF ENERGY’S 

EXCESS URANIUM MANAGEMENT PLAN 

Wednesday, April 22, 2015, 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON THE INTERIOR, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:12 a.m. in room 

2154, Rayburn House Office Building, the Honorable Cynthia 

Lummis [chairwoman of the subcommittee], presiding. 

Present: Representatives Lummis, Buck, Farenthold, Palmer, 

Gosar, Russell, Lawrence, Plaskett and Cummings. 

Ms. LUMMIS. Without objection, the Chair is authorized to declare a recess at any time. 

Good morning and welcome to today’s hearing of the Subcommittee on Interior of the Oversight and Government Reform 

Committee. 

Our purpose today is to examine the Department of Energy’s 

management of the U.S. excess uranium inventories. This is uranium, of varying grades, owned by the Federal Government that 

has been declared surplus to the national security needs of the 

United States. This uranium has significant value. Selling it generates revenue for the Federal Government and displaces uranium 

produced by private industry in the marketplace. 

The Department of Energy’s management of this uranium has 

prompted questions by the domestic uranium industry as well as 

the Government Accountability Office, a non-partisan agency that 

investigates how the Federal Government spends taxpayer dollars. 

The GAO found that the Department of Energy failed to consistently value uranium that transferred to third parties in exchange 

for other services. The GAO found that other transfers violated the 

miscellaneous receipts statute which requires government officials 

who receive money on the government’s behalf to deposit those 

funds with the Treasury, except where otherwise provided by law. 

By not depositing an amount equal to the value of the uranium 

into the Treasury, DOE has inappropriately circumvented the 

power of the purse granted to Congress under the Constitution. 

Further, the GAO found that the Department of Energy’s studies 

to assess the market impact of proposed uranium transfers is required by the USEC Privatization Act of 1996 failed to show quality assurance guidance to provide detail about the data, methodology and assumptions made in studies and has had other shortcomings. 
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This raised questions about the validity of the conclusion that 

the proposed transfers would have no adverse material impact on 

domestic uranium industries. The domestic uranium industry plays 

an important role in ensuring America is not completely dependent 

on foreign sources of energy, particularly in the area of uranium 

where we actually import about 90 percent of the uranium that we 

use here, completely unnecessary to do so. 

While I note that the DOE is in the process of revising its procedures to determine the market impact on proposed transfers of excess uranium, it is important to discuss previous problems to ensure they are not repeated. 

Today, we will hear from the GAO to discuss their reports. We 

will also hear from the Department of Energy to learn more about 

their management of excess uranium and their response to the 

GAO. Finally, we will hear from a representative of the domestic 

uranium industry to discuss how these transfers have affected the 

industry. 

A representative of the Fluor-B&W Portsmouth, the DOE contractor for cleanup at the Portsmouth Gaseous Diffusion Plant in 

Piketon, Ohio, was invited to the hearing to discuss the importance 

of the cleanup that some of the transfers have funded but was unable to attend. 

I look forward to hearing the panel discuss ways the excess uranium management can be improved to eliminate legal concerns and 

ensure the best value for the taxpayer while not disrupting the domestic uranium industry and continue to meet DOE’s obligation to 

clean up its legacy sites. 

With that, I would like to thank the witnesses in advance for 

your testimony. 

I now recognize Mrs. Lawrence, the Ranking Member of the Subcommittee on the Interior, for her opening statement. 

Mrs. LAWRENCE. Thank you, Madam Chairwoman. I want to 

thank you for holding this hearing today and also want to thank 

our witnesses for their testimony today. 

One of the core missions of this committee is to oversee the proper stewardship of government assets. Today, we will be focusing 

our attention on an important asset, uranium, managed by the Department of Energy. 

It is important that the Department of Energy will be able to sell 

and swap uranium in order to support objectives of the agency. 

Selling uranium to nuclear power plants and swapping uranium in 

exchange for environmental cleanup activities are both necessary 

uses of the excess uranium. 

However, the agency must be careful that all of its uranium 

transactions are carried out in accordance with the law. I am 

pleased that the GAO and the department are both here to help 

us understand more about the laws pertaining to past and future 

uranium transfers. 

If the Congress needs to resolve different interpretations of the 

law now is the time to let us know so we can begin that process. 

It is also critical that we maintain a robust domestic uranium industry which is particularly important to the States of Wyoming 

and Utah where the bulk of our uranium is mined. 
3 

The department’s decisions must be backed by sound market 

studies on whether any particular sale or transfer would be a negative impact on our domestic uranium industry. 

Let us all keep an open mind—I will—to the testimony that will 

be offered today and the information. 

Thank you, Madam Chair. 

Ms. LUMMIS. I thank the Ranking Member. 

I will hold open the record for five legislative days for any member who would like to submit a written statement. 

We will now recognize our panel of witnesses. I am pleased to 

welcome Mr. John Kotek, Principal Deputy Assistant Secretary, Office of Nuclear Energy, U.S. Department of Energy; Mr. David 

Trimble, Director, Natural Resources and Environment, U.S. Government Accountability Office; and Mr. Scott Melbye, Executive 

Vice President at Uranium Energy Corp. Welcome all. 

Pursuant to this committee rules: all witnesses will be sworn before they testify. Please rise and raise your right hand. 

Do you solemnly swear or affirm that the testimony you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

[Witnesses respond in the affirmative.] 

Ms. LUMMIS. In order to allow time for discussion, please limit 

your testimony to 5 minutes even if your entire written testimony 

is longer. It will be made part of the record. 

I would first recognize Mr. John Kotek. Thank you so much for 

being here. 

WITNESS STATEMENTS 

STATEMENT OF JOHN KOTEK 

Mr. KOTEK. Thank you, Chairman Lummis, Ranking Member 

Lawrence and members of the committee. I appreciate the opportunity to be here today to discuss the Department of Energy’s management of its excess uranium. 

I do have a longer written statement for the record. 

Currently, I serve as the Principal Deputy Assistant Secretary in 

DOE’s Office of Nuclear Energy where I am responsible for helping 

to advance nuclear power to meet our Nation’s energy needs. I took 

this position about 3 months ago but earlier in my career, I served 

in a number of roles in DOE within the Department of Energy’s 

National Lab system at Argonne National Lab West in Idaho right 

over the border from Wyoming. 

I later served as Deputy Manager of the department’s Idaho Operations Office where I was responsible for Federal management of 

the Idaho National Lab. 

More recently, I had the honor of serving as Staff Director to the 

blue ribbon Commission on America’s Nuclear Future which recommended a strategy for managing nuclear waste in the United 

States. 

When I am not serving in Washington, I still make my home in 

Idaho with my wife and three kids. 

