DEPARTMENT OF 

ENERGY

Enhanced 

Transparency Could 

Clarify Costs, Market 

Impact, Risk, and 

Legal Authority to 

Conduct Future 

Uranium Transactions

Report to Congressional Requesters

May 2014

GAO-14-291

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-291, a report to 

congressional requesters

May 2014

DEPARTMENT OF ENERGY

Enhanced Transparency Could Clarify Costs, Market 

Impact, Risk, and Legal Authority to Conduct Future

Uranium Transactions

Why GAO Did This Study

USEC is the only company that uses 

U.S.-developed technology to enrich 

uranium. According to DOE, under 

international agreements the U.S. must

use uranium enriched with domestic 

technology to meet national security 

needs, such as for nuclear weapons. In 

2012 and 2013, DOE transferred 

uranium to USEC to support the 

development of next generation 

enrichment technology and for other 

national security purposes. In May 

2013, USEC ceased enrichment 

operations and, in March 2014, filed for 

Chapter 11 bankruptcy protection. In 

April 2014, DOE announced it would 

assume managerial responsibility for 

continued development of the next 

generation technology.

GAO was asked to review recent DOE

transactions involving USEC. This 

report examines (1) the uranium 

transactions DOE undertook in 2012 

and 2013 involving USEC, (2) legal 

concerns regarding the transactions, 

(3) other issues the transactions raise, 

and (4) the extent to which DOE 

assessed impacts of the transactions

on the domestic uranium market. To 

address these issues, GAO analyzed

relevant laws and key documents and 

interviewed DOE, USEC, and uranium 

industry officials, among other steps.

What GAO Recommends

GAO recommends six actions to DOE 

to improve the transparency of its 

uranium transactions, including 

developing a consistent method for 

valuing depleted uranium tails and 

conducting quality assurance on future 

market impact studies. DOE generally 

disagreed with GAO’s legal analysis 

and recommendations. GAO maintains 

that its recommendations are valid.

What GAO Found

The Department of Energy (DOE) undertook four uranium transactions involving 

USEC Inc. (USEC) in 2012 and 2013. These transactions served to provide the 

company with operating cash. According to DOE, the department benefited from 

these transactions in two ways: (1) by ensuring availability of domestic lowenriched uranium (LEU) for the production of tritium, a key radioactive isotope 

used to enhance the power of nuclear weapons, and (2) by supporting USEC’s 

development of next generation enrichment technology. Three of the four 

transactions involved transferring ownership of depleted uranium tails (tails), a 

product of the enrichment process. Tails are generally considered to be an 

environmental liability, but can have value as an asset when uranium market 

conditions make tails re-enrichment economical in lieu of enriching natural 

uranium. In two transactions, DOE accepted ownership of tails, along with liability 

for disposal costs, in exchange for other benefits. In another transaction, DOE 

transferred ownership of tails to a third party to be re-enriched by USEC. The 

fourth transaction involved the transfer of uranium material other than tails.

GAO identified legal concerns with all four of DOE’s uranium transactions. For 

the largest transaction—DOE’s transfer of tails to a third party for reenrichment—GAO believes that DOE likely did not have authority to transfer tails 

under restrictions imposed by the USEC Privatization Act. DOE disagreed, citing

its authority to conduct this transaction under the Atomic Energy Act. Even if 

DOE had such authority, GAO found that it did not meet the Act’s requirement to 

charge a price for the tails because it transferred them without charging any price 

at all. In another transaction, DOE transferred ownership of uranium material that 

it previously obtained to meet national security needs, without obtaining a 

presidential determination that the uranium material was no longer necessary for 

national security needs, as GAO found is required by the USEC Privatization Act. 

GAO identified issues concerning DOE’s methods for valuing tails and whether 

DOE received reasonable compensation with respect to its largest transaction. 

DOE does not have guidance for determining the value of tails when they are 

treated as an asset in a transaction, and as a result, the estimated value of the 

tails ranged from $0 to $300 million. DOE decided that the tails had no value in 

this transaction, and therefore, the transaction had no cost to the department. 

But, in other instances, DOE has determined that tails have value and has 

sought to sell its tails. Without consistent guidance for how to value its tails for 

transactions, DOE cannot ensure the government will be reasonably 

compensated, as required if, as DOE asserts, the Atomic Energy Act applies.

DOE contracted for two studies in 2012 and 2013 to support required 

determinations by the Secretary of Energy that certain uranium transfers would 

not have an adverse material impact on the domestic uranium market and posted 

these studies on its website. However, DOE did not take steps outlined in its 

contracts or in departmental quality assurance guidance to ensure the quality of 

these studies. For example, the studies provided only limited detail about their 

methodology and data sources; however, DOE’s quality assurance guidance 

states that DOE information disseminated to the public should contain such 

information. GAO also identified shortcomings in the studies that raise questions 

about the definitiveness of the studies’ conclusions.

View GAO-14-291. For more information, 

contact David C. Trimble at (202) 512-3841 or 

trimbled@gao.gov.
Page i GAO-14-291 Department of Energy

Letter 1

Background 7

DOE Engaged in Four Uranium Transactions Involving USEC in 

2012 and 2013 to Obtain Tritium and Support the Development 

of New Enrichment Technology 18

DOE Likely Lacked Authority for the Largest Uranium Transaction, 

and the Other Transactions Raise Additional Legal Concerns 29

DOE’s Methods for Valuing Tails and for Mitigating Risks for Its 

Largest Uranium Transaction Raise Issues About Whether the 

Government Received Reasonable Compensation 35

DOE Did Not Assess the Quality of Studies It Obtained to 

Determine the Market Impact of Its Uranium Transfers and Will 

No Longer Use a Guideline to Limit Its Annual Uranium Sales or 

Transfers 43

Conclusions 50

Recommendations for Executive Action 53

Agency Comments and Our Evaluation 55

Appendix I Timeline Showing DOE’s Uranium and Financial Transactions 

Involving USEC Since 2012 64

Appendix II Scope and Methodology 65

Appendix III Summary of DOE’s Uranium and Financial Transactions Involving 

USEC Since 2012 69

Appendix IV Legal Analysis of DOE’s Four Uranium Transactions 70

Appendix V DOE’s Actions to Comply with the National Environmental Policy Act 92

Appendix VI GAO Analysis of DOE-Contracted Market Impact Studies 97

Contents
Page ii GAO-14-291 Department of Energy

Appendix VII Comments from the Department of Energy 101

Appendix VIII Comments from the Nuclear Regulatory Commission 105

Appendix IX GAO Contacts and Staff Acknowledgments 106

Tables

Table 1: Types of and Uses for Uranium 9

Table 2: Uranium Transactions Involving DOE and USEC Inc. in 

2012 and 2013 19

Table 3: Conflicting Amount of Tails Reported in Documents 

Supporting the June 2012 Tails Acceptance Transaction 

(equivalent amounts of material presented in two different 

units) 26

Figures

Figure 1: Nuclear Fuel Cycle 8

Figure 2: DOE’s Excess Uranium Inventorya by Type, as of 

December 31, 2012 11

Figure 3: March 2012 SWU Procurement 20

Figure 4: May 2012 Tails Transfer 22

Figure 5: March 2013 SWU Transfer 28

Figure 6: Cylinders of Depleted Uranium Tails at the Paducah 

Gaseous Diffusion Plant 40
Page iii GAO-14-291 Department of Energy

Abbreviations

AEA Atomic Energy Act

DOE Department of Energy

EA Environmental Assessment

EIS Environmental Impact Statement

ERI Energy Resources International, Inc.

FONSI Finding of No Significant Impact

GDP Gaseous Diffusion Plant

HEU highly enriched uranium

kg kilogram

LEU low enriched uranium

MAP Mitigation Action Plan

MTU metric tons of uranium

NEPA National Environmental Policy Act

NNSA National Nuclear Security Administration

NRC Nuclear Regulatory Commission

NWSP Nuclear Weapons Stockpile Plan

RD&D Research, Development, and Demonstration

SWU separative work unit

TVA Tennessee Valley Authority

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

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Page 1 GAO-14-291 Department of Energy

441 G St. N.W.

Washington, DC 20548

May 9, 2014

The Honorable Edward J. Markey

United States Senate

The Honorable Michael C. Burgess

House of Representatives

Uranium is a naturally occurring radioactive element that is enriched to 

fuel nuclear power plants, which provide about 20 percent of U.S. 

electricity, and to meet certain national security requirements.1 The 

Department of Energy (DOE) considers nuclear power a viable source of 

clean energy, and as such, is committed to the maintenance of a strong 

domestic nuclear industry. Beginning in the 1940s, the federal 

government, through DOE and its predecessor agencies, provided the 

nation’s domestic uranium enrichment services for both commercial 

power and national security needs using government-owned plants. In 

1992, USEC Inc. (USEC) was established as a government corporation2

to provide uranium enrichment services for the U.S. government and 

utilities that operate nuclear power plants and to take over operations of 

DOE’s enrichment facilities. USEC was then privatized in 1998 under the 

USEC Privatization Act.3

USEC’s financial condition has been negatively affected by external 

business pressures, among other factors. One such factor was the March 

2011 tsunami caused by a major earthquake off the coast of Japan that 

resulted in irreparable damage to four nuclear reactors at the Fukushima 

Daiichi power plant. The events in Japan triggered broader concerns 

about the risks associated with nuclear power, and more than 50 nuclear 

Since then, shares of USEC have been publicly 

traded on the New York Stock Exchange.

 1

To transform uranium ore into a form that can be used to fuel nuclear reactors, uranium 

goes through a number of steps including mining, conversion, and enrichment. 

Enrichment is the process of separating uranium-235—the form, or isotope, that 

undergoes fission to release enormous amounts of energy in nuclear reactors and 

weapons—from uranium-238 to increase the concentration of uranium-235. 

2

The corporation was initially established as the United States Enrichment Corporation. 

Upon privatization, the corporation was renamed USEC Inc.

3

USEC Privatization Act, Pub. L. No. 104-134 tit. III, ch. 1, subch. A, 110 Stat. 1321–335 

(1996), codified as amended at 42 U.S.C. §§ 2297h-2297h-13 (2014).
Page 2 GAO-14-291 Department of Energy

reactors in Japan and Germany were subsequently taken off-line, 

affecting the global market for uranium enrichment services and resulting 

in significant downward pressure on market prices for low-enriched 

uranium (LEU).4 Another such factor has been the advancement of 

enrichment technology used by USEC’s competitors. To date, all of the 

uranium USEC has enriched for sale has been enriched using 60-year old 

gaseous diffusion technology at plants the company leased from DOE. 

Since 2001, USEC has operated one such Gaseous Diffusion Plant 

(GDP) in Paducah, Kentucky.5 In December 2013, USEC announced that

it intended to restructure its debt through a Chapter 11 bankruptcy 

petition, which it filed in March 2014.6

In December 2011, USEC informed DOE that it was considering ceasing 

enrichment operations at the Paducah GDP because of decreased 

demand for LEU and high production costs associated with the plant’s 

older, energy inefficient technology, which required about as much 

electricity per year to operate as the city of Memphis, Tennessee.

Specifically, USEC plans to replace 

over $600 million in previously held debt with new debt and equity in 

USEC.

7

 4

Uranium is categorized by concentration of uranium-235, expressed as a percentage 

“assay.” Natural uranium has an assay of about 0.7 percent uranium-235. For use in a 

nuclear power reactor or weapon, natural uranium must be enriched to increase its assay 

to a level required for its ultimate use. For example, LEU, which is used in commercial 

nuclear power reactors, typically, has an assay of between 3 and 5 percent uranium-235.

Building on technology originally developed by DOE from the 1960s to the 

1980s, USEC has been working to deploy next-generation American 

Centrifuge technology for uranium enrichment, near the site of another 

DOE GDP it operated in Ohio until 2001. If successfully deployed, the 

American Centrifuge Plant—the facility where the American Centrifuge 

technology will be operated—would establish a commercial domestic 

5

The gaseous diffusion process involves the passage of uranium hexafluoride in a 

gaseous form through a series of filters. Because uranium-235 is lighter, it passes through 

the filters more readily than uranium-238, resulting in gaseous uranium that is enriched in 

uranium-235—the fissionable isotope.

6

USEC Inc. is the entity that filed for Chapter 11 bankruptcy protection. However, its 

primary operating subsidiary, the United States Enrichment Corporation is not filing for 

such protection and, according to USEC, will conduct ongoing development of next 

generation uranium enrichment technology.

7

According to USEC, the cost of electricity at the Paducah GDP accounted for 

approximately 70 percent of the plant’s operating costs in 2012.
Page 3 GAO-14-291 Department of Energy

uranium enrichment capability that could meet the demand for U.S. 

national security needs.8

Since its privatization, USEC has been the only domestically owned 

supplier of uranium enrichment services that uses domestically developed

enrichment technology, conditions DOE has posited are necessary to 

meet national security needs for LEU while complying with international 

agreements to which the United States is a party. DOE has identified two 

principal national security needs for enriched uranium: (1) LEU is needed 

for the production of tritium, a key radioactive isotope used to enhance 

the power of nuclear weapons in the U.S. stockpile, and (2) highly 

enriched uranium (HEU) is needed to fuel the reactors that power the 

U.S. Navy’s aircraft carriers and submarines.

In April 2014, the Secretary of Energy stated 

that DOE’s Oak Ridge National Laboratory would assume responsibility 

for managing the American Centrifuge Plant and technology with a focus 

on meeting national security needs. According to a filing submitted by 

USEC as part of its bankruptcy proceedings on May 1, 2014, the 

contractor for Oak Ridge National Laboratory intends to utilize USEC as a 

subcontractor to carry out the program. The subcontract at about $117 

million, including all options and is scheduled to last no longer than 

January 31, 2015.

9

 8

Gas centrifuge technology employs rapidly spinning cylinders containing uranium 

hexafluoride to separate the fissionable uranium-235 from the nonfissionable uranium238. The centrifuge is significantly less power intensive than the gaseous diffusion 

process, and centrifuge technologies have already been commercialized by USEC’s 

competitors. All of USEC’s competitors are foreign owned and use foreign-developed 

technology. Its three primary competitors are (1) URENCO, a consortium of companies 

owned or controlled by the British and Dutch governments and by two German utilities; (2) 

a multinational consortium controlled by AREVA, a company that is 90 percent owned by 

the French government; and (3) the Russian government’s State Atomic Energy 

Corporation (“Rosatom”), which sells LEU through Techsenabexport (TENEX), a Russian 

government-owned entity.

The U.S. government has 

entered into international agreements that govern how uranium and 

uranium enrichment technologies may be used. These agreements carry 

“peaceful use restrictions” or “obligations” that may preclude uranium 

originating in another country or uranium that is enriched using another 

country’s technology from being used for U.S. national security or military 

9

USEC has never enriched uranium to HEU levels. The United States has not had a 

domestic capability to produce HEU since 1992 and instead meets national security needs 

using an inventory of HEU that was enriched prior to 1992. According to DOE, the 

department’s current HEU allocations are sufficient to meet national security demands 

through 2064.
Page 4 GAO-14-291 Department of Energy

purposes. DOE asserts that the government’s obligations under these 

agreements require it to use unobligated LEU10—domestically sourced 

uranium that is enriched using domestic technology—to meet national 

security needs.11

Under the Atomic Energy Act of 1954, as amended by the USEC 

Privatization Act,

Since USEC ceased enrichment activities at the 

Paducah GDP in May 2013, there is no longer an operating U.S. 

domestic enrichment facility that uses domestic technology. According to 

USEC officials, if financing became immediately available, enrichment 

operations could begin at the American Centrifuge Plant as early as 2017.

12 DOE has certain authorities to sell or transfer natural 

uranium and LEU subject to applicable conditions, such as a 

determination by the President it is not needed for national security and a 

determination by the Secretary of Energy that the transfer will not have an 

adverse material effect on the domestic uranium market. We have 

previously reported on DOE’s authority to sell or transfer depleted 

uranium tails (tails)—a product of the enrichment process—as well as 

uranium transactions that DOE has conducted to fund environmental 

cleanup activities by selling part of its uranium inventory to avoid having 

to use appropriated funds to support those activities. Specifically, in a 

report in 2008, we found that DOE likely lacks authority to sell depleted 

uranium tails.13

 10By unobligated, we mean that neither the uranium nor the technology used to enrich it 

carry an “obligation” from the source country that they will only be used for peaceful 

purposes.

In 2011, we also reported on the legal bases for and 

market analyses of certain DOE uranium transactions involving USEC 

and concluded that DOE had violated federal fiscal law because DOE 

11We are conducting a separate review for congressional requesters on the extent to 

which international agreements to which the United States is a party affect the commercial 

supply base for unobligated LEU available to DOE for national security or military 

purposes, among other things, and we expect to publish a report in 2014. 

12See Atomic Energy Act of 1954 §§ 53, 63, codified as amended at 42 U.S.C. §§ 2073, 

2093 (2014); USEC Privatization Act § 3112(d), codified as amended at 42 U.S.C. § 

2297h-10 (2014).

13GAO, Nuclear Material: DOE Has Several Options for Dealing with Depleted Uranium 

Tails, Each of Which Could Benefit the Government, GAO-08-606R (Washington, D.C.: 

Mar. 31, 2008); see also: GAO, Nuclear Material: DOE’s Depleted Uranium Tails Could Be 

a Source of Revenue for the Government, GAO-11-752T (Washington, D.C.: June 13, 

2011). 
Page 5 GAO-14-291 Department of Energy

should have deposited the net proceeds of certain transactions into the 

Treasury but did not.14

Since our 2011 report, DOE has conducted four uranium transactions 

directly or indirectly involving USEC.15 In contrast to prior uranium 

transactions DOE has conducted, the four transactions reviewed in this 

report were not associated with ongoing cleanup activities, but rather 

focused on either ensuring availability of LEU for national security 

purposes or on supporting continued development of the American 

Centrifuge technology. DOE signed a $350 million cooperative agreement 

with USEC in June 2012 to financially support a Research, Development, 

and Demonstration (RD&D) program for American Centrifuge technology 

in furtherance of national security purposes and potential 

commercialization. The cooperative agreement required the completion of 

a number of milestones and performance indicators. The terms of the 

cooperative agreement which covered work performed from June 1, 

2012, through April 30, 2014, committed DOE to providing up to $280 

million, or 80 percent, of the costs for the program, with USEC committing 

to fund the remaining 20 percent.16 As of April 30, 2014, DOE had 

contributed about $280 million in funding under the cooperative 

agreement, which included $148 million in transfers of appropriated funds 

and $132 million in credited value associated with two of the four uranium 

transactions.17

In this context, you asked us to review the financial relationship between 

DOE and USEC with a focus on any legal, economic, or other concerns 

See appendix I for a timeline and additional information 

about the four uranium transactions and eight transfers of appropriated 

funds.

 14GAO, Excess Uranium Inventories: Clarifying DOE’s Disposition Options Could Help 

Avoid Further Legal Violations, GAO-11-846 (Washington, D.C.: Sept. 26, 2011).

15For the purposes of our review, uranium transfers or “transactions” involve the exchange 

of natural, enriched, or depleted uranium, or uranium enrichment services between DOE 

and another party. DOE and USEC discussed carrying out a fifth uranium transaction in 

May 2013, but it was not ultimately completed.

16Under the agreement, DOE commits to incremental funding through amendments, to be 

made subject to appropriations and other conditions. 

17DOE transferred appropriated funds to support the RD&D program for the American 

Centrifuge technology on eight separate occasions. Specifically, DOE agreed to transfer 

the funds on: November 30, 2012; June 13, 2013; July 24, 2013; October 25, 2013; 

November 20, 2013; January 28, 2014; February 12, 2014; and April 1, 2014. 
Page 6 GAO-14-291 Department of Energy

that may be raised by DOE’s recent uranium transactions involving the 

company.18

To describe the uranium transactions DOE undertook in 2012 and 2013 

involving USEC, we first identified that four uranium transactions took 

place over this time period: a multiparty transaction that included DOE 

and USEC, as well as three direct transactions between DOE and USEC 

in which enriched uranium and other goods were exchanged. We also 

reviewed and analyzed agency documents pertaining to the type and 

estimates for the value of uranium or enrichment services transferred,

Accordingly, this report examines (1) the details of the 

uranium transactions that DOE undertook in 2012 and 2013 involving 

USEC; (2) any legal concerns that may exist with respect to these 

uranium transactions; (3) any other issues that may be raised by these 

uranium transactions; and (4) the extent to which DOE assessed the 

market impact of these uranium transactions.

19

including the purposes for those transactions; reviewed USEC’s corporate 

financial filings with the U.S. Securities and Exchange Commission; and 

interviewed key USEC and Energy Northwest executives and officials 

from DOE, the Nuclear Regulatory Commission (NRC), and the 

Tennessee Valley Authority (TVA).

20

 18This request was originally made by the Ranking Member of the House Committee on 

Natural Resources, Representative Edward J. Markey, who is now a member of the 

Senate, and Representative Michael C. Burgess.

To identify any legal concerns 

related to these four transactions, we assessed DOE’s compliance with 

key provisions of applicable statutes; reviewed our previous related work; 

reviewed contracts associated with these transactions as well as key 

internal agency memoranda; and interviewed DOE, the Department of 

State, TVA, and Energy Northwest officials. To identify any other issues 

related to these four transactions, we analyzed agency documents and 

interviewed DOE and contractor officials at the Y-12 National Security 

Complex. We also reviewed the Standards for Internal Control in the 

19We did not did not attempt to independently verify the reliability of DOE’s estimates for 

the value of goods transferred between the agency and other parties because the amount 

and quality of data on how estimated costs and benefits were determined varied so greatly 

between the transactions. As a result, data on DOE’s reported estimated costs and 

benefits are of undetermined reliability.

20Energy Northwest is a membership organization of public utilities in the northwestern 

United States that includes the Columbia Generating Station—a nuclear power plant that 

provides all of its output at cost to the Bonneville Power Administration, a federal nonprofit 

agency.
Page 7 GAO-14-291 Department of Energy

Federal Government regarding practices for risk assessment.21

We conducted this performance audit from January 2013 to May 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

To 

identify the extent to which DOE has assessed the market impact of 

uranium transactions that involved USEC occurring in 2012 and 2013, we 

analyzed two market impact studies that DOE contracted from Energy 

Resources International (ERI)—a nuclear fuel consulting firm. The ERI 

studies assessed two of the four uranium transfers involving USEC, as 

well as additional uranium transfers that did not involve USEC. In 

addition, we examined the methodology underlying these studies, 

interviewed the principal author of the studies, and discussed the studies 

with DOE officials, as well as with representatives from the uranium 

industry and a consulting firm that specializes in nuclear fuel markets. We 

also reviewed DOE’s contract with ERI, as well as DOE’s Information 

Quality Guidelines, which set forth quality assurance steps and 

procedures to ensure the quality of information that DOE makes publicly 

available. Appendix II describes our scope and methodology in more 

detail.

This section describes nuclear fuel production and pricing; DOE’s excess 

uranium inventory and comprehensive excess uranium management 

plan; DOE’s and USEC’s involvement in uranium enrichment; and DOE’s 

legal authorities regarding sales and transfers of enriched uranium.

Uranium undergoes a number of processing steps to produce LEU 

nuclear fuel, beginning with the mining of uranium ore and ending with the 

fabrication of LEU fuel for nuclear reactors (see fig. 1). The uranium 

 21GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington, D.C.: Nov. 1999). These standards provide an overall framework for 

establishing and maintaining internal control and for identifying and addressing major 

performance and management challenges and areas at greatest risk of fraud, waste and 

abuse, and mismanagement.

Background

Nuclear Fuel Production 

and Pricing
Page 8 GAO-14-291 Department of Energy

enrichment stage falls approximately in the middle of the nuclear fuel 

cycle.

Figure 1: Nuclear Fuel Cycle

The enrichment process entails concentrating uranium-235, which is the 

isotope of uranium that undergoes fission to release enormous amounts 

of energy. Uranium is categorized by its concentration of uranium-235, 

expressed as a percentage of weight or “assay” level. DOE categorizes 
Page 9 GAO-14-291 Department of Energy

uranium in five general types, each of which is characterized by a 

different assay level and has different uses (see table 1).

Table 1: Types of and Uses for Uranium

Type

Assay level of 

uranium-235 Examples of uses

Low-assay 

depleted uranium 

tails

Less than 0.34% Tails are a product of the enrichment process. 

Tails consist of uranium hexafluoride containing 

fewer isotopes of uranium-235 than occur in 

natural uranium. Some low-assay tails are not 

considered economical to re-enrich.

High-assay 

depleted uranium 

tails

0.34% - 0.7% In some cases, it may be profitable to re-enrich 

“high-assay” tails with assays greater than 

0.34%. All tails regardless of assay are 

radioactive and hazardous to human health and 

the environment. Tails may be safely stored for 

years but eventually require stabilization and 

disposal.

Natural uranium 0.7% Natural uranium is mined from the earth and 

contains 0.7% of the uranium-235 isotope. The 

remaining 99.3% is mostly the uranium-238 

isotope. Natural uranium may be used for fuel in 

certain foreign nuclear reactor designs; 

otherwise, it is enriched for the uses described 

for LEU and HEU.

Low-enriched 

uranium (LEU)

More than 0.7% -

20%

LEU is used in commercial reactors at assay 

levels generally between 3% and 5%. Research, 

isotope production, and test reactors may use 

LEU at assay levels between 12% and 19.75%.

Highly enriched 

uranium (HEU)

More than 20% HEU is used in the construction of nuclear 

weapons, for naval reactors, and for some 

research reactors. Weapons grade HEU 

generally has an assay level of at least 90%. 

HEU can be downblended by mixing it with either 

depleted or natural uranium, or LEU to convert it 

into a new product that is less than 20 percent 

uranium-235.

Sources: GAO analysis of DOE, NRC, USEC Inc., and other documents.

In the 1950s, the United States had a large uranium mining industry that 

was supported by federal subsidies. Production of mined uranium peaked 

in 1980 when there were over 250 domestic mines in operation. Between 

the early 1980s and 2003, the number of domestic mines declined as the 

nation met most of its uranium demand through imports. By 2012, 11 U.S. 

mines operated in the United States, according to the U.S. Energy 

Information Administration. In 2012, the U.S. produced about 2.7 percent 

of the world’s mined uranium, compared with other countries, such as 
Page 10 GAO-14-291 Department of Energy

Kazakhstan (36.5 percent), Canada (15 percent), and Australia (12 

percent), according to the World Nuclear Association.22 At present, the 

U.S. nuclear fuel supply is highly dependent on imports of mined uranium 

concentrates, uranium conversion, and enrichment.23

LEU is generally composed of two components that determine its price: 

(1) the feed component, which is natural uranium in the form of uranium 

hexafluoride; and (2) the enrichment component, or separative work units 

(SWU), which is both the industry standard for the measure of effort 

needed to transform a given amount of natural uranium into LEU and the 

basis for pricing these services. Uranium buyers, such as power utilities, 

can purchase uranium and the services to convert it into nuclear fuel in 

two different types of markets. In the “term” market, buyers contract with 

sellers for the delivery of a quantity of material or services over a period 

of years. In the “spot” market, quantities of uranium are generally sold for 

more immediate delivery, such as within several months after a sales 

contract is signed. When tails are re-enriched and used as the feed 

component in lieu of converted natural uranium, the mining, milling, and 

conversion stages of the nuclear fuel cycle (see fig. 1 above) are 

bypassed. In some cases, it may be profitable to re-enrich tails with 

assays greater than 0.34% such as when either the price of natural 

uranium is high or the price of enrichment services (SWU) is low.

There is only one 

uranium hexafluoride conversion facility in the United States, which is 

located in Illinois.

 22The United States has a nuclear cooperation agreement with all three of these 

countries. A nuclear cooperation agreement is a bilateral agreement that establishes a 

framework for civilian nuclear cooperation, including the transfer of certain nuclear 

material and components of nuclear reactors between cooperating countries. Under these 

agreements, the natural uranium from these countries hold an obligation that it will be 

used only for peaceful purposes. See GAO, Nuclear Commerce: Governmentwide 

Strategy Could Help Increase Commercial Benefits from U.S. Nuclear Cooperation 

Agreements with Other Countries, GAO-11-36 (Washington, D.C.; Nov. 4, 2010).

23Conversion is the process of converting mined natural uranium to a gas that can be 

used for enrichment. Please see figure 1 on page 8. 
Page 11 GAO-14-291 Department of Energy

DOE maintains an extensive uranium inventory, generally measured in 

metric tons of uranium (MTU), which plays a role in achieving the 

department’s current and future mission needs (see fig. 2). As discussed 

below, DOE periodically sells or transfers uranium that is in excess of 

those needs. DOE’s inventory comes from a variety of sources, including 

the dismantlement of some of the nation’s nuclear weapons, as well as 

uranium it enriched or purchased prior to USEC’s privatization. DOE also 

stores depleted uranium tails that are contained in about 66,000 metal 

cylinders in storage yards on-site at its Kentucky and Ohio GDPs. The 

tails in DOE’s inventory vary in assay levels, with about 22 percent of the 

inventory considered “high-assay” tails.

Figure 2: DOE’s Excess Uranium Inventorya by Type, as of December 31, 2012

a

According to DOE, it defines its excess uranium inventory as the uranium currently held by DOE as 

excess and not dedicated to national security missions. For example, DOE also maintains an 

inventory of HEU for programmatic purposes that is not considered excess and therefore is not 

included in the data presented here.

Tails, are a product of the enrichment process and are generally 

considered an environmental liability. The NRC requires uranium 

enrichment facility operators to provide financial assurance that funds will 

be available when needed for the disposition of depleted uranium tails, 

DOE’s Excess Uranium 

Inventory and 

Comprehensive Excess 

Uranium Management 

Plans
Page 12 GAO-14-291 Department of Energy

among other things.24

To help manage its excess uranium inventory, and pursuant to a 

recommendation we made in 2008, DOE issued its Excess Uranium 

Inventory Management Plan in December 2008, which describes the 

amount and type of excess uranium in DOE’s possession and its 

disposition strategy at the time. In addition, in 2008, DOE adopted a 

guideline to generally restrict its uranium sales and transfers to 10 

percent of annual domestic nuclear fuel requirements—a percentage 

arrived at after consultation with the uranium industry. DOE noted that it 

may exceed 10 percent in any given year for certain special purposes.

To meet these NRC requirements, USEC has used 

surety bonds—which guarantee payment for the tails disposition costs by 

a third party, among other things, in the event that USEC defaults on such 

obligations—to guarantee the disposition of its depleted uranium and 

stored wastes.

25

The Secretary of Energy also issued a policy statement in 2008 on the 

management of DOE’s excess uranium inventory, which committed DOE 

to generally undertake transactions involving non-U.S. government 

entities in a transparent and competitive manner that is supportive of a 

strong domestic nuclear industry. In order to ensure that its uranium 

transfers will not have an adverse material impact on the domestic 

uranium industry, as required by the USEC Privatization Act, DOE has 

commissioned studies on the potential market impact of some of its 

planned uranium transactions. In 2011, we found that DOE was poised to 

release uranium at a substantially faster rate than its 2008 plan stated, 

and we recommended that DOE update its plan to enhance its 

transparency.26 Subsequently, under the Consolidated Appropriations 

Act, 2012, Congress required DOE to submit a revised plan for the period 

2013 through 2018 by June 30, 2012.27

 24The financial assurance requirements applicable to USEC’s operation of the gaseous 

diffusion uranium enrichment facilities are stated in 10 C.F.R. § 76.35(n) (2014).

DOE ultimately submitted its 

updated plan in July 2013, which discusses DOE’s current excess 

inventory and general disposition plans for uranium through 2018. In this 

25According to DOE’s 2008 Excess Uranium Inventory Management Plan, an example of 

a special purpose for exceeding 10 percent of annual domestic nuclear fuel requirements 

in a given year is for initial core loads for new reactors.

26See GAO-11-846.

27Consolidated Appropriations Act, 2012, Pub. L. No. 112-74 § 312(c). 125 Stat. 786, 879 

(Dec. 23, 2011).
Page 13 GAO-14-291 Department of Energy

plan, DOE announced that it would discontinue using its 10 percent 

guideline that it had established in 2008.

DOE and USEC have been closely linked for 20 years. Following 

enactment of the USEC Privatization Act in 1996, USEC was privatized 

through an initial public offering on July 28, 1998, which resulted in 

proceeds to the U.S. government of nearly $1.9 billion, consisting of 

nearly $1.4 billion from the sale of USEC stock, and $500 million 

borrowed by USEC and paid to the government. Congress authorized 

privatization of USEC under conditions reflecting concern with protecting 

the public interest in maintaining a reliable and economical domestic 

source of uranium enrichment services, among other things. We have 

previously reported that USEC has been the beneficiary of several 

favorable arrangements with the U.S. government, including: (1) an 

advantageous lease providing for nominal rent payments for the use of 

the Ohio and Kentucky GDPs with an open-ended renewal option, and (2) 

the U.S. government’s retention of substantially all liabilities arising from 

the operation of the enrichment plants prior to privatization, including 

nearly all environmental cleanup and decommissioning.28

 28See GAO, Nuclear Nonproliferation: Implications of the U.S. Purchase of Russian Highly 

Enriched Uranium, 

These 

arrangements were entered into prior to the government’s privatization of 

USEC, and the proceeds received by the government reflected these 

benefits. In addition, in June 2002, DOE and USEC signed an agreement 

that committed both parties to further develop gas centrifuge technology 

for uranium enrichment. For use in the completion of the milestones set 

out in the 2002 agreement, DOE licensed to USEC the gas centrifuge 

technology that DOE had spent $2.5 billion developing in the 1970s and 

1980s. DOE abandoned this technology in 1985 in favor of a different 

enrichment process that would use lasers to separate natural uranium 

into enriched uranium and depleted uranium. The transferred centrifuge 

technology became the basis of the design that USEC and its partners 

have been working to commercialize as the American Centrifuge 

technology. According to USEC, cumulatively, the company has spent an 

additional $2.5 billion to update the technology and reestablish the 

manufacturing infrastructure that was lost when DOE abandoned the 

technology in the 1980s. DOE has also received some benefits under its 

arrangements with USEC, which it can exercise if USEC is unable or 

GAO-01-148 (Washington, D.C.: Dec. 15, 2000).