As a legacy of the department’s activities, DOE has an inventory 

of uranium that exceeds its expected needs. This uranium comes 

from various sources, including governmental weapons programs 
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from its own former enrichment activities and from inventories of 

Russian origin natural uranium. 

This excess uranium has value to taxpayers. Among the chief 

uses in recent years, DOE barters excess uranium to fund work 

under crucial DOE programs—the environmental cleanup of the 

gaseous diffusion plant at Portsmouth, Ohio and the down blending 

of highly enriched uranium to eliminate excess weapon grade uranium, which occurs in Erwin, Tennessee. 

The department manages its excess uranium inventory in accordance with the Atomic Energy Act of 1954 and other applicable 

laws. Specifically, the Atomic Energy Act authorizes DOE to transfer special nuclear material and source material. 

However, the USEC Privatization Act places certain limitations 

on DOE’s authority to transfer uranium from its excess uranium 

inventory. Before certain uranium transactions, the Secretary of 

Energy must determine that the sale of uranium will not have an 

adverse material impact on the domestic uranium mining, conversion or enrichment industries. 

In terms of our current work, the department plans to issue a 

new secretarial determination covering continued transfers of uranium for cleanup services in Ohio and for down blending of highly 

enrichment uranium in Tennessee. 

To inform its deliberations, the department is engaged in two 

rounds of public comment seeking input from the public and from 

the industry about the effects of continued uranium transfers on 

the domestic uranium industries and recommendations about factors it should consider in assessing whether a given set of transfers 

would have an adverse material impact on the domestic uranium 

industry. 

The most recent comment period closed on April 6. We appreciate 

the comments we received from the range of uranium industries 

and from others, as well as from the recipients of bartered uranium. 

DOE’s staff is still reviewing comments and preparing recommendations for the Secretary so I will be limited in what I can 

say on issues that are presently being addressed in our pending 

proceedings. However, I can speak to the process we have recently 

undertaken to solicit public comment. 

In conclusion, Madam Chairman, I would like to emphasize that 

the department understands the importance of the uranium industry in many communities. DOE remains committed to managing its 

uranium inventories in compliance with all statutory requirements 

and in a manner that is consistent with and supportive of a 

healthy, domestic nuclear industry. 

Thank you again for the opportunity to testify. 

[Prepared Statement of Mr. Kotek follows:] 
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Ms. LUMMIS. Thank you, Mr. Kotek. 

Mr. Trimble, we would like to hear from you. 

STATEMENT OF DAVID TRIMBLE 

Mr. TRIMBLE. Chairman Lummis, Ranking Member Lawrence 

and members of the subcommittee, my testimony today discusses 

our observations on DOE’s management of its excess uranium inventory. 

My observations are drawn from GAO’s work since 2006 in which 

we have identified four key issues: one, DOE’s elimination of a 

guideline limiting its uranium sales and transfers; two, DOE’s efforts to insure the quality of its uranium market impact studies; 

three, legal concerns related to DOE’s transfers of uranium; and 

four, DOE’s stewardship of the government’s uranium resources. 

In 2013, DOE announced that it would no longer use a 10 percent guideline to limit its uranium sales and transfers. While DOE 

established the guideline in 2008 after soliciting input from industry, DOE did not consult with industry before deciding to abandon 

the guideline. 

Industry officials told us that the elimination of the guideline 

will diminish the transparency and predictability of DOE’s future 

transfers affecting an already depressed market. 

In our report, we recommended that DOE obtain industry input 

on the amount of DOE uranium transfers the market can absorb 

annually and assess whether it needs to reinstitute a guideline. 

Second, our 2014 report found that DOE did not take steps to assess the technical quality of its 2012 and 2013 market impact studies. Such quality control efforts are called for in the contract with 

the vendor as well as DOE’s own quality assurance guidelines. 

These studies were used by the Secretary of Energy to conclude 

that DOE’s transfers would not have an adverse impact on the domestic uranium market as required by the USEC Privatization Act. 

DOE officials told us they did not conduct an assessment of the 

technical quality of the studies nor did they request additional information requested from the contractor about their methodology. 

DOE Stated they contracted for this work since they did not have 

the technical capability to do the work themselves and further, 

they wanted the contractor studies to be independent. 

Third, we have repeatedly noted legal concerns related to certain 

DOE transfers of uranium. In 2006 and 2011, we found that DOE 

violated the miscellaneous receipts statute when it did not deposit 

the proceeds from uranium sales into the Treasury. 

Specifically, DOE provided uranium to USEC for sale to a third 

party and allowed USEC to keep the proceeds as payment for a 

new cleanup contract. Such actions undercut Congress’ authority to 

appropriate funds. 

In addition, DOE transferred uranium without obtaining a Presidential determination that the material was no longer needed for 

national security purposes. Notably, just 1 year earlier, DOE had 

acquired the same material for national security purposes. 
11 

Finally, we have noted that DOE likely does not have authority 

to sell or transfer depleted uranium and have suggested that Congress clarify DOE’s authority in this area. 

Fourth, regarding DOE’s stewardship of the government’s uranium resources, DOE has not established guidance on how depleted 

uranium tails should be valued. Specifically, if DOE does sell such 

material despite its apparent lack of authority to do so, it must at 

least charge a fair price for it as the Atomic Energy Act requires. 

For example, in 2012, DOE developed multiple estimates for the 

same transfer with values ranging from 0 to $300 million. In this 

case, DOE decided to not charge anything for the tails reasoning 

that they had no value since the tails could be considered an environmental liability. 

However, the tails were transferred for an economic purpose, to 

be re-enriched in lieu of natural uranium. Further, in a prior transaction, DOE charged a fee for tails that were transferred for re-enrichment and in 2013, DOE entered negotiations with another company for the sale of a portion of its tails inventory. DOE disagreed 

with our recommendation that it develop guidance for valuing tails. 

We believe that until DOE develops such guidance, it cannot ensure the government will be reasonably compensated for any future 

tails transfers. 

In closing, let me note that uranium is both an important national security asset and a commodity with economic value. Consequently, the government’s inventory of uranium represents a valuable asset that DOE must effectively and responsibly manage. 

To do this, DOE must ensure that disposition decisions fully consider national security needs, provide the Nation’s taxpayers with 

value for these assets and ensure that transfers do not adversely 

impact the domestic uranium industry. 

Although DOE has disagreed with many of our recommendations, we are encouraged by some recent steps DOE has taken to 

increase transparency by seeking public input on its proposed uranium transfers. 

However, we continue to believe that DOE needs to take additional steps to ensure that it conducts future transfers in a more 

transparent manner, consistent with law and that such transfers 

benefit taxpayers while not harming the uranium industry. 