DOE’s and USEC’s 

Involvement in Uranium 

Enrichment
Page 14 GAO-14-291 Department of Energy

unwilling to proceed with development of the American Centrifuge 

technology. For example, under a June 2012 modification to the June 

2002 agreement, USEC granted to DOE (1) an irrevocable, nonexclusive, 

royalty-free license, for use by or on behalf of the United States, in all 

centrifuge intellectual property for government purposes,29

DOE, through its National Nuclear Security Administration’s (NNSA)

and (2) an 

irrevocable, nonexclusive license in all centrifuge intellectual property, 

with the right to sublicense to other parties, for commercial purposes.

30

Tritium Readiness Subprogram, supplies tritium to meet U.S. nuclear 

weapons stockpile demand. Tritium, a key radioactive isotope used to 

enhance the power of nuclear warheads and bombs, has a relatively 

short half-life of 12 years (it decays at a rate of about 5.5 percent per 

year), and tritium must be periodically replenished in existing weapons. 

Thus, an assured long-term source of tritium is necessary to maintain the 

U.S. nuclear weapons stockpile. Consistent with DOE’s interpretation of 

U.S. commitments under international agreements, the Tritium Readiness 

Subprogram requires that only unobligated LEU be used in reactors to 

produce tritium, and the reactors licensed for use in producing tritium 

belong to TVA, a government entity.31

 29As previously noted, the Secretary of Energy announced in April 2014 that Oak Ridge 

National Laboratory would assume responsibility for managing the American Centrifuge 

Plant and technology with a focus on meeting national security needs. 

To fulfill its agreement to produce 

tritium for NNSA, TVA entered into a long-term agreement to purchase 

unobligated LEU from USEC. According to DOE, unobligated LEU has a 

premium—that is, it costs more than other LEU that may carry obligations 

from other countries. Under the interagency agreement between DOE 

and TVA, TVA must use the higher cost unobligated LEU in its reactors 

that are used to produce tritium for NNSA and, accordingly, NNSA pays 

30Congress created NNSA as a semi-autonomous agency within DOE under the National 

Nuclear Security Administration Act. (Pub. L. No. 106-65 § 3211, 113 Stat. 957 (1999)).

NNSA is responsible for the management and security of the nation’s nuclear weapons, 

nonproliferation, and naval reactors programs.

31To produce tritium, stainless steel rods containing lithium aluminate and zirconium are 

irradiated in TVA’s Watts Bar 1 commercial nuclear power reactor, which is fueled with 

LEU. For additional information describing the process for producing tritium from LEU, see 

GAO, Nuclear Weapons: National Nuclear Security Administration Needs to Ensure 

Continued Availability of Tritium for the Weapons Stockpile, GAO-11-100 (Washington, 

D.C.: Oct. 7, 2010).
Page 15 GAO-14-291 Department of Energy

TVA the difference in TVA’s fuel costs.32

USEC’s financial condition has weakened over the past several years 

partly because of lower than anticipated demand for enrichment due in 

part to the Fukushima disaster’s effect on the uranium market, the 

expense of continuing to operate the inefficient Paducah GDP especially 

with respect to electricity costs, spending on the American Centrifuge 

technology, and the company’s lack of immediate financing for the 

American Centrifuge Plant. USEC applied for a $2 billion loan guarantee 

for U.S. government guaranteed debt financing both in 2008 and 2010 

under DOE’s Loan Guarantee Program.

As a result of this agreement, 

TVA must buy some enrichment services from USEC. According to USEC 

officials, TVA, however, makes up only a small percentage of USEC’s 

annual sales. In its 2012 annual report, USEC reported that revenue from 

the U.S. government accounted for between 10 and 15 percent of gross 

revenue from the enrichment segment of its business, or between about 

$185 and $277 million. In addition to providing enrichment services to the 

government, USEC also provides enrichment services to domestic and 

international utilities that operate commercial nuclear power plants. 

Specifically, USEC supplies LEU to about 150 nuclear power plants 

worldwide and has averaged about a 25 percent share of the world’s 

uranium enrichment market over the 5-year period ending in 2012.

33

 32The interagency agreement is intended to be at cost such that TVA neither loses money 

nor profits from it. NNSA agreed to pay TVA the cost difference—known as the 

enrichment price differential—for TVA’s commercial nuclear power reactors that are part 

of the tritium program. To determine the differential, the cost of fuel in TVA’s tritium 

program reactors is compared with the market price for LEU at a reference location 

(regardless of obligations). The reference location was selected as the best proxy for 

market prices TVA would have paid if it did not participate in the tritium program.

DOE deferred USEC’s 

applications in 2009 and 2011, citing financial and technical concerns. 

USEC has faced the threat of delisting from the New York Stock 

Exchange. In May 2012, USEC received a warning that the closing price 

of its stock had fallen below the $1 threshold criteria for continued listing 

on the New York Stock Exchange. Then, in April 2013, USEC received 

another warning as a result of its low market capitalization, or company 

value. In response, USEC shareholders approved a reverse stock split in 

33For more information on DOE’s Loan Guarantee Program, see GAO, Department of 

Energy: Further Actions Are Needed to Improve DOE’s Ability to Evaluate and Implement 

the Loan Guarantee Program, GAO-10-627 (Washington, D.C.: July 12, 2010); and GAO, 

DOE Loan Guarantees: Further Actions Are Needed to Improve Tracking and Review of 

Applications, GAO-12-157 (Washington, D.C.: Mar. 12, 2012).
Page 16 GAO-14-291 Department of Energy

June 2013, which increased the stock price above the $1 threshold. 

Despite this effort, as of May 1, 2014, the company’s market capitalization 

remains below the minimum $50 million level. On December 16, 2013, 

USEC announced that it had reached an agreement with a majority of the 

holders of its convertible notes on the terms of a financial restructuring 

plan that the company says will strengthen its balance sheet. USEC filed 

a Chapter 11 (reorganization) petition for relief, which, among other 

things, set forth the terms of the agreement, in the United States 

Bankruptcy Court for the District of Delaware in March 2014. At that time,

USEC reported that it expected to continue its operations and would meet 

its obligations to its suppliers, customers, and other stakeholders. In 

addition, USEC reported that the filing would not have any effect on the 

American Centrifuge RD&D program or its transition activities at the 

Paducah GDP. However, because the RD&D program was set to end on 

April 15, 2014, the Secretary of Energy stated in April 2014 congressional 

testimony that the department’s Oak Ridge National Laboratory would 

assume responsibility for managing the American Centrifuge Plant and 

technology with a focus on meeting national security needs. On April 15, 

2014, USEC announced that DOE and USEC had agreed to extend the 

RD&D program through the end of April 2014 at no additional cost to the 

government.

DOE has several general authorities under the Atomic Energy Act of 1954

(AEA), as amended, to transfer uranium related to its nuclear energy 

functions. For example, DOE has authority to acquire natural uranium and 

LEU. The AEA also provides DOE with general authority to distribute 

natural uranium under certain conditions to qualified entities; and to sell, 

lease, grant, distribute, or otherwise make available enriched uranium 

under certain conditions. For example, with respect to certain entities 

such as commercial nuclear facilities, DOE is authorized to sell natural 

uranium subject to conditions, including the requirement to make a 

reasonable charge of the recipient based on a price for the material 

established on a nondiscriminatory basis that would provide reasonable 

compensation to the government.

As discussed above, in 1996, Congress enacted the USEC Privatization 

Act to amend the Atomic Energy Act. The USEC Privatization Act 

authorized the establishment of USEC as a private, for-profit corporation. 

Congress also restricted DOE’s authority to engage in certain actions 

related to uranium, such as prohibiting DOE from providing commercial 

enrichment services and restricting certain transfers. Specifically, section 

3112 of the USEC Privatization Act prohibits DOE from transferring or 

DOE’s Legal Authorities 

Regarding Uranium Sales 

and Transfers
Page 17 GAO-14-291 Department of Energy

selling “any uranium...to any person” except as consistent with the USEC 

Privatization Act’s specific terms and conditions,34

• Section 3112(d) authorizes DOE to sell natural uranium and LEU from 

its stockpile if (1) the President determines the material is not 

necessary for national security needs; (2) the Secretary of Energy 

determines the sale will not have an adverse material impact on the 

domestic uranium mining, conversion, or enrichment industry; and (3) 

the price paid will not be less than the fair market value of the 

material. Notably, two distinct determinations are required: one from 

the President as to the national security need for the particular 

material

which include the 

following:

35

• Section 3112(b) provides for DOE to receive certain Russian-origin 

uranium hexafluoride and to sell it, generally subject to certain 

conditions.

and one from the Secretary of Energy concerning market 

impacts.

• Section 3112(e) authorizes DOE to transfer or sell enriched uranium 

in several specific circumstances, including to any person for national 

security purposes, as determined by the Secretary.

Finally, in section 3113, the USEC Privatization Act also requires DOE to 

accept depleted uranium for disposal, in which case the entity that 

generated the uranium must reimburse DOE in an amount equal to 

DOE’s disposal costs including a pro rata share of any capital costs.

In 2008 and 2011, we reported on DOE’s authority to sell or transfer 

certain types of uranium as follows:

• In 2008, because we determined that the USEC Privatization Act 

likely prohibited DOE from selling or transferring depleted uranium, we 

suggested that Congress consider clarifying DOE’s statutory authority 

to manage this material and provide explicit direction about whether 

and how DOE may sell or transfer it. DOE did not comment on our 

legal opinion or our suggestion to Congress.

 34See USEC Privatization Act § 3112 (emphasis added), codified as amended at 42 

U.S.C. § 2297h-10.

35DOE officials stated they are not aware of any documents by which the President has 

delegated this authority.
Page 18 GAO-14-291 Department of Energy

• In 2011, we concluded that DOE sold uranium to USEC, which USEC 

subsequently sold to a third party to fund DOE environmental cleanup 

activities. We found that DOE did not, as it contended, barter the 

uranium in exchange for USEC’s cleanup services. Consequently, 

DOE was required to deposit the value of the net proceeds from the 

uranium sales into the Treasury, and by not doing so, and allowing 

USEC to keep the sale proceeds, we concluded that DOE violated 

federal fiscal law, specifically, the miscellaneous receipts statute.36

Moreover, by arranging for USEC to be compensated for its cleanup 

services in this manner instead of using DOE’s appropriated funds, 

DOE circumvented the congressional appropriations process. We 

suggested that Congress consider providing DOE with explicit 

authorities to retain the proceeds from barters, transfers, or sales of 

excess uranium. DOE disagreed with our legal opinion that its actions 

violated federal fiscal law.

DOE conducted four uranium transactions in 2012 and 2013 that involved 

USEC, primarily to ensure the availability of unobligated LEU for the 

production of tritium and to support USEC’s development of the American 

Centrifuge technology. Three of these transactions involved direct 

uranium transfers with USEC; while, the fourth transaction involved a 

uranium transfer with a third party which then transferred the uranium to 

USEC for enrichment. For a complete description of DOE’s uranium 

transactions and transfers of appropriated funds involving USEC since 

2012, see appendix III. Table 2 provides a high-level overview of each 

uranium transaction including DOE-identified costs and benefits. Each 

uranium transaction is further summarized below.

 36Miscellaneous receipts statute, 31 U.S.C. § 3302(b) (2014) (“an official or agent of the 

Government receiving money for the Government from any source shall deposit the 

money in the Treasury as soon as practicable without deduction for any charge or claim”).

DOE Engaged in 

Four Uranium 

Transactions 

Involving USEC in 

2012 and 2013 to 

Obtain Tritium and 

Support the 

Development of New 

Enrichment 

Technology
Page 19 GAO-14-291 Department of Energy

Table 2: Uranium Transactions Involving DOE and USEC Inc. in 2012 and 2013

DOE-identified benefits

Date and transaction name DOE-identified costs Non-monetary Monetary

March 13, 2012 separative 

work units (SWU) 

procurement

$43.7 milliona Obtained unobligated low-enriched uranium (LEU) for 18 

months of tritium production

$44.4 millionb

May 15, 2012 tails transfer $0c • Assured source of unobligated LEU for up to 15 years of 

tritium production

• Kept the Paducah Gaseous Diffusion Plant (GDP) open 

for an additional year and delayed the department’s 

cleanup obligations

$759 milliond

June 12, 2012 tails 

acceptance

$81.1 millione Supported the development of the American Centrifuge 

technology as a long-term source of unobligated LEUf n/a

March 15, 2013 SWU transfer $44.4 milliong Supported the development of the American Centrifuge 

technology as a long-term source of unobligated LEUh n/a

Source: GAO analysis of DOE documents.

a

DOE assumed this cost by accepting title to and disposal liability for depleted uranium tails from 

USEC.

b

DOE received this amount in SWU contained in the unobligated LEU.

c

Upon review, we identified concerns with DOE’s assessment of $0 cost to the department, which we 

discuss later in this report.

d

DOE identified this amount in cost savings primarily from avoiding the costs of an alternative to using 

tails to obtain LEU and delaying the turnover of the facility.

e

DOE assumed this cost by accepting title to and disposal liability for depleted uranium tails from 

USEC.

f

DOE provided USEC $87.7 million for its portion of cost share for the American Centrifuge Research, 

Development, and Demonstration (RD&D) program.

g

DOE assumed this cost by not receiving payment for the enrichment component—or SWU—

contained in unobligated LEU it provided to USEC.

h

DOE provided USEC $44.4 million for its portion of cost share for the American Centrifuge RD&D 

program.

In March 2012, before DOE and USEC signed the June 2012 cooperative 

agreement to fund the American Centrifuge RD&D program, USEC’s 

financial condition was deteriorating and, according to DOE officials, 

USEC was struggling to support the development of the American 

Centrifuge technology. Moreover, USEC had notified DOE in December 

2011 that it might cease enrichment activities at the Paducah GDP as 

early as May 2012. Initially, DOE requested authority to transfer $150 

million from existing funds in fiscal year 2012 to support USEC’s 

development of the American Centrifuge technology. When Congress did 

not provide this authority, DOE entered into this transaction with USEC 

stating that the transaction was needed to support national security 

interests. Figure 3 describes the March 2012 SWU procurement.

The March 2012 SWU 

Procurement
Page 20 GAO-14-291 Department of Energy

Figure 3: March 2012 SWU Procurement

a

As explained later in this report, according to DOE, the natural uranium as uranium hexafluoride in 

this transaction was Russian-origin stemming from a preexisting agreement with Russia to receive 

Russian LEU downblended from HEU.

b

In this transaction, DOE did not provide monetary payment to USEC for the enrichment services 

(SWU) and, instead, DOE compensated USEC by accepting $44 million in liability for the future 

disposal of tails.

DOE accepted title to 13,073 MTU of low-assay tails, along with the 

responsibility for their disposal, from USEC. This enabled USEC to free 

up $44 million in previously encumbered funds that were being used as 

collateral for surety bonds to satisfy NRC’s financial assurance 

requirements for the tails’ future disposal. DOE officials told us they 

expected USEC to invest those funds in the development of the American 

Centrifuge technology. USEC reported that it did use the funds for this 

purpose. While USEC had reserved $44 million to secure bonds for the 

future disposal of these tails, DOE estimated that it would cost the 

department $43.7 million to dispose of the same tails.

According to DOE officials, in order to receive an asset in return for 

assuming USEC’s liability, DOE received $44.4 million in SWU services 

from USEC for which it did not provide monetary compensation. To 

facilitate receipt of this SWU, DOE bartered with USEC, providing 409 
Page 21 GAO-14-291 Department of Energy

MTU Russian-origin natural uranium as uranium hexafluoride for 48 MTU 

of unobligated LEU (equivalent to 409 MTU of natural uranium plus 

SWU).37

According to DOE, the department received a $700,000 benefit, which is 

the difference between the $44.4 million in SWU that it received from 

USEC and the $43.7 million in liability that it incurred from accepting 

responsibility for the disposal of the tails. The department also acquired 

unobligated LEU, which it intended to use for the production of tritium as 

a result of its barter of Russian-origin natural uranium as uranium 

hexafluoride, which DOE could not have used for tritium production.

According to DOE, the value of the SWU component DOE 

received ($44.4 million) was roughly equivalent to the value of the tails 

liability it assumed from USEC ($43.7 million). DOE officials considered 

this transaction to be only a procurement of SWU, and not a uranium 

transfer, but we found otherwise as discussed later in this report.

According to DOE, by May 2012, it became clear that USEC was no 

longer in a financial position to continue enrichment activities at the 

Paducah GDP, and DOE sought to ensure availability of a supply of 

unobligated LEU from USEC for future tritium production before the 

plant’s anticipated closure. The resulting May 2012 tails transfer was the 

most complex and largest of the four transactions in our review, both in

terms of LEU transferred and estimated dollar value, and it involved four 

main parties: DOE, Energy Northwest, USEC, and TVA.38 Five two-party 

contracts were executed within 1 day of each other, and each related to 

transfers, enrichment, or use of uranium. DOE was party to two of the five 

contracts, and its transfer of tails to Energy Northwest initiated the series 

of additional uranium transfers.39

 37According to DOE officials, 48 MTU of unobligated LEU is enough to produce tritium for 

up to 18 months.

There was no overarching contract or 

agreement tying all of the transfers between the four entities together. 

Our analysis of the May 2012 tails transfer identified six key steps that 

must occur before DOE secures tritium from TVA. As of May 1, 2014, four 

38Generally, when we refer to the May 2012 tails transfer we refer to DOE’s transfer of 

tails to Energy Northwest and the ensuing agreements and actions taken by the other 

parties.

39One of DOE’s contracts was with Energy Northwest for the transfer of depleted uranium 

tails. The other was an amendment to DOE’s (NNSA’s) preexisting interagency agreement 

with TVA for the supply of tritium in support of NNSA’s Tritium Readiness Subprogram.

The May 2012 Tails Transfer
Page 22 GAO-14-291 Department of Energy

of these steps are complete. Ultimately, DOE expects to benefit from this 

transaction by ensuring a source of unobligated LEU for TVA’s use for up 

to a 15-year supply of tritium production from a single reactor. Figure 4 

describes the May 2012 tails transfer.

Figure 4: May 2012 Tails Transfer

a

TVA will provide some natural uranium to Energy Northwest as part of its payment for the LEU. 

According to Energy Northwest, it will use the estimated 1,656 MTU of this natural uranium to support 

its facilities.

b

NNSA will continue to reimburse TVA for any cost differential for using unobligated LEU based on 

market price at the time, consistent with the agreement in support of the Tritium Readiness 

Subprogram.

Specifically, the transaction involves the following six steps:
Page 23 GAO-14-291 Department of Energy

1. Beginning in May 2012, DOE transferred 9,092 MTU of U.S. origin 

high-assay depleted uranium tails to Energy Northwest. Energy 

Northwest did not provide payment to DOE for those tails.40

2. Energy Northwest delivered the tails to USEC for enrichment to LEU 

and according to Energy Northwest officials, it paid USEC $687 

million—using bonds backed by the Bonneville Power 

Administration—for the enrichment services.

3. USEC then produced 482 MTU of LEU, which also resulted in 

secondary tails from the enrichment process, and it provided this 

amount of LEU to Energy Northwest over the next year, completing its 

work by May 2013. In order to enrich the tails, USEC extended its 

existing contract with TVA to provide power to the Paducah GDP 

through May 31, 2013.41

4. The last step completed as of May 1, 2014, occurred when DOE 

accepted title to the secondary tails from Energy Northwest and also 

stored the LEU at the Paducah GDP on behalf of Energy Northwest.

Enrichment operations at the Paducah GDP 

ceased in May 2013, after USEC completed the tails enrichment.

5. Energy Northwest holds title to all of the resulting LEU; it plans to 

retain a small portion of the LEU for its future use, and it entered into 

an agreement with TVA to sell to TVA the remaining unobligated LEU 

that USEC enriched in installments from 2015 through 2022 under a 

long-term contract.

6. Finally, TVA plans to use the unobligated LEU for up to 15 years of 

tritium production under its agreement with NNSA,42

 40In its agency comments, DOE reported that it transferred 9,075 MTU of U.S. origin highassay depleted uranium tails. However, we are reporting that DOE transferred 9,092 MTU 

of these tails, which is information DOE provided to summarize its nuclear materials 

transactions documentation (DOE/NRC Form 741).

and NNSA is to 

pay TVA the enrichment price differential plus additional incremental 

costs for obtaining and preserving unobligated fuel instead of 

41USEC had been TVA’s single largest industrial customer, having signed a contract with 

TVA in 1995.

42TVA is bound by its interagency agreement with NNSA to use unobligated LEU in its 

reactor used for tritium production. As modified in 2012, the agreement specifies “it shall 

be the responsibility of DOE to ensure that TVA can obtain unobligated fuel [LEU] to 

support tritium production, and DOE shall be responsible for reimbursing TVA any 

additional costs associated with this.” The agreement does not require TVA to use the 

specific LEU that was enriched for Energy Northwest, but includes a provision for the 

additional costs DOE will pay if TVA purchases the Energy Northwest fuel.
Page 24 GAO-14-291 Department of Energy

obligated fuel. According to TVA, NNSA could pay TVA about $42 

million for tritium per year over the 15-year period.43

Overall, DOE’s role in this transaction is to transfer high-assay tails to 

Energy Northwest and take back the secondary low-assay tails, including 

their disposal liability, from Energy Northwest. Following completion of the 

first five steps, NNSA will be able to obtain tritium from TVA through the 

agencies’ ongoing interagency agreement.

DOE determined that there was no cost to the department for the May 

2012 tails transfer because, according to DOE, the tails it transferred had 

no value. We disagree that the tails had no value for reasons we discuss 

later in this report. However, DOE did value the collective benefit to the 

department of this transaction at about $759 million and identified several 

additional nonmonetized benefits. Specifically, in a financial analysis 

conducted by DOE’s Office of the Chief Financial Officer, DOE estimated 

the benefit of the transaction by identifying two key cost savings realized 

by using tails as the source material for the resultant unobligated LEU: (1) 

a $654 million cost avoidance from not having to downblend HEU to LEU, 

DOE’s identified alternative to enriching natural uranium or tails to obtain 

unobligated LEU;44 and (2) a $105.3 million cost savings associated with 

reduced tails liability and deferred maintenance, since USEC would 

operate the GDP for another year.45

 43NNSA has a long-standing contract with TVA to produce tritium from 2000 to 2035 for 

which NNSA will pay TVA an estimated total of $1.5 billion. The $42 million is the average 

annual amount that NNSA will reimburse TVA for tritium production—including the cost 

differential for unobligated LEU, as well as administrative costs—over the 15-year period 

in which the LEU produced from the May 2012 tails transfer is planned to be used by TVA 

to produce tritium.

DOE cited but did not quantify other 

benefits, which include the intangible benefits of ensuring the availability 

of unobligated LEU for up to a 15-year supply of tritium production and 

job retention for approximately 1 year at the Paducah GDP, among 

others.

44HEU can be downblended by mixing it with either depleted, natural, or LEU to produce a 

new product that has a lower concentration of uranium-235.

45After the Paducah GDP is returned to DOE, DOE will incur first-year costs to place the 

facility in cold shutdown mode and then ongoing costs of surveillance and maintenance 

until the facility can be decontaminated and decommissioned. These costs were avoided 

for 1 year by keeping the Paducah GDP open to re-enrich the tails.
Page 25 GAO-14-291 Department of Energy

According to the financial analysis prepared by DOE’s Office of the Chief 

Financial Officer, DOE had considered three alternatives to conducting 

this transaction before determining that the May 2012 tails transfer was, 

in its view, the best option: (1) using backup LEU from another DOE 

program’s inventory, but DOE determined that this option would only 

provide up to 6 years of tritium production; (2) downblending HEU not 

currently deemed in excess to national security needs, but DOE 

determined that this option would require the HEU to be replaced at great 

cost at some point in the future and would accelerate the date by which 

the United States would have to acquire an HEU enrichment capability; 

and (3) contracting with USEC to enrich the depleted uranium, but DOE 

determined that this option would require a large supplemental 

appropriation, which it deemed unlikely.

In June 2012, DOE accepted $87.7 million in disposal liability from USEC 

for depleted uranium tails to fulfill DOE’s first installment of its financial 

commitment to the American Centrifuge RD&D program.46

We reviewed key documents supporting this transaction and found that 

they contain different information on the quantity of tails that DOE could 

accept from USEC, which could result in DOE having to assume 

additional liability at a later date. As outlined in table 3, agency 

documents identify different amounts of tails that may be transferred 

under this transaction. In one document, DOE reported that relevant 

quantity in metric tons of uranium (MTU) and four other documents 

reported that relevant quantity in metric tons of depleted uranium 

hexafluoride. USEC also reported that relevant quantity in one document 

Specifically, 

DOE agreed to accept title to up to 39,200 metric tons of depleted 

uranium hexafluoride from USEC. This allowed USEC to free up $87.7 

million in previously encumbered funds that were being used as collateral 

for surety bonds committed to the future disposal of these tails. USEC 

applied this funding toward DOE’s financial commitment to supporting the 

development of the American Centrifuge RD&D program. USEC had cash 

reserves of $87.7 million to back bonds for the future disposal of these 

tails but, according to a DOE internal financial analysis, DOE estimated 

that it would cost the department $81.1 million to dispose of the same 

tails.

 46As previously discussed, DOE also provided USEC with a total of $148 million in 

appropriated funding to support the development of the American Centrifuge RD&D 

program from November 2012 to April 2014.

The June 2012 Tails 

Acceptance
Page 26 GAO-14-291 Department of Energy

in metric tons of uranium hexafluoride. In order to facilitate a comparison 

among all five documents, table 3 provides the documented quantity of 

material that could be transferred in both units of measure. According to 

DOE, one MTU is equal to 1.4789 metric tons of depleted uranium 

hexafluoride.47

Table 3: Conflicting Amount of Tails Reported in Documents Supporting the June 

2012 Tails Acceptance Transaction (equivalent amounts of material presented in 

two different units)

Document

Amount identified 

in Metric Tons 

Uranium (MTU)

Amount identified in 

Metric Tons of depleted 

uranium hexafluoride

Summary of DOE/NRC 

documentation used to report nuclear 

materials transactionsa

16,570 24,505

DOE internal financial analysisb Up to 17,648 Up to 26,100

DOE-USEC Inc. Cooperative 

Agreementc Up to 26,506 Up to 39,200

USEC’s 2012 annual filing with the 

U.S. Securities and Exchange 

Commissiond

Up to 26,506 Up to 39,200

DOE’s comments on GAO draft 

reporte 25,909 38,317

Sources: GAO analysis of DOE, NRC, and USEC documents.

Note: Amounts listed in bold text are the units in which the document originally reported.

a

DOE reported that it accepted this amount of tails in a summary of its NRC documentation. NRC 

regulations require licensees who ship, receive, or adjust their physical inventory of source or special 

nuclear material to document and report such activities. The reports are submitted using the 

DOE/NRC Form 741.

b

DOE reported that it would accept this amount of tails in its cost analysis documentation in which 

DOE determined the department’s liability cost for the tail’s disposal. DOE, Assessing the Tails 

Transfer Proposal, May 31, 2012.

c

DOE agreed to accept this amount of tails in its agreement with USEC. Cooperative Agreement 

between Department of Energy, USEC Inc., and American Centrifuge Demonstration, LLC (June 12, 

2012).

d

USEC reported that DOE agreed to accept this amount of tails in its 2012 annual U.S. Securities and 

Exchange Commission filing.

e

In commenting on a draft of this report, DOE stated that it accepted 38,317 metric tons of depleted 

uranium hexafluoride from USEC for this transaction.

 47DOE, Assessing the Tails Transfer Proposal, May 31, 2012.
Page 27 GAO-14-291 Department of Energy

As indicated above, the quantity of tails reported in a summary of its 

DOE/NRC documentation—which is required by NRC regulations to 

report nuclear materials transactions48—was less than the quantity DOE 

used to determine the department’s liability cost for the tails’ disposal. On 

this basis, it appears that the amount that USEC transferred is in line with 

the costs DOE assumed. However, the cooperative agreement between 

DOE and USEC states that, for the budget period from June 2012 

through November 2012, USEC would transfer up to 39,200 metric tons 

of depleted uranium hexafluoride, which is 14,695 metric tons of depleted 

uranium hexafluoride more than the amount DOE reported in its summary 

of DOE/NRC documentation and 13,100 metric tons of depleted uranium 

hexafluoride more than used by DOE to estimate its disposal liability for 

the tails. USEC also reported the same amount that was identified in the 

cooperative agreement (up to 39,200 metric tons of depleted uranium 

hexafluoride) in its 2012 annual filing with the U.S. Securities and 

Exchange Commission. Because the cooperative agreement allows for 

USEC to transfer more tails than the summary of DOE/NRC

documentation used to report the material transfer recorded, DOE could 

be required by its cooperative agreement with USEC to accept additional 

tails from USEC at a later date, resulting in DOE having to incur additional 

tails disposal liability.

49

In March 2013, to fulfill part of its financial commitment to the American 

Centrifuge RD&D program, DOE agreed to provide SWU to USEC by 

transferring back the unobligated LEU that it received from USEC in the 

March 2012 SWU procurement. In effect, this transaction largely reversed 

the transfers of natural and enriched uranium material that occurred 

between DOE and USEC in the March 2012 SWU procurement (however, 

DOE retained the depleted uranium tails that it accepted from USEC in 

that transaction). Specifically, DOE provided USEC 48 MTU of 

unobligated LEU—the same unobligated LEU that it received from USEC 

in the March 2012 SWU procurement. In return, USEC provided DOE 409 

MTU of Russian-origin natural uranium as uranium hexafluoride (the 

same Russian-origin natural uranium as uranium hexafluoride that DOE 

provided USEC in March 2012), which the parties view as equivalent to 

the natural uranium component in the transferred LEU. As a result, USEC 

 48See e.g., 10 C.F.R. § 75.34 (2014).

49In January 2014, we asked DOE to explain the difference in the amount of transferred 

tails, but officials did not provide a response.

The March 2013 SWU Transfer
Page 28 GAO-14-291 Department of Energy

gained the value of the SWU component in the LEU, which DOE and 

USEC continued to value at $44.4 million. USEC applied the SWU value 

toward DOE’s financial commitment to the American Centrifuge RD&D 

program. According to USEC officials, USEC could therefore sell the 

unobligated LEU on the market to generate operating cash. According to 

DOE officials, DOE returned the unobligated LEU that it had intended for 

about 18 months of tritium production and in return received obligated 

Russian-origin natural uranium as uranium hexafluoride. Officials told us

that they believed this transaction would benefit DOE more in the long 

run, as they hope the American Centrifuge technology will provide a longterm, stable source of unobligated LEU to meet national security needs. 

Figure 5 describes the March 2013 SWU transfer.

Figure 5: March 2013 SWU Transfer
Page 29 GAO-14-291 Department of Energy

We found several legal concerns related to DOE’s conduct of all four of 

the uranium transactions. For example, for the transfer of LEU to USEC, 

in March 2013, we found that DOE did not obtain a presidential 

determination, which is one of the required conditions of the USEC 

Privatization Act. Our detailed legal analysis of these transactions is 

contained in appendix IV and is summarized below.

We found that DOE likely lacked authority to transfer the depleted 

uranium tails in May 2012 (see fig. 4 for an illustration of the May 2012 

tails transfer) for the same reasons that we found, in 2008, that DOE 

likely lacked authority to transfer other depleted uranium.50 As we 

explained then, section 3112(a) of the USEC Privatization Act prohibits 

DOE from “transfer[ing] or sell[ing] any uranium to any person except as 

consistent with this section.”51 The section authorizes and regulates 

DOE’s sale and transfer of a number of types of uranium, but it specifies 

no conditions for the sale or transfer of depleted uranium tails. Under 

rules of statutory construction, DOE therefore likely lacks such authority.52

Congress has not acted to date to clarify or enhance DOE’s authority, 

although legislation has been introduced in the current Congress that 

would authorize DOE to sell or transfer depleted uranium subject to 

certain conditions.53

 50See 

DOE asserts that it does not need additional 

authority because it asserts that it may use general Atomic Energy Act 

GAO-08-606R. No changes in law have occurred since 2008 that affect our prior 

legal opinion.

51USEC Privatization Act, Pub. L. No. 104-134 § 3112(a) (1996), codified at 42 U.S.C. § 

2297h-10(a) (2014) (emphasis added).

52In 2008, we noted that Congress likely did not authorize and regulate the sale and 

transfer of depleted uranium in section 3112 because depleted uranium was not deemed 

valuable in 1996. Instead, assuming depleted uranium would be deemed a waste, it 

addressed the disposal of depleted uranium in section 3113. See GAO-08-606R. 

53SAVE Act, H.R. 1999, § 204 (introduced May 15, 2013).