Thank you. I would be happy to answer questions. 

[Prepared Statement of Mr. Trimble follows:] 
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Ms. LUMMIS. Thank you, Mr. Trimble. 

Mr. Melbye, you are now recognized for 5 minutes. 

STATEMENT OF SCOTT MELBYE 

Mr. MELBYE. Thank you. Good morning, Chairwoman Lummis, 

Ranking Member Lawrence and members of the subcommittee. 

My name is Scott Melbye. I am Executive Vice President of Uranium Energy Corporation. 

I am proud to be a second generation U.S. uranium miner, my 

father having discovered and developed uranium deposits in Wyoming’s Powder River Basin and the Colorado plateau of the western United States. 

I have worked in the uranium industry now for more than three 

decades, including senior roles at Cameco and Uranium One. I also 

previously served as President of the Uranium Producers of America. 

While I remain firmly optimistic in the potential of U.S. uranium 

production, we are facing the most challenging market conditions 

in my career, with market prices having fallen below the level of 

all but the most competitive production cost operations. 

My company, Uranium Energy Corporation, based in Corpus 

Christi, Texas, has gone through what has become an all too familiar development. We, like other U.S. uranium producers, were 

incentivized by market conditions in 2009 and 2010 to startup or 

expand uranium operations. 

In South Texas, we brought on the first new mine there in many 

years, employing as many as 85 people in 2012. Today, however, 

we are idling operations, ceasing new well field development, and 

cutting back our staff to 39 employees. 

We recognize the department’s transfers are not solely responsible for the current market conditions. However they have made 

the situation decidedly worse. All of us in the mining industry understand and regularly deal with normal, healthy competition and 

the ups and downs that are inherent in our cyclical business. 

However, what the DOE is doing in this market defies normal 

business logic. At a time when producers in the United States, and 

elsewhere, are reducing production, shutting in mines and canceling new projects, the Federal Government has substantially increased its sales volumes and become our largest competition. 

For context, the department sold nearly twice as much uranium 

in 2014 as the entire domestic industry produced. Under the volumes announced in the May 2014 Secretarial Determination, the 

Federal uranium transfers account for more than 100 percent of 

the global uncommitted utility demand for 2015, meaning there is 

no room for the domestic producers to compete. 

The UPA is not opposed to DOE leveraging America’s uranium 

assets. However, the disposition of the uranium inventory should 

be predictable, transparent, and done in a way which minimizes 

the impact on our industry and secures the highest value for taxpayers. 

As you know, under the USEC Privatization Act, before making 

any uranium transfer, the department must certify the transfer 

‘‘will not have an adverse material impact on the domestic uranium 

mining, conversion, or enrichment industries.’’ The department also 
32 

has a legal obligation to ensure taxpayers receive fair value for this 

asset. 

UPA maintains the department’s recent actions, including the 

May 2014 Secretarial Determination, fail to meet its legal obligations under the USEC Privatization Act. 

When prices crashed following Fukushima, domestic producers 

throttled back operations. DOE’s response was the exact opposite. 

As uranium prices dropped, DOE pushed more material into a market that was already oversupplied. 

UPA recently commissioned a market report from Trade Tech, a 

leading market industry analyst, to look at the impact of the department’s uranium transfers. Trade Tech found transfers of DOE 

material outweighed other supply developments due to Fukushima 

in the short-term. 

In addition, Trade Tech concluded if DOE does not reduce the 

amount of material entering the market, the transfers will influence the fates of uranium producers, both existing and in development, through its impact on prevailing prices and producer margins. 

Let me briefly outline UPA’s recommendations regarding steps 

the department could take to reduce the impact of future transfers 

on the domestic industry. 

1 would be to reinstate an annual cap on transfers. In 2008, the 

uranium industry, utilities, and the department reached consensus 

on a plan to limit annual transfers to 10 percent of domestic utility 

requirements, about 5 million pounds per year. 

Unfortunately, the department quickly abandoned the cap and 

has dramatically increased the amount of material entering the 

market. UPA recommends reinstating a cap of 5 million pounds per 

year that includes all categories of DOE material and would be 

phased-in over 5 years. 

2 would be to reform how material enters the market. The manner in which DOE moves the material into the market, primarily 

through the spot market or near-term contracts, is nearly as damaging to our industry as the amount of material being transferred. 

UPA encourages the department to work with the domestic converter uranium producers to minimize the impact of government 

material coming into the market, as was done under the Megatons 

to Megawatts Agreement. 

Uranium producers, with a vested interest, can feed the material 

into long-term contracts, which will ease some of the pressure in 

the short-term when the market is oversupplied. 

3 would be to subject future Secretarial Determinations to full 

notice and comment before they are finalized with greater transparency and oversight on DOE actions. 

Thank you again for the opportunity to testify at today’s hearing. 

I would be pleased to take your questions. 

[Prepared Statement of Mr. Melbye follows:] 
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Ms. LUMMIS. Thank you, Mr. Melbye, you were spot on with your 

5 minutes. 

Gentlemen, we will now begin questions. I would actually like to 

recognize the Ranking Member first. 

Mrs. LAWRENCE. Thank you, Madam Chair. 

The testimony is clear that the uranium market is currently facing depressed conditions. However, the department is increasing 

the amount it transfers into the market. 

Mr. Kotek, why has DOE elected to transfer its uranium now 

rather than waiting for the market prices to rebound? Can you 

please respond? 

Mr. KOTEK. Thank you for the question. 

Of course the department has to make a determination about the 

impact that such transfers would have on the industry. The Secretary of Energy considers a variety of factors when making such 

determinations and of course is very interested in ensuring that we 

both protect a robust domestic nuclear industry, including the uranium industry while also meeting our other obligations for cleanup 

and non-proliferation. 

What I will say going forward is that the department has certainly heard the concerns expressed by this committee, the industry and others and is trying to engage in a process going forward 

that will address some of the concerns that have been raised here 

today, particularly regarding the transparency and the opportunity 

for comment. 

As you may know, we issued a notice late last fall requesting an 

initial input from the industry. We more recently provided an opportunity for industry to provide feedback on further information, 

a compilation of comments we received and some other analyses so 

that we understand fully both the views of market conditions and 

the opinions of participants in the industry on other issues so that 

going forward we have provided the types of opportunities for 

transparency and input that participants in this marketplace are 

looking for. 

Mrs. LAWRENCE. Does the DOE monitor real time market conditions to maximize the value that it is obtaining or the value of the 

uranium for the government? I am asking because shouldn’t it be 

the objective of DOE to prevent depressing the market after marketing a transfer? 

Can you delve into what have been the steps for you to have a 

real price value? You are gathering this information but what have 

you done to ensure we are not depressing the market? 