DOE Likely Lacked 

Authority for the 

Largest Uranium 

Transaction, and the 

Other Transactions 

Raise Additional 

Legal Concerns

DOE Likely Did Not Have 

Authority to Transfer Tails 

as Part of the May 2012 

Tails Transfer and Did Not 

Comply with Other 

Requirements
Page 30 GAO-14-291 Department of Energy

authority, which it believes is not restricted by the USEC Privatization Act, 

to transfer the depleted uranium tails as source material.54

Even assuming, as DOE believes, that DOE’s Atomic Energy Act 

authority to transfer tails is not restricted by the USEC Privatization Act, 

which we disagree with, we found that DOE did not comply with all of the 

Atomic Energy Act requirements. Specifically, the Atomic Energy Act 

required DOE to establish and charge nondiscriminatory prices for source 

material transferred to commercial entities, such as Energy Northwest.55

But rather than establish a price for the tails (the transferred source 

material), DOE officials developed an estimate of the intangible benefits 

of the transaction to the department, which it relied on to justify the 

transfer. DOE never determined a price and did not charge the recipient 

(Energy Northwest) a price for the depleted uranium tails.56

In addition to analyzing the May 2012 transaction under the Atomic 

Energy Act, as amended by the USEC Privatization Act, we reviewed 

DOE’s actions under the National Environmental Policy Act (NEPA). 

NEPA requires federal agencies, among other things, to evaluate the 

likely environmental effects of projects they are proposing. In 2009, DOE 

prepared an Environmental Assessment (EA) under NEPA to evaluate its 

excess uranium disposition activities as a whole. The EA covered in a 

general sense DOE’s intent to make future uranium sales and transfers—

such as several of the uranium transfers we discuss in this report, 

including the May 2012 tails transfer—but does not identify any specific 

planned transfers. DOE then conducted additional analysis specifically for 

the May 2012 tails transfer. We describe DOE’s NEPA analysis specific to 

the May 2012 transfer in appendix V.

 54In 2008, DOE did not comment on our finding that DOE’s legal authority to sell or 

transfer depleted uranium is doubtful. DOE declined to provide its formal legal position but 

noted it had conducted a previous transfer of depleted uranium tails under its Atomic 

Energy Act authority. 

55Atomic Energy Act §§ 63(a)(3), (c), 161(m), codified at 42 U.S.C. §§ 2093(a)(3), (c), 

2201(m) (2014).

56In contrast, in 2005, DOE transferred high-assay tails and established a price of $10,450 

per cylinder.
Page 31 GAO-14-291 Department of Energy

For the March 2012 SWU procurement, we found that DOE failed to 

recognize one component of the transaction—its transfer of Russianorigin uranium, governed by the USEC Privatization Act—and 

consequently, a later market impact study that DOE obtained failed to 

account for it as required by the statute (see fig. 3 for an illustration of the 

March 2012 SWU procurement). DOE officials told us they viewed the 

transaction solely as a procurement of SWU (uranium enrichment 

services) with no potential impact on uranium markets, and as such, 

relied on the department’s broad procurement authority under the Atomic 

Energy Act.57 However, we found that the transaction also included a sale 

or transfer of Russian-origin natural uranium to USEC, based on facts 

such as that USEC subsequently owned and controlled the uranium. 

DOE’s Atomic Energy Act authority to sell or transfer natural uranium falls 

squarely under the USEC Privatization Act’s limitations on transactions 

involving this material. In particular, as noted above, USEC Privatization 

Act section 3112(a) prohibits DOE from transferring or selling any 

uranium except as consistent with the act’s specific terms and conditions, 

and section 3112(b) specifies the detailed conditions under which DOE 

may sell Russian-origin uranium.58 DOE officials told us they did not 

consider the natural uranium to have been “transferred,” or sold, but 

rather “provided,” a distinction which we do not find supported by the facts 

or relevant to the applicability of the USEC Privatization Act. Because 

DOE did not consider the natural uranium to have been transferred or 

sold, DOE did not include the March 2012 transfer in its subsequent 

analyses of the potential impact of all DOE’s transfers of uranium on the 

domestic uranium market (which are discussed further below).59

 57Section 55 of the Atomic Energy Act authorizes DOE to obtain special nuclear material, 

which includes LEU, and section 161(g) of the Atomic Energy Act authorizes DOE to 

acquire and purchase personal property, among other things. 42 U.S.C. §§ 2075, 2201(g) 

(2014).

As a 

result, the market impact analyses that DOE obtained to assess the 

potential impact of certain other uranium transfers did not consider the 

potential impact of this natural uranium, as the statute requires, and DOE, 

58USEC Privatization Act § 3112(b)(2)(D), codified at 42 U.S.C. § 2297h-10(b)(2)(D) 

(2014).

59Under the USEC Privatization Act, DOE’s sales of Russian-origin uranium do not trigger 

a market impact study. However, under the act, when other sales or transfers of uranium 

trigger a market impact study, the study is required to account for any sales of Russianorigin uranium in assessing impacts. 

DOE Did Not Apply the 

Proper Legal Requirement 

for Part of Its March 2012 

SWU Procurement and as 

a Result, Did Not Assess 

Its Market Impact
Page 32 GAO-14-291 Department of Energy

therefore, cannot be reasonably assured that DOE’s cumulative transfers 

will not have an adverse material impact on the domestic uranium market.

We found that DOE’s acceptance of USEC’s liability for disposing of 

depleted uranium tails in its March 201260 and June 201261 transactions 

is governed by the USEC Privatization Act, not the Atomic Energy Act, 

which DOE officials generally cited to us as their authority. Under section 

3113(a)(3) of the USEC Privatization Act, DOE is required to accept 

depleted uranium for disposal upon request, and the generator is to 

reimburse DOE “an amount equal to [its] costs,”62 including a proportional 

share of capital costs. As a result of failing to recognize section 3113 as 

governing, DOE used a lower unit cost than it should have in one of the 

transactions and undercharged USEC. Specifically, several private 

companies planning enrichment facilities had asked DOE what it would 

charge for disposing of their depleted uranium, and DOE developed a 

target unit cost of $4.15 per kilogram of tails, including a proportional 

share of capital costs. For the March 2012 transaction with USEC, 

however, DOE subtracted the capital cost component, to arrive at a unit 

cost of $3.43 per kilogram of tails for disposing of the depleted uranium 

tails, an estimated difference of about $9 million less than the cost if the 

capital component had been included.63

Moreover, DOE lacked assurance that it acted in accordance with its 

policies in conducting the March 2012 and June 2012 transactions. The 

2008 Secretary of Energy’s Policy Statement on Management of the 

Because DOE did not follow the 

requirements of the USEC Privatization Act section 3113, it did not 

ensure that it was reimbursed the proper amount for accepting depleted 

uranium tails for disposal.

 60As noted above, DOE accepted depleted uranium disposal liability from USEC in a 

barter to procure SWU.

61As noted above, DOE accepted depleted uranium disposal liability from USEC to satisfy 

an installment of its cost-share commitment under its cooperative agreement with USEC 

for the American Centrifuge RD&D program.

62USEC Privatization Act §§ 3113(a)(1)(A), (a)(3), codified at 42 U.S.C. §§ 2297h11(a)(1)(A), (a)(3) (2014).

63Conversely, DOE used a unit cost that included capital costs in the June 2012 

transaction. Records provided by DOE did not explain why the June 2012 transaction 

reflected capital costs, and the March 2012 transaction did not.

DOE Did Not Recognize 

the Proper Legal 

Requirement to Accept 

Tails Liability in Its March 

2012 and June 2012 

Transactions and, as a 

Result, DOE 

Undercharged USEC
Page 33 GAO-14-291 Department of Energy

Department of Energy’s Excess Uranium Inventory commits DOE to 

manage its excess uranium inventories in a manner that, among other 

things, is both consistent with all applicable legal requirements and 

transparent. Because the internal memorandums supporting each of 

these transactions did not specify which legal authorities governed the 

DOE uranium transfers (e.g., its acceptance of tails) DOE was not 

positioned to ensure the transaction satisfied all applicable legal 

conditions.

Finally, we found that DOE did not meet one of the conditions of the 

USEC Privatization Act for the transfer of LEU to USEC in March 2013 

(see fig. 5 for an illustration of the March 2013 SWU transfer). Section 

3112(d) of the act authorizes DOE to sell LEU subject to several 

conditions, the first of which is that “the President determines that the 

material is not necessary for national security needs.”64 We found that 

DOE did not obtain a presidential determination.65 DOE officials told us 

that it met the condition by reviewing whether the July 2011 Nuclear 

Weapons Stockpile Plan (NWSP) included this material as being 

necessary for national security.66

 64USEC Privatization Act § 3112(d)(2)(A), codified at 42 U.S.C. § 2297h-10 (d)(2)(A) 

(2014).

DOE determined that the subject 

65As noted previously, section 3112(d) requires two distinct determinations, one by the 

President—which to our knowledge has not been delegated—and one by the Secretary of 

Energy.

66The NWSP is the overarching plan of the Departments of Energy and Defense that 

specifies the size and composition of the nuclear stockpile for a projected multi-year 

period. See 10 U.S.C. § 179 (2014), 42 U.S.C. § 2121(a)(2) (2014). The NWSP, which is 

classified, is based on the Nuclear Weapons Stockpile Memorandum submitted by the 

Department of Energy and the Department of Defense to the President, accompanied by a 

presidential directive. When the directive is signed, the Memorandum goes into effect as 

the NWSP. Thus the NWSP is approved by the President. See Office of the Assistant 

Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs, The 

Nuclear Matters Handbook (c. 2011).

DOE Did Not Obtain a 

Required Presidential 

Determination for the 

Transfer of LEU to USEC 

in March 2013
Page 34 GAO-14-291 Department of Energy

material was not included in the plan and, therefore, deemed the material 

as unnecessary for national security needs.67

DOE’s reliance on the NWSP to satisfy the presidential determination 

requirement in this particular case is unfounded. The July 2011 NWSP 

relied on by DOE predated DOE’s acquisition of the LEU in March 2012, 

meaning that the national security need for this material could not have 

been considered. We also note that the NWSP does not in fact identify 

any LEU as needed for national security and we question whether the 

lack of inclusion of specific uranium has the significance DOE ascribes to 

it. We observe that DOE has repeatedly linked unobligated LEU with 

national security, for example, by stating that the transfer of high-assay 

depleted uranium tails to Energy Northwest and its enrichment to LEU 

would “deliver important benefits to U.S. national security,” “advance 

America’s national security interests at a reduced cost to taxpayers,” and 

“ensur[e] a supply of nuclear fuel essential for national security 

missions.”68 Similarly, DOE has justified its support of USEC’s American 

Centrifuge technology as rooted in the need for LEU for national 

security.69

We are aware of no case law or legislative history interpreting the 

presidential determination requirement in USEC Privatization Act section 

3112(d)(2)(A). When we asked DOE to explain the department’s basis for 

using the NWSP—more precisely, the absence of inclusion of certain 

material in the plan—to satisfy the presidential determination requirement, 

DOE could not provide documentation.70

 67DOE takes the same position as it did when we discussed this issue with DOE officials 

in 2011. See 

We note that, in contrast to its 

GAO-11-846. DOE officials told us, at that time, the Nuclear Weapons 

Stockpile Memorandum identifies inventories of uranium for national defense needs, and 

therefore if uranium is not included in the memorandum, the uranium has been 

determined to be unnecessary for national security purposes. The uranium at issue in our 

2011 review had been in DOE’s inventory for many years, however, and we did not review 

the memorandum or the NWSP at that time. 

68See DOE, “DOE Announces Transfer of Depleted Uranium to Advance the U.S. National 

Security Interests, Extend Operations at Paducah Gaseous Diffusion Plant” (May 15, 

2012; DOE, Office of Environmental Management, “Paducah Plant Begins Enrichment 

Operations after Five Parties Strike Agreement” (May 1, 2012).

69See, e.g., Letter from Stephen Chu, Secretary of Energy, to Representative Whitfield 

(Jan. 13, 2012).

70DOE did, however, provide several documents showing that referencing the NWSP has 

been the department’s long-standing approach to satisfying this condition.
Page 35 GAO-14-291 Department of Energy

approach to meeting the presidential determination under section 

3112(d)(2)(A), DOE satisfies the parallel requirement for a secretarial 

determination under section 3112(d)(2)(B) with individual determinations 

signed by the Secretary of Energy for each transaction or group of 

transactions. Because DOE did not obtain the required presidential 

determination for the LEU transfer in March 2013, DOE decision makers 

did not have assurance that the material was not necessary for national 

security needs.

DOE does not have guidance for determining the value of depleted 

uranium tails in the context of a uranium transaction. As a result, DOE 

used multiple methods to calculate alternative values and ultimately 

decided that its tails were a liability, not an asset, and their transfer did 

not require payment in return. We disagree and believe that the highassay tails that DOE transferred in May 2012 were as an asset. 

Moreover, for this transaction, DOE did not mitigate risks associated with 

its reliance on third-party contracts to better ensure that the expected 

benefit of the transaction—a future supply of tritium—would be achieved.

DOE does not have guidance for determining the value of tails to ensure 

that the government receives reasonable compensation when transferring 

tails as an asset, as it did in the May 2012 transaction. As discussed 

above, we found that DOE likely lacks authority to sell depleted uranium 

tails. Even assuming that DOE had authority to transfer the tails under the 

AEA, this act, as well as DOE’s 2008 Secretary of Energy’s Policy 

Statement on Management of the Department of Energy’s Excess 

Uranium Inventory required DOE to ensure, respectively, that the 

department received reasonable compensation and value in return for the 

transferred uranium.71

 71As previously discussed, although we do not believe that DOE had authority to transfer 

the tails, DOE was nonetheless required by the Secretary’s Policy Statement to ensure 

that it would receive reasonable value in return. Further, under the legal authority DOE 

cited for the May 2012 tails transfer, DOE would be required to establish a 

nondiscriminatory price for the tails that would provide reasonable compensation to the 

government.

Accordingly, in this case, DOE would need to know 

DOE’s Methods for 

Valuing Tails and for 

Mitigating Risks for Its 

Largest Uranium 

Transaction Raise 

Issues About Whether 

the Government 

Received Reasonable 

Compensation

DOE Does Not Have 

Guidance for Valuing Tails 

and Inappropriately 

Treated the Tails It 

Transferred in May 2012 

as a Liability Instead of an 

Asset
Page 36 GAO-14-291 Department of Energy

the value of the tails it transferred, as the value represents the cost to the 

department for which it needs to be reasonably compensated. In the 

period when DOE operated the GDPs, it maintained a pricing policy for 

uranium that, at various times, specified standard prices or a market 

value standard to prices for depleted uranium.72 Such a pricing policy had 

generally informed DOE decision makers in determining the value of tails. 

DOE officials characterized the previous pricing policy as being overtaken 

by the Energy Policy Act of 1992, as well as the USEC Privatization Act. 

That is, after USEC was formed and assumed operation of the GDPs 

from DOE, the department no longer relied on this uranium pricing 

policy.73

Lacking guidance for determining the value of tails, DOE evaluated two 

different methods for calculating the value of the tails it transferred in the 

May 2012 transaction. In addition, based on our analysis of a previous 

DOE transaction involving tails, DOE could have considered at least one 

other method for calculating the value of the tails. These three different 

methods produced disparate results for the value of the tails and, 

therefore, the cost to DOE, in this transaction.

• According to DOE officials and documents, including an analysis 

prepared by the Office of the Chief Financial Officer, there was no 

cost to the department for this transaction. DOE officials indicated that 

there was no cost because the tails that DOE supplied—that initiated 

the entire series of transfers—are considered to be a liability, not an 

 72See e.g., DOE, Pricing Policy Change for Sale of Uranium Depleted in Isotope U-235, 

47 Fed. Reg. 17,110 (1982). See also notices from DOE’s predecessors in operating the 

enrichment facilities, Atomic Energy Commission, Uranium Heraflouride: Base Charges, 

Use Charges, Special Charges, Table of Enriching Services; Specifications, and 

Packaging, 32 Fed. Reg. 16,289 (1967); Energy Research And Development 

Administration, Uranium Heraflouride: Base Charges, Use Charges, Special Charges, 

Table of Enriching Services; Specifications, and Packaging: Revisions, 42 Fed. Reg. 

51,635 (1977).

73In January 2014, DOE submitted to relevant committees an 11-page Report to Congress 

evaluating the economic feasibility of re-enriching depleted uranium located at federal 

sites, which under the Consolidated Appropriation Act, 2012, DOE was required to submit 

by December 31, 2011. In this report, DOE described a number of factors—including the 

market prices for natural or enriched uranium and SWU, as well as enrichment supplier 

capacity and availability—that would influence the economic and technical feasibility of reenriching its tails inventory at federal sites. However, DOE did not provide information on 

how tails could be priced for re-enrichment purposes—a factor that would appear to affect 

the economic feasibility of re-enrichment.
Page 37 GAO-14-291 Department of Energy

asset, regardless of the value of the natural uranium equivalency 

contained in the tails. Further, because the department received 

nearly the same quantity of secondary depleted tails after USEC’s reenrichment activities were complete, as it initially transferred, the 

department perceived the transaction as a wash.74

• However, the same financial analysis that we reviewed conducted by 

the Office of the Chief Financial Officer indicated that the tails could 

be worth $300 million based on the value of the resultant LEU minus 

the costs to re-enrich the tails. As such, the cost to DOE for this 

transaction could have been determined to be $300 million, 

recognizing that the tails were an asset transferred to Energy 

Northwest. The same financial analysis also determined that the 

transaction resulted in $105.3 million in cost savings associated with 

deferred maintenance and a reduction in disposal liability for tails.75

• In 2005—the only other time that DOE transferred high-assay tails—

DOE charged a fixed fee of $10,450 per cylinder of tails. Using DOE’s 

2005 price point, DOE’s May 2012 tails transfer could be valued at 

about $11.1 million. As we reported in 2008, changing market 

conditions can greatly affect the tails’ value.

As such, DOE could have calculated that the cost of the transaction to 

the department was $195 million, using the $105 million in deferred 

maintenance and reduced liability cost savings to offset the $300 

million value of the tails. DOE did not present this scenario in its 

internal financial analysis.

76

 74Secondary tails are low-assay and, according to DOE, are not viable for further reenrichment. Also according to DOE officials, the estimated disposal cost for tails does not 

differ based on the assay level of the tails.

Thus, recognizing that 

market conditions have changed considerably since 2005, the $11.1 

million estimate for the May 2012 tails transfer is offered as a rough 

estimate based on the only other time DOE transferred tails and to 

demonstrate that the tails in fact had value and not precisely what that 

value is. DOE also did not present this type of scenario in its internal 

financial analysis.

75The $105.3 million includes cost savings associated with (1) maintaining the Paducah 

GDP for 1 fewer year than anticipated after USEC returns the facility to DOE—which DOE 

estimates will save the department about $100 million; (2) having reduced disposal liability 

because DOE will receive about 490 MTU less in secondary tails than it provided to start 

the transaction—which DOE estimates to save the department about $3.5 million; and (3) 

the time value of deferring costs associated with placing the Paducah GDP in cold 

shutdown status and the first year’s surveillance and maintenance, which DOE estimates 

will save the department $1.8 million.

76See GAO-08-606R.
Page 38 GAO-14-291 Department of Energy

In the absence of guidance providing a consistent method for determining 

the value of tails when transferred, the department ultimately determined 

in its financial analysis prepared by the Office of the Chief Financial 

Officer that the tails transferred to Energy Northwest were a liability and 

without economic value. As such, the department did not request or 

receive payment for the tails from Energy Northwest. Moreover, Energy 

Northwest expected to benefit from taking the tails, also showing that the 

tails were not a liability. However, we find that the tails were an asset in 

the context of this transaction and, therefore, the Atomic Energy Act and 

DOE’s own policy required it to receive, respectively, reasonable 

compensation and value in return for sold or transferred uranium. 

Specifically, the Atomic Energy Act provision DOE relied upon required 

the department to impose a reasonable charge on and receive 

reasonable compensation from Energy Northwest, as discussed in 

appendix IV. Moreover, DOE’s 2008 Secretary of Energy’s Policy 

Statement on Management of the Department of Energy’s Excess 

Uranium Inventory commits DOE to ensuring that all transactions 

involving excess uranium transfers or sales to non-U.S. government 

entities result in the department’s receipt of a reasonable value for the 

sold or transferred uranium. The two reasons that DOE officials cited for 

treating the tails as a liability are not consistent with DOE’s treatment of 

tails in other comparable circumstances where DOE clearly treated tails 

as an asset.

• First, according to DOE officials, depleted uranium tails are always 

considered a liability because DOE must report its estimated 

liability for the future disposal of the tails per federal accounting 

standards. However, DOE has recognized that depleted uranium 

tails may have economic value. For instance, as noted above, in 

2005, DOE charged a fixed fee of $10,450 per cylinder of tails in 

the context of a transaction with Energy Northwest. In addition, in 

February and July 2013, DOE treated its inventory of tails as an 

asset when it sought industry interest in purchasing a portion of its 

tails inventory (see fig. 6 for photograph of depleted uranium tails 

at the Paducah GDP). DOE received expressions of commercial 

interest and in November 2013, announced that it would begin 

sales negotiations with GE-Hitachi’s Global Laser Enrichment for 
Page 39 GAO-14-291 Department of Energy

the sale of a portion of its tails inventory.77

• Second, according to DOE’s financial analysis, the tails 

transferred in May 2012 were a liability and were not suitable for 

enrichment in a commercial facility. Specifically, DOE stated that 

the material had some impurities that could contaminate 

commercial equipment and that DOE could incur liability as a 

result. However, officials from Energy Northwest told us that only 

a small percentage of the tails were contaminated. Furthermore, 

as discussed above, in the summer of 2013, DOE received 

commercial interest for its tails which, according to DOE’s request, 

also contained some trace contaminants.

The fact that DOE 

received commercial interest in its tails underscores the point that 

tails can be viewed as an asset and that DOE should have a 

consistent method for determining the value of its tails before 

proceeding with this sale.

In 2012, we included a discussion of DOE’s excess uranium inventories in 

our annual duplication, overlap, and fragmentation report as an 

opportunity to enhance government revenue because, as we reported in 

2008 and 2011, DOE’s tails inventory could potentially be worth billions of 

dollars.78

 77Specifically, in February 2013, DOE requested expressions of interest from industry 

related to the purchase or exchange of DOE’s inventory of tails. According to DOE’s 

request, the purpose of this initiative was to identify opportunities to create value for the 

U.S. government, while also lowering DOE’s overall maintenance or disposal costs. DOE 

received several responses and announced in November 2013 that it would open 

negotiations with GE-Hitachi’s Global Laser Enrichment for the sale of a portion of its tails. 

Global Laser Enrichment has proposed licensing, constructing, and operating a new 

facility in the United States based on the Australian laser enrichment technology known as 

Separation of Isotopes by Laser Excitation (SILEX) that has yet to be commercialized.

We suggested that Congress clarify DOE’s authority to transfer 

or sell tails and to retain the proceeds from these sales. We continue to 

maintain that these legal authorities require clarification, particularly in 

light of DOE’s plans to conduct further tails transactions and, as noted 

above, legislation has been introduced in the current Congress that would 

achieve that.

78See GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and 

Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington, 

D.C.: Feb. 28, 2012). See GAO-08-606R, GAO-11-752T, and GAO-11-846.
Page 40 GAO-14-291 Department of Energy

Figure 6: Cylinders of Depleted Uranium Tails at the Paducah Gaseous Diffusion 

Plant

DOE did not take steps to mitigate risks associated with its reliance on 

third-party contracts for the May 2012 tails transfer to ensure that the 

expected benefit of the transfer would be achieved. Specifically, DOE 

transferred tails to Energy Northwest, with the goal of eventually ensuring 

the availability of unobligated LEU sufficient for up to 15 years of tritium 

production. However, as noted above, this was a large and complex 

transaction that involved four main parties and five two-party contracts. 

There was no overriding contract or memorandum of agreement linking 

these transactions, and DOE was not a party to three of the five 

agreements. Moreover, DOE officials told us that they had not seen or 

otherwise reviewed any of the three third-party contracts, even though the 

benefits to DOE would be compromised if any of these third-party 

DOE Did Not Take Steps 

to Mitigate Risks 

Associated with Its May 

2012 Tails Transfer and 

Did Not Obtain 

Reasonable Assurance 

That It Will Receive 

Expected Benefits
Page 41 GAO-14-291 Department of Energy

contracts were not fully performed.79

One of the federal standards for internal control—risk assessment—

states that management should comprehensively identify risks and 

consider all significant interactions between the entity and other parties.

As such, this raises issues about 

whether DOE could ultimately fail to receive the expected benefit of the 

availability of unobligated LEU for up to 15 years of tritium production.

80

Specifically, risks should be assessed at the activity level, from both 

external and internal sources, and once risks have been identified, 

management should decide what actions should be taken to mitigate 

them. We have recently reported on widely recognized principles for 

effective risk management and the overarching need to generate a 

comprehensive list of risks—regardless, of whether those risks are under 

the control of the organization—based on events that could significantly 

affect the achievement of objectives.81

DOE identified general risks associated with the May 2012 tails transfer. 

For example, in two separate May 2012 internal memorandums to the 

Secretary recommending approval of the transfer, DOE acknowledged 

that a general risk to receiving the expected benefit of the transaction is 

DOE’s reliance on third-party contracts. It did not elaborate on what 

specific risks could lead to a negative outcome. In another document 

DOE officials provided to us, six other risks were identified, but they did 

not demonstrate how the risks might prevent DOE from eventually 

receiving the expected benefit of the transaction. Four of the six risks 

focused on possible criticism from external parties, such as potential 

criticism from congressional offices about providing support for USEC and 

possible criticism regarding whether DOE will receive adequate value for 

transferring its high-assay tails to Energy Northwest. The two other risks 

DOE identified included the possibility that USEC may transfer the 

 79DOE’s agreement with Energy Northwest included several termination clauses whereby 

DOE could terminate the agreement. For example, DOE could terminate if Energy 

Northwest terminated its enrichment services agreement with USEC, or if Energy 

Northwest terminated its agreement with TVA. However, where DOE transferred title to 

the depleted uranium within a year of the agreement, DOE’s sole remedy would be to be 

paid any costs due under the agreement—which are none, with respect to the transferred 

depleted uranium.

80GAO/AIMD-00-21.3.1 (“Green Book”).

81GAO, DOD Financial Management: Ineffective Risk Management Could Impair Progress 

toward Audit-Ready Financial Statements, GAO-13-123 (Washington, D.C.: Aug. 2, 2013).
Page 42 GAO-14-291 Department of Energy

Paducah GDP back to DOE before it has sufficient funds to accept the 

return of the facilities, and that the transfer had not yet been subject to a 

market impact analysis. In the latter case, had the market impact analysis 

resulted in negative findings, it is unlikely that the transaction would have 

proceeded.

We found that DOE did not take steps to mitigate risks it did identify that 

may prevent DOE from eventually receiving the expected benefit of the 

transaction. For example, while DOE identified reliance on third-party 

contracts as a general risk to the success of the transaction, it did not 

take steps to mitigate this risk—such as by including a right of first refusal 

to purchase the unobligated LEU in its agreement with Energy 

Northwest—in the event that Energy Northwest does not deliver 

unobligated LEU to TVA.82 In fact, Energy Northwest representatives told 

us they could theoretically loan or sell the LEU to other entities, but they 

do not have plans to do so. Similarly, DOE did not enter into a 

memorandum of agreement with the three other parties, a mechanism 

that could have been used to tie all the contracts among the four parties 

together, such as by describing, among other things, the purpose, each 

party’s actions, and the intended outcome of the transaction. By not 

taking steps such as these to mitigate risks, DOE has accepted the 

possibility that, over the course of a decade, any one of the three twoparty contracts that do not involve the department may not be fully 

performed. Consequently, DOE may not have put itself in the best 

position to ensure that the expected supply of unobligated LEU needed 

for national security purposes is available, despite having transferred the 

most valuable tails in its inventory.

 82A right of first refusal is generally a potential buyer’s contractual right to meet the terms 

of a third party’s higher offer. In this context, a right of first refusal would give DOE the 

right to purchase the unobligated LEU before Energy Northwest could sell it to a third 

party, and hence protect DOE from the risk that the unobligated LEU would not be 

available for use in tritium production.
Page 43 GAO-14-291 Department of Energy

The Secretary of Energy is generally required by the USEC Privatization 

Act to determine that any DOE sale or transfer of natural or LEU will not 

have an adverse material impact on the domestic uranium mining, 

conversion, or enrichment industries.83 In part to fulfill this requirement, 

DOE obtained two studies assessing the potential market impact of 

certain planned uranium transfers. Based on study findings, the Secretary 

of Energy determined these uranium transfers would have no adverse 

material impact on the domestic uranium industry. However, we found 

that DOE did not take sufficient steps to ensure the quality of the market 

impact studies, and the studies provided limited detail about their 

methodology, assumptions, and data sources. Moreover, we have 

concerns about the transparency to industry of DOE’s planned future 

uranium transfers given that DOE recently discontinued its guideline to 

limit its annual uranium sales and transfers. According to DOE, this 

guideline had been established with industry consultation to generally 

ensure that such transfers would not have an adverse material impact on 

the domestic uranium industry.

84

 83The act provides several limited exceptions; for example, DOE may transfer or sell 

enriched uranium to any person for national security purposes, as determined by the 

Secretary. USEC Privatization Act § 3112(b), (c), (e), codified at 42 U.S.C. § 2297h-10(b), 

(c), (e) (2014).

84In 2011, we referred to the guideline as a 10 percent target. However, DOE officials 

requested that we refer to this as a guideline. In this case, the guideline refers to a ceiling 

that DOE may approach or exceed in certain circumstances, such as initial fuel loads in

new nuclear reactor cores.

DOE Did Not Assess 

the Quality of Studies 

It Obtained to 

Determine the Market 

Impact of Its Uranium 

Transfers and Will No 

Longer Use a 

Guideline to Limit Its 

Annual Uranium 

Sales or Transfers
Page 44 GAO-14-291 Department of Energy

In 2012 and 2013, the Secretary of Energy determined that certain of 

DOE’s uranium transfers will not have an adverse material impact on the 

domestic uranium industry. To help inform the Secretary’s determination, 

DOE contracted with Energy Resources International, Inc. (ERI), a 

nuclear fuel consulting firm, to develop two studies analyzing the potential 

impact of planned uranium transfers on the market.85

The two ERI studies assessed the May 2012 tails transfer and March 

2013 SWU transfer, as well as additional uranium transfers that did not 

involve USEC.

The Secretary of 

Energy made determinations in May 2012 and March 2013 that DOE’s 

uranium transfers would not have an adverse material impact on the 

domestic uranium market. The two determinations specifically reference 

the results of the two ERI studies and the state of the uranium industry as 

the basis for these decisions. These determinations were made public on 

DOE’s website. The two ERI studies were also made public on DOE’s 

website, but one of them was removed during the course of our review.

86

The first study, dated April 2012, projected the potential market effects 

during calendar years 2012 through 2033 for three DOE uranium 

transfers as follows:

ERI did not assess DOE’s March 2012 SWU 

procurement because, as described above, DOE considered the March 

2012 transaction to be a procurement of enrichment services (SWU) only 

and that, therefore, would not have affected the uranium market. As 

explained above, DOE provided Russian-origin natural uranium as 

uranium hexafluoride to USEC as part of the transaction, and we believe 

this transfer should have been considered in its market impact study. ERI 

also did not assess DOE’s June 2012 tails acceptance because it did not 

involve a DOE transfer of uranium into the market; instead, DOE received 

depleted uranium tails from USEC. We agree that it was not necessary to 

include this transaction in the ERI studies.

 85Energy Resources International, Inc., Quantification of the Potential Impact on 

Commercial Markets of Introduction of DOE Excess Uranium Inventory in Various Forms 

and Quantities During Calendar Years 2012 through 2033 (Washington, D.C.: Apr. 23, 

2012). Also see: Energy Resources International, Inc., Quantification of the Potential 

Impact on Commercial Markets of Introduction of the Enrichment Services Component of 

DOE Low Enriched Uranium Inventory During Calendar Year 2013 (Washington, D.C.: 

Jan. 28, 2013).

86For example, DOE has transferred natural uranium to contractors in exchange for 

environmental cleanup services at the Ohio plant, a practice we reported on in 2011. See 

GAO-11-846.

Based on Studies’

Findings, the Secretary of 

Energy Determined 

Certain DOE Uranium 

Transfers Would Have No 

Material Market Impact on 

the Domestic Uranium 

Industry
Page 45 GAO-14-291 Department of Energy

1. DOE’s May 2012 tails transfer—accounting for about 16 percent of 

the material studied by ERI

2. ongoing quarterly transfers of natural uranium to contractors in 

exchange for environmental cleanup services at the Ohio plant—

accounting for 72 percent of the material studied by ERI

3. transfers of downblended highly enriched uranium—accounting for 12 

percent of the material studied by ERI

The study assumed that DOE would transfer the material for these three 

transfers—totaling 20,639 MTU—over the period of 2012 through 2033. 

ERI considered 12 different scenarios resulting from different 

combinations of how this material would be introduced into the market 

over this time frame. ERI ultimately concluded that the three DOE 

transfers would not constitute an adverse material impact on the domestic 

uranium industry. In addition, the studies’ principal author told us that, 

based on its estimation of price impacts, ERI determined that DOE’s 

transfers would not have an adverse material impact on the uranium 

industry collectively, but the impact on individual companies could differ 

based on other factors, such as their production costs and realized prices.