Mr. KOTEK. As mentioned this morning, we conduct regular analysis that look at the amount of material or a range of the amount 

of material that can go into the marketplace and get an industry 

expert organization to help us understand what impacts particular 

ranges of transactions could have. 

We are, of course, very mindful of the value of the asset that we 

hold in terms of this uranium. We try to structure our transactions 

in a way that best serves the interests of the taxpayers and our 

programs. 

When actually structuring the transactions, we peg the value of 

the uranium to be transferred on market indices and publicly avail-
37 

able at the time, so we try to ensure that the taxpayers are, in fact, 

getting the best value for that resource. 

As you may know, in accordance with the law, we also provide 

a 30-day advance notification to Congress on the amounts, the 

value and the timing of the uranium transfers that we will engage 

in for both the cleanup and for the non-proliferation programs. 

Mrs. LAWRENCE. It is my understanding that the DOE enters 

into long term contracts for the environmental cleanup of the gaseous diffusion plant in Portsmouth, Ohio and for the down blending 

of weapons grade uranium in Erwin, Tennessee, is that correct? 

Mr. KOTEK. We have contracts for both of those activities, yes. 

Mrs. LAWRENCE. Are those contracts funded by the transfer of 

uranium in exchange for the cleanup services? 

Mr. KOTEK. Thank you for the question. 

As part of fulfilling or obligations under those contracts, there is 

uranium bartered to cover some of the services provided under 

each contract. There are also appropriations that cover I think in 

both cases the majority—certainly the cleanup contract for the majority of the activity. 

Mrs. LAWRENCE. When these transfers happen or are bartered, 

do you use the market value at that current time for the uranium 

that you are bartering? 

Mr. KOTEK. That is my understanding. I will confess, the cleanup 

program and the non-proliferation programs are outside of my program area but that is my understanding. If that is incorrect, we 

will correct it as a followup. 

Mrs. LAWRENCE. I yield my time. 

Ms. LUMMIS. The gentlelady’s time has expired. 

The Chair now recognizes herself for 5 minutes. 

Mr. Trimble, I want to start by asking what is the miscellaneous 

receipts statute? 

Mr. TRIMBLE. I am not a lawyer so I would ask to take a formal 

response for the record but the general principle is if there is 

money coming in to the government, money should be deposited to 

the Treasury so that it basically protects Congress’ authority and 

control over the purse. 

Congress appropriates money. It has that authority. If you didn’t 

respect that, an agency could take in money and then decide how 

to spend that money itself. It essentially prevents the circumvention of the appropriations process. 

Ms. LUMMIS. Between 2009 and 2011, DOE made seven transfers 

of excess uranium to pay for cleanup services at a DOE enrichment 

facility, is that correct? 

Mr. TRIMBLE. That is correct. 

Ms. LUMMIS. Did that activity violate the miscellaneous receipts 

statute? 

Mr. TRIMBLE. That was our finding in our 2011 report, yes. 

Ms. LUMMIS. Mr. Kotek, the Department of Energy has contracted with Energy Resources International to conduct market impact analysis of proposed transfers of excess uranium. 

Prior to 2014, the analysis reached a determination that there 

would be no adverse material impact on the domestic uranium industry. It explicitly Stated that conclusion. In 2014, however, the 
38 

ERI analysis did not make a determination of market impact. Can 

you tell me why that is? 

Mr. KOTEK. Thank you, Madam Chairman. 

First of all, I should point out, with the fact that the 2014 process is subject to litigation, there is a limit to what I can say. 

We did provide comment on the 2014 ERI draft as we always do. 

Our comments conveyed this is ultimately the Secretary’s decision. 

The statute leaves it up to the Secretary to make that determination. 

[Slide.] 

Ms. LUMMIS. I would like to show you some slides because we requested from ERI documents regarding the process that is used in 

its market impact analysis. 

[Slide.] 

Ms. LUMMIS. The first slide I am showing you shows the 2010 

ERI market assessment. As you can see in the highlighted language that is blocked off on the right, it finds no adverse material 

impact. That is the 2010 report. 

Now you go to the next slide which is the 2013 ERI market assessment. It also finds no adverse material impact. There are 2010 

and 2013. 

[Slide.] 

Ms. LUMMIS. Now let us go to the 2014 draft ERI market assessment. It notes, in a departure from previous years, that ERI can 

no longer make a definitive statement of no adverse material impact. 

[Slide.] 

Ms. LUMMIS. Now go to slide four, please. This slide shows the 

final 2014 ERI market assessment. It clearly States that ERI 

makes no conclusion regarding an adverse material impact which 

seems to be a departure from their draft. 

[Slide.] 

Ms. LUMMIS. Let me ask you to put up one more slide, please. 

This fifth slide shows DOE’s comments in response to the 2014 

draft assessment. In it, comments from DOE suggest that it is not 

the place of ERI to determine if the transfers would constitute an 

adverse material impact. 

It appears that at one point, the fact that ERI was concluding 

there was no adverse material impact was OK but then when they 

decided, we cannot say that anymore, that was when DOE intervened and said, oops that is a Secretarial determination. Do you 

know who made those comments? 

Mr. KOTEK. I am afraid I do not. Having been with DOE for less 

than 3 months in this position, I am afraid I do not have the history. 

Ms. LUMMIS. I appreciate the situation you are in but we still 

thank you for being here today. 

I do want to understand why when the contract provider determined there was no adverse material impact, that was accepted, 

but when they hit the point where they said we cannot say that 

anymore, all of a sudden DOE says, oh, well, that is not yours to 

say. 

Thank you, Mr. Kotek and Mr. Trimble. 
39 

My time having expired, I will return to the normal order of 

things and yield to Mr. Russell of Oklahoma for 5 minutes—the 

gentleman from Texas, Mr. Farenthold. 

Mr. FARENTHOLD. Thank you, Madam Chairman. 

Mr. Melbye, as a constituent, welcome to Washington. 

I would like to ask Mr. Kotek a couple of questions. Is there any 

disagreement that DOE transfers are depressing uranium prices? 

You all are not disputing that, are you? 

Mr. KOTEK. As you see in our analyses, we certainly look at the 

situation in the marketplace and have an evaluation done of the 

potential impacts of transfers into the marketplace. Those show 

some movement in prices certainly. 

Mr. FARENTHOLD. I am little concerned you are also using the 

uranium to basically barter. If I sold my office furniture to pay for 

a junket to China, I would be in a little bit of trouble. Did you all 

not see this coming? 

Mr. KOTEK. My understanding is this practice has been undertaken for some number of years. 