ERI’s second study, dated January 2013, projected the market impact 

during calendar year 2013 for one transaction: DOE’s March 2013 

transfer of the enrichment services component of LEU to USEC. As 

discussed previously, in exchange for DOE’s transfer of LEU to USEC, 

USEC provided the natural uranium component of the LEU to DOE and, 

therefore, USEC gained the net value of the enrichment component of 

that LEU. ERI determined that only the enrichment component of this 

transaction needed to be examined because DOE was not transferring 

any natural uranium into the market. ERI ultimately concluded that this 

DOE transfer would not constitute an adverse material impact on the 

domestic uranium enrichment industry.

We found that DOE did not take steps to ensure the technical quality of 

ERI’s market impact studies. DOE’s contract with ERI includes a 

statement of work, which states that, at regular intervals DOE will formally 

evaluate the contractor’s performance, which may include the technical 

quality of the contractor’s deliverables, among other things. Moreover, 

because the two studies were published on DOE’s website, DOE’s 

Information Quality Guidelines apply. These guidelines—developed by 

DOE as required by the Information Quality Act and under associated 

guidelines issued by the Office of Management and Budget—set forth 

DOE Did Not Take 

Sufficient Steps to Assess 

the Technical Quality of 

Market Impact Studies, 

and the Studies Did Not 

Sufficiently Document 

Their Methodology, Data 

Sources, and Assumptions
Page 46 GAO-14-291 Department of Energy

quality assurance steps and procedures to ensure the technical quality of 

information that DOE makes publicly available.87

However, DOE officials told us that they neither conducted an 

assessment of the technical quality of the ERI studies, nor requested any 

additional information from ERI about the studies. DOE officials told us 

that they reviewed the studies to ensure that they accurately described 

the department’s plans for uranium transfers. They also provided us a 

copy of a brief internal e-mail, dated June 11, 2013—more than 1 year 

after the first study was completed and about 5 months after the second 

study was completed—from DOE’s Contracting Officer’s Representative 

for its ERI contract that stated that, overall, ERI’s performance had been 

satisfactory and within scope. According to DOE officials, they did not 

examine the studies’ methodology or conduct an assessment of the 

studies’ technical quality because they wanted ERI’s studies to be 

independent and did not want to influence their results. Furthermore, 

DOE officials told us that they contracted with ERI to provide subject 

matter expertise that did not exist within DOE and trusted ERI to provide 

that expertise. However, if DOE did not have the internal subject matter 

expertise to review the studies, another tool available to the department is 

peer review, which is generally defined as the process of having 

independent experts assess the technical and scientific merit of studies. 

DOE’s Information Quality Guidelines state that the department may have 

information peer reviewed and that “if the data and analytical results have 

been subject to formal, independent, external peer review, the information 

may generally be presumed to be of acceptable objectivity.” Nonetheless, 

ERI’s principal author told us that the two studies were not peer reviewed 

by a third party. Without taking quality assurance steps, DOE cannot be 

assured of the reliability and quality of the analyses conducted. Moreover, 

DOE cannot be certain of the studies’ conclusions, which the department 

used as the basis for the Secretary’s determination that DOE’s uranium 

transfers did not have an adverse material market impact and to meet its 

legal requirements under the USEC Privatization Act.

The guidelines state that 

DOE should seek to ensure that information disseminated to the public 

meets a basic level of quality, which is measured by the objectivity of the 

information and whether the information is accurate, clear, complete, and 

reliable.

 87Consolidated Appropriations Act, 2001, Pub. L. No. 106-554 Title V § 515 (a) 114 Stat. 

2763A-153 to 2763A-154 (2000) (commonly referred to as the Information Quality Act).
Page 47 GAO-14-291 Department of Energy

In addition, we found that ERI’s studies provided limited detail about its 

methodology, data sources, and assumptions, even though DOE 

guidelines require such information to be included in publicly 

disseminated documents. DOE’s Information Quality Guidelines state that 

information disseminated to the public should contain full, accurate, and 

transparent documentation and include information on assumptions, data 

sources, and methods. Moreover, the guidelines state if DOE 

“disseminates influential scientific, [or] financial information, a high degree 

of transparency of data and methods should be ensured to facilitate the 

reproducibility of such information by qualified third parties.”88

According to the studies’ principal author, ERI views its methodology as 

proprietary and consequently did not include details about its 

methodology and data sources in the two studies. Although the studies’

principal author was willing to answer our questions about ERI’s 

methodology and data sources, we were told that documentation 

underlying ERI’s methodology could not be provided because ERI’s 

methodology is considered to be proprietary, and the costs and sources 

used in the studies were developed independently of the work performed 

for DOE. DOE’s Information Quality Guidelines do provide for situations 

where compelling interests—such as when using trade secret (or 

However, 

the information ERI provided about its methodology was limited. For 

example, the information ERI provided about its methodology for its 

market clearing model—which was the foundation of ERI’s analysis and 

represents ERI’s estimate of the supply and demand for each sector of 

the domestic uranium market—was summarized at a high-level in a threesentence footnote. As another example, ERI did not provide information 

about the sources of data it used to develop its market supply curves, 

which were fundamental to its market analysis. In its April 2012 report, 

ERI states that it developed an annual supply curve from each mining and 

conversion company using company cost and production data, but ERI 

did not provide any details about the sources from which it obtained this 

data (e.g., from the companies themselves or publicly available 

information). This raises questions about whether ERI’s methodology, 

data sources, and assumptions were clearly defined and presented, as 

required by DOE’s Information Quality Guidelines.

 88This threshold likely applies because the studies could be seen as detailing influential 

financial information. Specifically, the results of these studies are used by DOE decision 

makers to determine whether DOE transfers will have an adverse material impact on the 

domestic uranium market.
Page 48 GAO-14-291 Department of Energy

proprietary) information—may preclude public access to data and 

methods. In such cases, DOE should “apply rigorous robustness checks 

to analytical results and document what checks should be undertaken.”

As mentioned above, DOE neither conducted a review of the studies’

technical quality, nor did the department have the studies peer reviewed 

by a third party.

Based on the information that was provided in the studies and 

supplemented by additional information we learned by interviewing the 

studies’ principal author and DOE officials and from subsequent 

correspondence with ERI officials, we were able to conduct a limited 

review of ERI’s 2012 and 2013 studies. We did not identify any significant 

flaws; however, we found that the studies have shortcomings that raise 

questions about the definitiveness of ERI’s conclusions, on which the 

Secretary of Energy based his determinations that DOE’s uranium 

transfers would not have an adverse material impact on the domestic 

uranium market. Specifically, we identified several concerns with the 

certainty of ERI’s conclusions regarding the effect of DOE’s uranium 

transfers on the term and spot markets, including

• the completeness of the data ERI used to develop the market supply 

curves, which were fundamental to its term market analysis;

• ERI’s assumption that DOE’s planned uranium transfers would not 

have a cumulative effect on the term market; and

• ERI’s model that it developed for its analysis of the spot market, which 

accounts for some, but not all, factors that can affect spot market 

prices.

See appendix VI for our analysis of ERI’s market impact studies and 

discussion of these shortcomings.

In its July 2013 Excess Uranium Inventory Management Plan, DOE 

announced its decision to discontinue using its guideline for uranium 

sales and transfers of generally no more than 10 percent of the annual 

U.S. requirements for nuclear fuel. In 2008, the Secretary of Energy 

stated that uranium transfers involving non-U.S. government entities 

would be undertaken in a transparent manner and established the 10 

percent sales and transfer guideline, which, according to DOE, generally 

would ensure that such transfers would not have an adverse material 

The Transparency of 

DOE’s Future Uranium 

Sales and Transfers May 

be Affected by DOE’s 

Recent Elimination of its 

Internal Guideline
Page 49 GAO-14-291 Department of Energy

impact on the domestic uranium industry.89 In addition, DOE has based 

programmatic decisions on adherence to this guideline. For example, in 

2009 DOE based its Environmental Assessment and Finding of No 

Significant Impact under the National Environmental Policy Act for 

disposition of excess uranium on the assumption that DOE sales and 

transfers generally would not exceed the 10 percent guideline.90 As we 

reported in 2011, the guideline was established with input from 

representatives from the uranium industry and intended, in part, to 

alleviate their concerns that DOE uranium sales could harm the domestic 

uranium mining, conversion, and enrichment industries by depressing 

prices.91

DOE officials told us that DOE is not obligated to establish a guideline 

and, according to DOE’s July 2013 Excess Uranium Inventory 

Management Plan, the department determined that it can meet its 

statutory and policy objectives with regard to DOE uranium sales and 

transfers without an established guideline. Instead, DOE will review 

decisions to introduce uranium into the market every 2 years. While we 

agree that DOE’s periodic review of the potential market impact is 

constructive, we note that DOE is already required to perform such 

reviews by law, and the periodic conduct of these reviews may not in and 

of itself obviate the need for a guideline to enhance the transparency of 

DOE’s planned future transactions. According to DOE’s 2013 Excess

Uranium Inventory Management Plan, its May 2012 secretarial 

determination covers uranium transfers that are planned or under 

consideration by the department through 2021. However, DOE released 

additional uranium and sought another determination in March 2013—

less than 1 year after the May 2012 determination—and thus, the 

Secretary’s previous determination was quickly outdated. Moreover, 

according to ERI’s April 2012 analysis, in some years, DOE’s planned 

transfers might reach values in the range of 12 to 15 percent of U.S. 

annual requirements for uranium mining and conversion services—which 

is greater than DOE’s previous 10 percent guideline that limited its annual 

 89Secretary of Energy’s Policy Statement on Management of the Department of Energy’s 

Excess Uranium Inventory, (March 11, 2008).

90DOE, Environmental Assessment for the Disposition of DOE Excess Depleted Uranium, 

Natural Uranium, and Low-Enriched Uranium, DOE/EA-1607 (June 2009).

91See GAO-11-846. 
Page 50 GAO-14-291 Department of Energy

uranium sales and transfers—and it will reach values of not more than 7 

percent of U.S. annual requirements for enrichment services.

Industry representatives we interviewed raised several concerns about 

DOE’s July 2013 plan, including its decision to no longer use an 

established guideline. First, DOE officials did not consult with industry 

before deciding to discontinue using its 10 percent guideline or 

disseminating the updated plan. Industry representatives told us that they 

believe DOE’s decision to cease use of the guideline indicates that DOE 

has already determined—without industry input and with no clear basis—

that no future DOE uranium transfers will have an adverse material 

impact on the market. DOE officials acknowledged that the department 

did not specifically seek comment from industry representatives on its 

2013 plan or its decision to discontinue use of the 10 percent guideline 

but noted that industry representatives could request informal meetings 

with DOE to discuss their concerns. In addition, DOE officials told us that 

they have presented the department’s plans and listened to views of 

interested stakeholders at formal industry meetings.

Second, industry representatives told us that DOE’s new plan lacks 

transparency because it does not provide information about DOE’s future 

uranium disposition plans. The Uranium Producers of America—an 

association that promotes the viability of the domestic uranium industry—

stated in July 2013 that DOE’s plan is ambiguous and lacks predictability, 

which is needed for the uranium industry—a sector that is currently 

struggling to secure capital to start up, sustain, or grow its operations. 

Industry representatives that we spoke with underscored that DOE’s 

introduction of material into the market is further deteriorating demand for 

uranium and driving down uranium prices. For example, one company 

representative told us that his company has recorded a loss in all of the 

previous 5 years and that the volume of DOE’s uranium transfers into the 

market is significant enough to tip the scales between making an annual 

profit and realizing losses because of the slim margins in the industry. 

However, by eliminating its guideline without considering input from the 

domestic uranium industry, DOE’s uranium management plan provides 

less transparency on DOE’s future uranium transfers for members of 

industry.

The relationship between DOE and USEC is long and complex. DOE has 

come to rely exclusively on USEC as its sole supplier of uranium 

enrichment services to meet national security needs because, according 

to DOE, USEC was the only supplier of enrichment services that is not 

Conclusions
Page 51 GAO-14-291 Department of Energy

subject to obligations under certain international agreements. In the 

nearly two decades that USEC has existed as a private company, no 

other wholly domestic enrichment services provider has entered the 

market. As a result of lower than anticipated global demand for 

enrichment services since the tsunami in Japan in 2011, the prohibitive 

cost of continuing to operate inefficient gaseous diffusion technology, and 

the company’s lack of financing for the American Centrifuge Plant, USEC 

filed for Chapter 11 bankruptcy protection in March 2014. The nation is 

currently without an enrichment capability that can meet national security 

needs and be consistent with DOE’s position that these needs be met 

using unobligated LEU. USEC and DOE had been looking toward the 

successful commercialization of the American Centrifuge technology to 

reestablish a domestic enrichment capability that can fulfill national 

security needs, but USEC’s financial condition and the absence of project 

financing raise questions about when and how this will occur. Under the 

June 2012 cooperative agreement between DOE and USEC to 

demonstrate the American Centrifuge technology, which was extended 

through the end of April 2014, DOE provided about $280 million in 

funding, which included $148 million in eight separate transfers of 

appropriated funds and $132 million in credited value of two of the four 

uranium transactions with USEC. For one of these uranium 

transactions—its June 2012 tails acceptance—we found that agency 

documentation varied pertaining to the amount of material that could be 

transferred, which could lead to DOE having to incur additional tails 

disposal liability in the future.

After USEC officials informed DOE as early as December 2011 that the 

company was considering closing the Paducah GDP, DOE amended the 

terms of its 2002 agreement with USEC to secure a royalty-free license to 

all centrifuge intellectual property for government purposes as well as a 

license with the right to sublicense to other parties for commercial 

purposes. In addition, DOE identified options to ensure that it obtained or 

created a near-term supply of unobligated LEU for tritium production and 

continued to support development of American Centrifuge technology. It 

did so primarily by relying on various legal authorities it believes it has 

with respect to the transfer and sale of various forms of uranium under 

the Atomic Energy Act. Over the course of a 14-month period beginning 

in March 2012, DOE conducted four uranium transactions involving 

USEC. We identified legal concerns with all four uranium transactions that 

relate to DOE’s reliance on general Atomic Energy Act authorities without 

recognizing governing uranium-specific USEC Privatization Act provisions 

that condition, or likely prohibit the transactions, as well as the extent to 

which DOE met applicable conditions. We continue to believe that our 
Page 52 GAO-14-291 Department of Energy

previous matter for congressional consideration—that Congress consider 

clarifying DOE’s statutory authority to manage depleted uranium and 

provide explicit direction about whether and how DOE may sell or transfer 

depleted uranium—could, if implemented, help to address these 

concerns. We also believe the transparency of future uranium 

transactions would be enhanced if DOE takes steps to expressly and 

publicly cite the legal authorities governing uranium transactions that it 

believes authorize its transactions and demonstrates that it satisfied the 

conditions required by the cited legal authorities.

DOE does not have guidance or a consistent method for determining the 

value of tails when they are transferred in the form of an asset. Lacking 

such guidance, DOE treated the tails that it transferred to Energy 

Northwest in May 2012 as a liability and determined that there was no 

cost to the department for this transfer. The department’s treatment of 

tails without value in this instance directly contradicts how it treated tails 

in other situations, such as in 2013 when it determined DOE’s inventory 

of tails were an asset and sought to sell them with the express purpose of 

creating “value” for the U.S. government and in 2005 when it set a percylinder price for tails. Because DOE may sell or transfer additional tails 

in the near future, having guidance that provides a consistent and 

transparent method for determining the value of tails in the context of a 

transaction is timely and necessary to help DOE ensure that it is receiving 

reasonable compensation in return for its tails. We continue to believe 

that further congressional clarification is warranted, consistent with our 

suggestion, in 2011, with respect to DOE’s authority to retain the 

proceeds from barters, transfers, or sales of excess uranium.92

In May 2012, DOE transferred a significant quantity of its highest value 

tails without receiving payment, in order to ultimately ensure that a 15-

year supply of unobligated LEU is available to produce tritium. While DOE 

identified some risks associated with the May 2012 tails transfer, it did not 

take steps to mitigate risks that might ultimately prevent the department 

from ensuring the supply of unobligated LEU for the production of tritium 

at the end of this complex set of transfers, which won’t conclude for a 

decade. We identified risk mitigation measures potentially available to the 

department if it pursues future uranium transactions involving third-party 

contracts.

 92GAO-11-846.
Page 53 GAO-14-291 Department of Energy

We found that DOE did not conduct quality assurance reviews of the two 

market impact studies for which it contracted, the conclusions of which 

served as the basis for (1) secretarial determinations that certain DOE 

sales or transfers of uranium material would not have an adverse material 

impact on the domestic uranium market and (2) meeting a required 

condition of the USEC Privatization Act. Such reviews should have been 

undertaken consistent with DOE’s contracts for these studies and with 

internal DOE Information Quality Guidelines. Our review also found that 

the studies included limited information about their methodology, data 

sources, and assumptions, and we identified several shortcomings with 

the studies that raise questions about the definitive conclusions that were 

drawn. Enhanced steps by DOE to ensure the quality of these studies 

would improve confidence in the basis for secretarial determinations 

regarding findings of no adverse material impact on the domestic uranium 

market as a result of future DOE uranium sales or transfers.