Mr. FARENTHOLD. I am a little concerned about it. That may be 

something the overall committee needs to be looking at governmentwide. 

I see Congress has really kind of damaged our ability to govern 

by surrendering some of the power of the purse. It is probably a 

bigger issue beyond this hearing. 

I would like to go to Mr. Melbye for a second. You and your family have been in the uranium business for a long time. There was 

some talk about the uranium being sold in the spot market. 

Where is there a spot market for uranium? My understanding is 

there are very limited uses for uranium. Obviously, you have depleted uranium that is not a subject here that has some uses but 

radioactive uranium—medical, nuclear energy and bombs—am I 

missing something? 

Mr. MELBYE. In the commercial nuclear energy industry, the uranium is used for production of electricity, so the spot market for 

uranium is composed of electric utility companies buying requirements for their nuclear power plants. 

Mr. FARENTHOLD. Do they normally buy on a long term contract 

or do they just go out? 

Mr. MELBYE. That is an important point. These are big investments in nuclear power plants and to fuel these reactors, utilities 

generally cover their requirements well in advance of the actual 

need. 

The actual unfilled uranium requirements that fall into the spot 

market being utilities needing to buy to fuel their reactors are 

quite low. Hence, the focus of DOE uranium dispositions in the 

spot and near term market has a disproportionate impact on prices. 

Mr. FARENTHOLD. I guess that goes both ways though. You all 

probably do not sell that much into the spot market. I guess where 

I am going with this is where can you guys come together and 

make this work? It seems like you tried but now it is all in court. 

Is there another starting point we can get to? 

Mr. MELBYE. There certainly is, Mr. Farenthold. Really, the solution that will provide the greatest benefit to the taxpayer and have 
40 

the least impact on industry really can be found in a compromise 

solution. 

The way the current barter program is working, it is really kind 

of a senseless and self perpetuating, downward spiral where the 

more uranium the DOE sells, the more it impacts price. The more 

it impacts uranium price, the more uranium they have to sell. 

This was even something that was acknowledged by the Ohio 

congressional delegation as a challenge faced by the Portsmouth 

cleanup. Really, the solution is to have these measured caps, predictable limits on the inventory sales and involve domestic industries as much as possible. 

Mr. FARENTHOLD. Let me ask you one more question because I 

am very limited on time. 

The DOE has reported that domestic uranium production was up 

5 percent in 2014 compared to 2013. Given your remarks about the 

State of the industry, I was surprised to see an uptick in production. Again, you also have Fukushima and a potential decrease in 

demand. What is the story behind that? 

Mr. MELBYE. Mr. Farenthold, that is an excellent question. I am 

glad you asked it. 

The mining business, not just uranium mining, has very long 

lead times in terms of permitting, licensing, and development of 

mines. A lot of the investment decisions that were made particularly in the U.S., I think most of the major U.S. uranium producers 

made investment decisions in the 2009–2010 timeframe and only 

now in 2013–2014 have seen production top out. 

I can assure you that the amount of exploration drilling, drilling 

contractors in south Texas will tell you that the well field development has absolutely ceased. In Wyoming, it is the same story. The 

production levels we are going to see in 2015 and 2016 are certainly going to follow on the lack of investment. It is just the lag 

time to ramp up. 

Mr. FARENTHOLD. Maybe the government will get some more 

money for their uranium, but again, not good for your industry. 

I see my time has expired. Thank you very much, Madam Chairman. 

Ms. LUMMIS. I thank the gentleman and apologize to the 

gentlelady from the Virgin Islands. I should have recognized her 

next. The gentlelady is recognized for 5 minutes. 

Ms. PLASKETT. Thank you, Madam Chair. 

Good morning, gentlemen. 

I wanted to go back to the slides the Chairperson had us looking 

at earlier today. Chairman, did you put these into the record as 

yet? I did not hear you ask for unanimous consent. 

Ms. LUMMIS. I ask for unanimous consent that they be placed in 

the record. Without objection, so ordered. 

Ms. PLASKETT. Thank you. 

Would you please bring up the draft 2014 market analysis slide 

that was shown to you, if that is possible? Thank you. 

[Slide.] 

Ms. PLASKETT. The sentence ‘‘Given the current weak State of 

the markets and the impact described in this report, ERI can no 

longer make such a definitive statement’’ is highlighted. 
41 

Then when I look several sentences down, I see the sentence 

‘‘Based on the analysis contained in the study, it is not clear that 

a reduction in DOE inventory releases would cause the overall 

market conditions to change enough to make a significant difference in the health and status of the domestic industry.’’ 

The gentlewoman from Wyoming would appear to show that 

there was some bias that DOE had put into this report but I note 

that neither of these sentences, which are contradictory sentences 

in the draft report, were in the final market analysis report. 

If you pull up the final market analysis, that same context, you 

will see both of those sentences have been removed which seems 

to me to negate each of those sentences being contradictory conclusions and both of the sentences being edited out, I do not believe 

the final slide proves any bias or predetermined conclusions motivated by the edits since if they were contradictory and they were 

both removed, that seems to be pretty even handed and not to 

bring the scale one way or the other. 

I have other questions that I wanted to address this morning related to the uranium industry. 

One of the legal requirements for transferring excessive uranium 

is that the Secretary must make a determination that the transfers 

would not have a material adverse impact on the domestic mining 

conversion or enrichment industries. 

Mr. Kotek, for transfers in 2012 and 2013, the Secretary’s decisions were based on market studies by Energy Resources International that concluded no adverse impacts were proposed for 

sales, am I correct? Is that right? 

Mr. KOTEK. Yes. 

Ms. PLASKETT. However, according to GAO’s testimony, DOE did 

not take steps outlined in its contracts or departmental quality assurance guidelines to assess the technical quality of these studies. 

Mr. Trimble, can you explain that? 

Mr. TRIMBLE. Yes, I can. Our 2014 report looked at these studies 

and had similar findings to what we had in 2011 which really addressed the conclusiveness. We questioned whether the reports’ 

sort of definitive conclusions could be reached given the information we had. 

Specifically in the 2014 report, we noted there was limited information in the studies on their methodology, their assumptions or 

their data sources. We noted that the completeness of the data was 

in question. 

Specifically, they were using general industry information which 

was fine but they were reaching very specific information with sort 

of general, sort of top level data which we thought was a bit too 

much. 

They assumed no cumulative effect or impact of transfers over 

time. They sort of looked at each transfer in isolation of the prior 

transfer. 

Ms. PLASKETT. Let us give Mr. Kotek a chance. What is your department’s response to the GAO’s finding? 

Mr. KOTEK. Thank you for the question. 

We have, of course, a detailed response to the GAO’s findings 

that can actually be found at the back of the GAO report. 

Ms. PLASKETT. Just give me a high level—what is your response? 
42 

Mr. KOTEK. The department took issue with several of the findings from the GAO report. With respect to the ERI report, one of 

the things we are trying to do going forward is provide more transparency and more opportunities for input to our process. 

For instance, fairly recently, we published in the Federal Register a document providing some of the analysis that has been prepared for us. We have made the ERI report broadly available so 

that people can provide us with input where they think the report 

might be off the mark. 

Ms. PLASKETT. What steps are you taking to mitigate the negative market impacts that resulted from that when you used that 

study for the 2014 transfers? 

Mr. KOTEK. Thank you for the question. 

The 2014 process is all subject to litigation, so I am limited in 

what I can say about that. What I can say is that going forward, 

we have heard the concern about lack of transparency and lack of 

opportunity for input. 

We are trying something we have not done before in terms of the 

number of opportunities for providing for input. We have been very 

pleased with the number of responses and the quality of responses 

we have received. 

Those will be factored into the new determination that is issued 

and it should be fairly soon. Frankly, we will adjust the process 

going forward as we see how the situation unfolds. 

Ms. PLASKETT. Thank you. 

Thank you, Madam Chairman, for the time. 

Ms. LUMMIS. Thank you. The gentlelady yields back. 

The Chair recognizes the gentleman from Arizona, Mr. Gosar. 

Dr. GOSAR. Thank you, Madam Chairman. 

Mr. Kotek, do you understand market forces? 

Mr. KOTEK. I have only been on the job now X amount of time. 

Dr. GOSAR. But do you really understand market forces? I am 

going to give you an example. 

Do you understand the rare earth issue in the world—that we 

have China that manipulates them, they have a monopoly. What 

they actually do is they flood the market so it is inconceivable that 

actually a mining process can do it and make some type of a profit. 

Then they continue to raise it up to the point that people want to 

get back in and then they cut it back down? 

Mr. KOTEK. Sir, I can actually claim some understanding of the 

rare earth issue. In a past life, I participated in some of the communications work around a proposed rare earth mine in the northeastern part of the great State of Wyoming in the Bear Lodge District, so yes. 

Thank you for calling attention to that issue. That is an important one. 

Dr. GOSAR. Yes, it is manipulation of the marketplace. This is 

what I want to go back through. I know my colleague from Texas 

actually highlighted that. 

With the Fukushima accident and subsequent shuttering of the 

Japanese nuclear reactors, the price of uranium was dropped from 

$70 per pound down to $55. With the subsequent flooding of the 

market, we are down to $28 per pound and currently about $37 per 

pound. 
43 

In my State of Arizona, there is now only one producer left operating in the whole State. This has stunted economics. This is an 

aspect of great job stability in rural Arizona. From my standpoint, 

when you manipulate the marketplace without looking at the consequences of it, it drives this marketplace very differently. 

Is your agency pro-mining? 

Mr. KOTEK. Our agency supports a strong domestic mining industry and the uranium mining industry in particular. 

Dr. GOSAR. What efforts have you taken to help streamline the 

rules and regulations in regard to mining? 

Mr. KOTEK. That doesn’t really fall into the purview of our agency, sir. 

Dr. GOSAR. Well, but it has inferences on it because you want to 

promote it, right? 

Mr. KOTEK. If I could take just a minute to describe some of the 

other things we are trying to do to promote a healthy domestic uranium industry broadly which has implications for the nuclear industry. 

Our organization, the Nuclear Energy Office, is principally an 

R&D organization. For example, it was our organization that 

helped lay the technical groundwork for the license extensions that 

allowed nuclear power plants in the U.S. to go from 40 years of operation to 60 years. 

Dr. GOSAR. That is fine and good. I understand but I have limited time here. I understand that aspect but it is a multilayered aspect. There are fuels in, diversified fuel out, applications so you 

want not just one aspect of delivery, right? You do not want spent 

fuels—new uranium and mining not only from Texas and Arizona, 

you want dynamic markets and diversified markets. 

How have you looked at that from that diversified market, how 

have you looked at it from the standpoint of the impact of flooding 

the marketplace with current mining? You know, people have to 

stay in business and have to make a profit. By flooding the marketplace, you have actually taken away the application. In my State, 

we are down to one and they are holding on by a thread. 

Mr. KOTEK. Thank you, sir, for that concern. That is something 

we have heard broadly from the industry, particularly as it pertained to the 2014 determination and the 2013 management plan. 

That is why we are engaged in a process this year that is designed to provide more input into the Secretary’s determination 

process prior to his making that determination. 

Dr. GOSAR. I keep coming back to this. The highest grade of uranium is found in my district and found in my State and southern 

Utah. Yet, we have had this predilection in regard to eliminating 

that type of mining. We have not seen a cohesive aspect of support 

for that mining aspect. 

Mr. Melbye, have you seen that? You are very well aware of the 

Breccia Pipes up in northern Arizona and southern Utah. We are 

down to one mine that is barely holding on. We have an Administration continuing on with this advancement of potentially extending the Antiquities Act even further on this application. 

Do you see DOE actually engaging you in an active aspect of 

having a diversified mining application to help with this? 

Mr. MELBYE. Thank you, Mr. Gosar. 
44 

It is ironic that the Administration does support nuclear energy 

as a way to provide energy security to the United States and have 

an impact on carbon emissions, yet it seems like our biggest competitor in a very difficult market condition. 

U.S. uranium producers we can compete with any other producers in the world. We have advantages and environmentally 

clean operations. We are in safe and peaceful jurisdictions with 

strong regulation. 

Utilities want to buy from us but if we cannot get over the head 

winds that we are facing from DOE and dumping material into our 

markets, we just cannot really fulfill our potential. 

Dr. GOSAR. Your story is very unique because it is one of the 

cleanest mining processes around. Mitigation, I have taken numerous people up to the northern rim of the Grand Canyon and people 

cannot even find it. In fact, it may even help percolation of water 

into subsurface areas in a cleaner fashion. I want to compliment 

you on that. 

I do not envy you the problems because the Administration obviously does not understand market factors. 

Ms. LUMMIS. The gentleman’s time has expired. Thank you. 

Unless there is an objection, we will move to round two and unless there is objection, we will return to the regular order. Do you 

object to returning to the regular order? 

Mrs. LAWRENCE. No objection. 

Ms. LUMMIS. Thank you. In round two, I will recognize myself for 

5 minutes. 

Mr. Trimble, your May 2014 report identified legal concerns with 

another series of transfers undertaken by DOE. How did the DOE 

value the materials they were transferring? 

Mr. TRIMBLE. In our report, we looked at a series of transactions. 

The key finding regarding value was there was inconsistent practice at DOE in terms of how it valued tails. In my opening statement, I made reference to one transaction, which was a large 

transaction, ultimately I believe DOE saw benefit or cited benefits 

over $700 million in this transaction. 

Internally, they estimated the value to be zero or $300 million. 

Ultimately, they chose zero for the transaction even though it was 

being transferred for the purpose of re-enrichment, so it had economic value. 

The problem we cite in the report is simply that there is no internal guidance or policy governing how such decisions are to be 

made. That leads to inconsistent applications. Prior transfers going 

back several years, they had set a price for similar transactions for 

a similar purpose and they also entered negotiations for the disposition of some of its tails for re-enrichment, again, suggesting 

there is value and the price should be set. 

Moreover, under the law, both the Atomic Energy Act as well as 

the USEC Privatization Act, they are required to set a price to obtain a fair value for the commodity. By setting the price to zero, 

they were not consistent with that law. 

Ms. LUMMIS. Mr. Kotek, does the department review the contracts between Fluor and Trexus that outline how the uranium 

transferred by DOE to Fluor will be sold into the market and at 

what price? 
45 

Mr. KOTEK. My understanding is that is an arms-length arrangement. We do not get involved in the specifics. Again, that falls into 

a different program office. If I have that wrong, I will be corrected 

here shortly. 

Ms. LUMMIS. OK. If not, how does DOE ensure that these transfers are receiving fair value and not resulting in an adverse material impact on the domestic industry? 

Mr. KOTEK. My understanding is that when we are engaged in 

our bartering arrangement with the cleanup contractor, that is 

when we have to ensure we get the fair value. We ensure that 

takes place at that transaction. 

Ms. LUMMIS. You do ensure that takes place. How do you ensure 

that takes place? 

Mr. KOTEK. My understanding is that is based on an evaluation 

of the market conditions and prices at the time. 

Ms. LUMMIS. Mr. Melbye, following up on that, you indicated in 

your testimony that DOE may not be securing the highest value for 

the government’s uranium assets. Can you explain that statement? 

Mr. MELBYE. In this regard, meaning the domestic industry and 

the taxpayers, are completely aligned in getting the highest value 

for those government assets I think by limiting the amount that 

DOE puts into the market particularly in periods of market weakness. 

The value of the uranium that they do sell is going to be at a 

higher price, so that goes to the measured predictable and limited 

caps. Also, I think if you involve the domestic industry, meaning 

the converter and the United States and the uranium producers, no 

one has more of a vested interest to ensure that the uranium does 

not have an adverse impact on our markets. 

I think our ability to put it into portfolios of long term contracts—we do not mean spot or near term, forward carried trades 

the commodity traders are adept at doing—we are talking about 

the market that uranium producers sell to electric utilities over 

five to 8 year agreements at higher prices. 

We think that would certainly lift all the boats in this issue and 

get higher value for the taxpayer and less adverse impact on the 

industry. 

Ms. LUMMIS. Mr. Trimble, how can we be sure the taxpayer is 

being reasonably compensated for all this? 

Mr. TRIMBLE. Sort of following up the recommendations from our 

2014 report, I think there are two things that jump to mind. One 

is we have recommended and believe that DOE should establish 

guidance and internal policies on how such transfers will be valued 

and priced so there is clarity as to how that process is carried out 

and there is transparency regarding how those prices will be set. 

Second is we talked a bit about the market impact studies. The 

second part of this is that we have recommended DOE follow its 

own guidelines to ensure the quality of those studies. When it contracted out with the vendor for these market impact studies, it did 

not take steps to verify the quality of those studies as called for by 

its own guidance. 

We think, at a minimum, those steps should be taken to flag 

early any problems with that analysis. 

Ms. LUMMIS. I thank the gentlemen. 
46 

The Chair now recognizes the Ranking Member, Mrs. Lawrence, 

for 5 minutes. 

Mrs. LAWRENCE. Mr. Trimble, according to your testimony, the 

Department of Energy published the excess uranium inventory 

management plan based on your agency’s recommendation back in 

2008, correct? 

Mr. TRIMBLE. That is correct. 

Mrs. LAWRENCE. Was that recommendation based on a GAO finding that the department needed transparency in planning the use 

of excess uranium? Could you explain? 

Mr. TRIMBLE. Our work in this area goes back at least as far as 

2006, so we were flagging several of these issues back then and 

identified the need for the department to come up with a plan. The 

department had been working on something so we recommended 

that they complete that and develop a comprehensive plan. 

We also recommended that they clarify the legal authority as I 

highlighted in my statement. 

Mrs. LAWRENCE. Mr. Kotek, the management plan established 

the guideline that it would cap its uranium at 10 percent of industry needs, is that correct? In 2008, the plan established that. 

Mr. KOTEK. That was not a cap, that was a guideline. 

Mrs. LAWRENCE. It was a guideline, so you did not perceive it as 

a cap? 

Mr. KOTEK. That is my understanding, yes. 

Mrs. LAWRENCE. The department has never operated that there 

was an established cap. Did you adhere to the guideline? 

Mr. KOTEK. The guideline, I believe was adhered to, yes, in the 

first several years of the transactions. 

Mrs. LAWRENCE. Currently, what is the amount or the cap that 

you are using or is there a cap or a guideline existing now? 

Mr. KOTEK. There is not one now. The 2013 Uranium Management Plan made clear the department was moving away from the 

10 percent but was continuing to, of course, meets its obligation 

that the Secretary assess the situation and make a determination 

that there was no adverse material impact on the uranium markets. 

Mrs. LAWRENCE. Do you know if the department consulted with 

the domestic industry representations in deciding how this uranium—you call it a guideline, some call it a cap—was there any 

interaction with the domestic market? 

Mr. KOTEK. Having not been here then, I cannot speak to the 

specifics. I know there is regular interface between my organization 

and the department broadly and the uranium industry but certainly, the desire for more industry input is one of the things that 

has informed the process we are using this year with the 2015 Secretarial Determination. 

Mrs. LAWRENCE. Mr. Melbye, as far as you know, did the Energy 

Department seek industry input when it moved from what we are 

being told was not a cap but a guideline on the transfer and did 

it seek industry input when it significantly ramped up its uranium 

transfers into the market? Were you consulted? 

Mr. MELBYE. Thank you, Ranking Member Lawrence. 

They did not consult us when they decided to ramp up. It was 

very troubling. It wasn’t a couple years after they established the 
47 

2008 Inventory Management Plan. It was really less than 6 months 

after it was put in place. 

I will say that the industry was consulted in the formation of the 

so-called industry consensus which involved the Nuclear Energy Institute, the electricity companies and the domestic producers. That 

recommended—it was not a guideline, it was a cap on how much 

uranium DOE puts into the market. 

That is critically important when financial institutions or shareholders are looking to invest in our companies, that they know 

there is an upside limit to how much the government is going to 

impact our markets. 

Mrs. LAWRENCE. Mr. Kotek, you Stated DOE sought comment 

from the public about the effects of the continuous uranium transfers on domestic industries and recommendations about the factors 

it should consider in assessing whether to give these transfers and 

the adverse material impact. 

Was this request for comment part of the department’s response 

to concerns that the management process is no longer transparent 

and what was the decision of DOE when we looked at the impact 

of not having a cap? It seems like you just sell now and there are 

no guidelines. 

Mr. KOTEK. Thank you for the question. 

In the feedback we have received, first, to respond to your question about what we are doing in response to the expression of concern, yes, we have heard from the market participants. We understand their desire for more opportunity for input to the process and 

greater transparency. We are trying to achieve that. 

In response to the first round of comment that we received from 

industry, in March of this year, we published a list of six factors 

that we would intend to consider as a part of future determinations: market prices; realized prices for current operators; production and existing facilities; employment levels in the industry; 

changes in capital improvement plans and development for future 

facilities; and then, the long term viability and health of the industry. 

We published those for comment. We have received comment. 

While I have not read each of the comments we received back, my 

understanding from the response we have received back is that 

those factors seem to be a pretty good and thorough set of things 

for the Secretary to consider in making determinations going forward. 

Mrs. LAWRENCE. Madam Chair, I just want to say there are 

clearly two different experiences when it comes to input and responses to the industry and what the DOE is saying. I think that 

is a flag that this committee needs to really explore. 

Thank you. 

Ms. LUMMIS. The Ranking Member yields. The Chair now recognizes the gentleman from Texas for 5 minutes. 

Mr. FARENTHOLD. Thank you very much. I am not going to use 

the entire 5 minutes. 

Mr. Melbye, I just want to make sure I heard right a second ago. 

You guys in the industry viewed the 10 percent as a cap, not a 

guideline, is that correct? 

Mr. MELBYE. That is absolutely correct. 
48 

Mr. FARENTHOLD. You went to your bankers, you decided to buy 

equipment, you made leases, you went with business decisions 

based on what you believed were good faith representations by the 

government? 

Mr. MELBYE. It is something that the investment community 

watches very closely. When they try to model our businesses and 

our industry, they need to know how much impact the government 

is going to have on our business. 

Mr. FARENTHOLD. So it wasn’t just you guys that thought it was 

a cap, your lenders and investors thought it was a cap too? 

Mr. MELBYE. Correct, and the utilities and the NEI-led consensus. 

Mr. FARENTHOLD. I just wanted to make sure that was clear in 

the record. 

I yield back. Thank you. 

Ms. LUMMIS. I thank the gentleman. 

I do have one more question. Does the Ranking Member have 

any more questions? 

Mrs. LAWRENCE. No, Madam Chair. 

Ms. LUMMIS. With your indulgence, I will ask my final question. 

Mr. Kotek, you said earlier that your contract with Fluor is an 

arms-length transaction, did I get that right? 

Mr. KOTEK. My understanding, Madam Chairman, is that it is 

the contract between Fluor and I think it is Trexus. That is the 

arms-length relationship I was talking about. 

Ms. LUMMIS. I am going to ask once again, do you review the 

contract between Fluor and Trexus? 

Mr. KOTEK. My understanding is no, Madam Chairman—unfortunately, that is not in my program area in DOE, so I would like 

to offer to have folks get back to you with the specifics on that if 

I am incorrect. 

Ms. LUMMIS. That would be perfect. I would request that you respond in writing or have a colleague respond in writing to that specific question. 

Do you have an additional question? 

Mrs. LAWRENCE. Madam Chair, I really would like the agency to 

respond to the definition of a cap and a guideline. When we have 

the industry and lending industries clearly operating on a cap—it 

was removed and I would like clarification. Is there a guideline, as 

DOE calls it, or is there a perceived cap in that industry? I would 

really like clarification on that through the Chair. 

Ms. LUMMIS. Mr. Kotek, I believe the question is directed to you. 

Mr. KOTEK. I am sorry, I thought that was a request to respond 

for the record. 

Ms. LUMMIS. Would you rather have the response in writing for 

the record? 

Mrs. LAWRENCE. Yes, I would rather have the response for the 

record. 

Ms. LUMMIS. Do you understand the question? 

Mr. KOTEK. Yes. Thank you very much. 

Ms. LUMMIS. Thank you. 

Mr. KOTEK. Just to reiterate, having not been here at the time, 

my understanding is that at least the folks on our side view the 

10 percent number showing in the 2008 report as, again, a guide-
49 

line, not a cap, that we could go higher or lower each year but certainly, we have heard a different perspective here. We would be 

happy to followup with you. 

Thank you very much. 

Ms. LUMMIS. Thank you, Mr. Kotek. 

The gentleman from Alabama, Mr. Palmer, has just arrived. Mr. 

Palmer, do you have any questions? 

Mr. PALMER. Nothing. 

Ms. LUMMIS. Thank you. 

There appearing to be no further questions, I want to thank the 

Ranking Member and others for being here today. 

Mr. Kotek, I want you to thank Secretary Moniz, on my behalf, 

for taking time when he was in Wyoming last summer, to meet 

with me and others regarding this issue. 

Would you please also pass along to him that this committee has 

document requests outstanding with the department, including 

those regarding Mr. Poneman. I would like to reiterate my request 

for those documents. 

Mr. KOTEK. Thank you, Madam Chairman. I will be sure to pass 

that along. 

Ms. LUMMIS. Thank you. 

That being said, I think it is important that the committee conducts oversight of the workings of the Federal Government, not 

just to find problems, but to help identify solutions. In that regard, 

I want to thank all three of the gentlemen for being here today. 

In 2008, the DOE and domestic industry met and negotiated 

ways to ensure that both parties benefited from the transfer program. It is my hope that the Department of Energy can work with 

the domestic industry and those involved in cleanup to develop a 

way to ensure that excess uranium can be used to meet cleanup 

needs while ensuring a strong uranium industry in America that 

lessens our dependence on foreign sources of energy. 

I am sure that Congress would be interested in legislation that 

does so. I am hopeful that the Administration and industry can 

work toward those ends. 

I would like to thank our witnesses for taking time to appear before us today. Given the requests that we have submitted, we hope 

to hear from you soon in writing, Mr. Kotek. 

If there is no further business, without objection, the subcommittee is adjourned. 

[Whereupon, at 11:20 a.m., the subcommittee was adjourned.] 

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