Further, by removing the annual 10 percent guideline from its 2013 

Excess Uranium Inventory Management Plan, without input from industry, 

DOE has introduced uncertainty in the domestic uranium market. This 

action runs counter to DOE’s stated objectives in the updated plan to 

provide current information and enhanced transparency to the general 

public and interested stakeholders regarding the management of DOE’s 

potentially marketable uranium. It also runs counter to our 2011 

recommendation to DOE to enhance transparency in an updated excess 

uranium management plan. Without formal consultation with industry on 

these matters, members of the domestic uranium industry will have less 

insight into DOE’s future plans for uranium sales and transfers, and DOE 

decision makers may have less assurance that they are upholding their 

2013 commitment to conduct uranium transfers in a transparent manner.

We recommend that the Secretary of Energy take the following six 

actions:

(1) To ensure that DOE’s cooperative agreement and internal 

documentation supporting its June 2012 acceptance of depleted uranium 

tails are accurate and transparent, the Secretary of Energy should 

continue to review the accuracy of its documentation associated with this 

transaction and seek an independent review of this documentation by a 

third party, such as the DOE Inspector General.

(2) To ensure that DOE manages its excess uranium inventories in a 

manner that is both consistent with all applicable legal requirements and 

Recommendations for 

Executive Action
Page 54 GAO-14-291 Department of Energy

transparent, the Secretary of Energy should publicly identify the legal 

authority it relied on for each uranium transaction the department 

conducts and explain how the transaction meets the requirements of that 

authority.

(3) If DOE continues to transfer, sell, or barter depleted uranium tails 

pursuant to its general authority under the Atomic Energy Act, 

notwithstanding that the USEC Privatization Act likely prohibits such 

actions, to ensure that DOE is receiving the required compensation under 

the Atomic Energy Act and DOE policy, the Secretary of Energy should 

develop guidance for setting an appropriate method for determining the 

value of depleted uranium tails when transferring them as an asset and 

apply the method consistently and transparently, prior to conducting such 

transfers, sales, or barters.

(4) To ensure that DOE mitigates risks associated with achieving the 

expected benefits of future uranium transactions that may rely on thirdparty contracts, the Secretary of Energy should take steps to mitigate the 

risks for each uranium transaction, in accordance with federal internal 

control standards.

(5) To ensure the quality, credibility, and transparency of any future 

uranium market impact studies, the Secretary of Energy should

• conduct a rigorous and documented internal assessment consistent 

with contract provisions and the Department of Energy’s Information 

Quality Guidelines of the quality of such studies and/or have an 

independent third party conduct a peer review; and

• to the extent that market impact studies are made publicly available, 

require that studies include information on the methods, data sources, 

and assumptions used in such a way that allows others to understand, 

interpret, and evaluate the studies consistent with DOE’s Information 

Quality Guidelines.

(6) To further ensure that DOE’s future uranium transfers do not have an 

adverse material impact on the domestic uranium market, the Secretary 

of Energy should seek and consider industry input both on the amount of 

DOE sales or transfers of uranium the market can absorb annually and on 

whether there is a need to reinstitute a guideline that limits annual 

uranium sales or transfers.
Page 55 GAO-14-291 Department of Energy

We provided a draft of this report for review and comment to the 

Secretary of Energy, the Secretary of State, Executive Director for 

Operations of NRC, and the Vice President for Government Relations of 

TVA on March 14, 2014. DOE provided written comments on April 18, 

2014, which are summarized below and reproduced in appendix VII. DOE 

also provided technical comments, which we incorporated as appropriate. 

The Department of State did not provide comments. We received a 

written response from NRC on April 9, 2014, which is reproduced in 

appendix VIII. NRC noted GAO’s findings and recommendations and did 

not provide any additional technical comments. TVA did not provide 

comments on GAO’s findings and recommendations but did provide 

technical comments on April 9, 2014, which we incorporated as 

appropriate. We also provided a technical statement of facts to the 

following third parties: Energy Northwest, ERI, and USEC. We received 

technical comments from these parties and incorporated them as 

appropriate prior to providing the draft of this report to the agencies noted 

above.

In its written comments, DOE generally disagreed with our report’s 

findings and recommendations. DOE contended that various aspects of 

GAO’s legal analysis are unfounded or erroneous, although DOE noted 

that it gave careful consideration to GAO’s legal analysis and 

conclusions. We appreciate DOE’s willingness in this regard, but it has 

offered no compelling reason to reach different conclusions than in our 

report. GAO and DOE therefore continue to disagree. DOE also appeared 

to question whether GAO has legal authority to interpret federal laws and 

to evaluate whether agencies have complied with them. However, it is 

GAO’s statutory duty to assist the Congress in carrying out its oversight 

and appropriations responsibilities by, among other things, “evaluat[ing] 

the results of a program or activity the Government carries out under 

existing law” and “investigat[ing] all matters related to the receipt, 

disbursement, and use of public money.”93 These GAO duties, often 

involving interpretation of statutes and other “existing law,” are not, as 

DOE asserts, “execution” of the law.94

 9331 U.S.C. §§ 712(1), 717(b) (2012).

Interpretation of the laws at issue in 

this report ultimately would be the responsibility of the courts, not DOE or 

94DOE relies on a sentence in Bowsher v. Synar, 478 U.S. 714 (1986), taken out of 

context, to suggest that it is unconstitutional for GAO to interpret a statute. Bowsher v. 

Synar did not hold this and did not involve GAO evaluation of whether agency actions 

comply with a federal statute. 

Agency Comments 

and Our Evaluation
Page 56 GAO-14-291 Department of Energy

GAO.

95

DOE’s comments also suggested that as long as it meets the 

requirements of a general statutory authority, it is in compliance with law 

notwithstanding the existence of another more specific (and usually more 

restrictive) statutory authority. DOE may not, however, select which 

statute it will follow; rather, when two statutes are applicable to a situation 

they must be harmonized to the extent possible and if they are truly in 

conflict, the more specific provision takes precedence.

In the meantime, it remains GAO’s responsibility, using our 

expertise in accounting for the use of taxpayer money, to advise the 

Congress and the public concerning the use of appropriated funds and to 

review agency compliance with relevant laws as part of that process. It 

also remains GAO’s responsibility to make the type of recommendations 

we have made to DOE in this report, which are designed to achieve 

greater transparency and accountability in the Department’s management 

of federal uranium assets worth billions of dollars.

96

• DOE states that it continues to be authorized to transfer depleted 

uranium under provisions of the AEA.

Under this 

principle, DOE’s actions raise significant legal compliance issues:

97

 95As the U.S. Supreme Court ruled in Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 

(1803), “[i]t is emphatically the province and duty of the judicial department to say what the 

law is. Those who apply the rule to particular cases, must of necessity expound and 

interpret that rule. If two laws conflict with each other, the courts must decide on the 

operation of each."

Those provisions 

generally authorize DOE to distribute source material, which 

includes depleted uranium. However, Congress explicitly limited 

this general AEA authority when it enacted the uranium-specific 

section 3112 of the USEC Privatization Act, 42 U.S.C. § 2297h10, amending the AEA. Section 3112 states unequivocally that 

DOE “shall not . . . transfer or sell any uranium (including [but not 

limited to] natural uranium concentrates, natural uranium 

hexafluoride, or enriched uranium in any form) to any person

except as consistent with this section” (emphasis added), with no 

provision for sale or transfer of depleted uranium. We interpret this 

plain language, supported by legislative history, as likely 

96See, e.g., Preiser v. Rodriguez, 411 U.S. 475, 489- 90 (1973). See also Watt v. Alaska, 

451 U.S. 259, 266-67 (1981); Radzanower v. Touche Ross & Co., 426 U.S. 148, 153 

(1976); Morton v. Mancari, 417 U.S. 535, 550-51 (1974).

97Atomic Energy Act §§ 63, 161(m), codified as amended at 42 U.S.C. §§ 2093, 2201(m).
Page 57 GAO-14-291 Department of Energy

prohibiting DOE from selling or transferring depleted uranium. 

DOE mischaracterizes this interpretation of section 3112 as a “sub 

silentio implied repeal” of its general AEA authority but in fact our 

interpretation attempts to reconcile the two statutes and their 

legislative histories and to resolve any conflict in favor of the plain 

meaning of the more recent and more specific statute. In addition, 

as we explained in our 2008 report cited above,98 our 

interpretation respects the policy considerations and choices 

Congress made in 1996 when it considered the disposition of 

DOE’s valuable uranium in a crowded and price-sensitive market. 

It would be incongruous to read the applicable statutory provisions 

to allow DOE to sell or transfer potentially billions of dollars’ worth 

of federal assets without the scrutiny Congress gave to disposition 

of DOE’s valuable uranium in enacting section 3112. By contrast, 

DOE’s interpretation would rewrite section 3112 by reading a 

depleted uranium exception into the unqualified term “any 

uranium.” In addition, DOE’s assertion that it can sell depleted 

uranium “consistent with” section 3112 does not explain how 

disregard of section 3112 amounts to consistency.99

• DOE suggests that it does not have to comply with the specific 

requirement of section 3113 of the USEC Privatization Act, 42 

U.S.C. § 2297h-11, to seek reimbursement for the costs of 

disposing of depleted uranium, because section 3113 is not the 

“sole mechanism” under which it may accept depleted uranium. 

Rather, DOE suggests that it may rely on its general authority in 

42 U.S.C. § 2096 to acquire source material as authority to accept 

depleted uranium. Further, DOE asserts that section 3113 does 

not apply because it does not require depleted uranium to be 

characterized as low-level waste. However, the NRC has the 

authority to classify material as low-level radioactive waste and 

 98GAO-08-606R.

99Our 2008 report suggested that the Congress clarify through legislation DOE’s authority 

to transfer or sell depleted uranium. While to date, such legislation has not been enacted, 

H.R. 1999, the SAVE Act, introduced in 2013 and currently in committee, includes 

language that provides DOE with specific authority to transfer or sell depleted uranium 

tails, meeting the intent of our 2008 suggestion. In 2008, DOE declined to comment on our 

interpretation of section 3112 or on our suggestion that Congress clarify this provision. 
Page 58 GAO-14-291 Department of Energy

has classified depleted uranium accepted for disposal (which DOE 

does not dispute is what it did) as such.100

• DOE, with regard to its May 2012 transfer of depleted uranium to 

Energy Northwest, states that such transfers are authorized under 

its general AEA section 63 and 161(m) authorities. However, DOE 

asserts that it is not required to receive compensation in 

accordance with a set monetary price when it sells or transfers 

depleted uranium as a resource notwithstanding section 161(m)’s 

requirement that DOE establish “prices to be paid . . . which . . . 

will provide reasonable compensation to the Government . . ..” We

continue to maintain that the intangible benefits cited by DOE as a 

justification for this transfer did not amount to a “price.” We note 

further that DOE’s interpretation ignores section 161(m)’s 

requirement that the price must be paid by the recipient of the 

depleted uranium. DOE does not deny that it received nothing 

from Energy Northwest, however, and does not explain how the 

department complied with the AEA.

 

In its comments, DOE also dismissed our finding that it did not obtain a 

determination from the president, required by USEC Privatization Act 

section 3112(d)(2)(A), that the specific LEU it transferred to USEC in 

March 2013 was not needed for national security purposes. DOE 

confirms that it used the most recent Nuclear Weapons Stockpile Plan 

(NWSP), dated July 2011, as a proxy for such a determination and that 

the LEU in question was not in its possession at the time that that plan 

was signed by the president. DOE states that its reliance on the July 2011 

plan followed its standard practice to rely on the most recent NWSP but 

does not explain how in this case, a document predating DOE’s 

possession of the material in question could speak to whether that 

material was needed for national security. Nor does DOE explain how, in 

general, the use of the NWSP meets the requirements of section 

3112(d)(2)(A). Accordingly, we see no reason to change our position that 

the department did not comply with the requirement to obtain a 

presidential determination.

Finally, DOE generally disagreed with our six recommendations that were 

broadly aimed at improving the transparency of DOE’s uranium 

transactions. We believe transparency is a fundamental tenet of good 

 10042 U.S.C. § 2021b(9). See NRC Memorandum and Order, filed in Louisiana Energy 

Services, L.P., Docket No. 70-3192-ML, CLI-05-05, at 17 (Jan. 18, 2005).
Page 59 GAO-14-291 Department of Energy

government and that our recommendations support actions needed to 

enhance DOE’s transparency. In 2009, the president and OMB issued 

memos stating that “transparency promotes accountability and provides 

information for citizens about what the Government is doing...and that the 

Administration will take appropriate action, consistent with law and policy, 

to disclose information rapidly in forms that the public can readily find and 

use.”101

• Concerning our first recommendation that the Secretary of 

Energy clarify the total amount of tails it intended to accept 

from USEC as a part of its June 2012 tails acceptance, and, if 

necessary, amend its cooperative agreement with USEC to 

ensure the department is not required to accept additional 

tails liability at a later date, in its response to our draft report, 

DOE did not provide an explanation regarding the conflicting 

amount of tails reported in various documents supporting this 

transaction. Instead, DOE simply stated that it had accepted 

38,317 metric tons of depleted uranium hexafluoride from 

USEC and that its cooperative agreement with USEC did not 

require amendment. However, this quantity of tails further 

differs from the documentation DOE previously provided and 

which we assessed about this tails transaction—including its 

summary of the material transfer forms DOE filed with the 

NRC. This uncertainty regarding the amount of tails reinforces 

the need for additional clarification from DOE. If the figures in 

DOE’s comments on our draft report are accurate, then other 

documentation DOE provided to us during the course of our 

review indicates that DOE has significantly underestimated its 

liability cost for accepting the tails in its internal financial 

To facilitate transparency, we believe it is incumbent upon DOE 

to provide public information on the costs and risks of, market impact for, 

and legal authorities for its uranium transactions. Furthermore, we find it 

difficult to reconcile DOE’s unwillingness to improve publicly available 

information about its uranium transactions with the stated objectives of 

DOE’s 2013 uranium management plan, which seeks to provide current 

information and enhanced transparency to the general public and 

interested stakeholders regarding DOE’s management of its uranium 

inventory. Our response to DOE’s comments on our six recommendations 

is as follows:

 101Transparency and Open Government, Memorandum for the Heads of Executive 

Departments and Agencies, 74 Fed. Reg. 4,685 (Jan. 21, 2009); Office of Management 

and Budget, Open Government Directive, M-10-06 (2009). 
Page 60 GAO-14-291 Department of Energy

analysis and that DOE’s summary of documentation required 

by NRC regulation tracking this nuclear materials transaction 

is incorrect. We modified our report to reflect how DOE’s 

comments raise further questions about the amount of tails 

involved in the June 2012 tails acceptance. We revised our 

recommendation to state that DOE should continue to review 

the accuracy of its documentation associated with this 

transaction and seek an independent review of this 

documentation by a third party, such as the DOE Inspector 

General. 

• In response to our second recommendation that the 

Secretary of Energy publicly identify the legal authority it 

relied on for each uranium transaction the department 

conducts and explain how the transaction meets the 

requirements of that authority, DOE stated that it will comply 

with all legal requirements for future transactions, but will not 

publicly document the authorities it relied on because doing 

so goes beyond what is legally required and would disclose 

information “traditionally...protected as attorney work product 

or privileged pre-decisional documents.” DOE misconstrues 

our recommendation. We did not recommend that DOE 

release attorney work product, which is information prepared 

in advance of litigation,102

 102Fed. R. Civ. P. 26(b)(3).

or any internal legal memoranda 

that may reveal pre-decisional deliberations regarding which 

legal authority it believes authorized its transaction. Rather, 

we simply recommended public notice of DOE’s final decision 

about which legal authority it relied on and a brief explanation 

of how the department complied with individual requirements 

of that authority. For example, such explanations could be 

included in documents DOE already prepares concerning 

uranium transactions—such as advance congressional 

notifications of uranium transactions required by the 

department’s fiscal year 2014 appropriation. Since, as noted 

above, DOE implies that it may select which legal authority to 

follow in conducting uranium transfers, documenting which 

authority DOE relied on would at least make transparent the 

conditions with which DOE believes that transaction must 

comply. 
Page 61 GAO-14-291 Department of Energy

• In commenting on our third recommendation that the 

Secretary of Energy develop guidance for setting an 

appropriate method for determining the value of depleted 

uranium tails when transferring them as an asset and apply 

the method consistently and transparently prior to conducting 

such transfers, sales, or barters, DOE stated that it is not 

required to establish guidance or a pricing policy for depleted 

uranium, and to do so would hinder DOE’s ability to maximize 

the value received by the government in a given transaction. 

Again, DOE misconstrues our recommendation. We did not 

recommend that DOE develop a pricing policy, but rather that 

DOE document a consistent method for valuing depleted 

uranium tails when transferring them as an asset in the 

context of a transaction. In doing so, our recommendation 

acknowledges (a) that there may be considerations to DOE 

other than price that figure into the overall value of a 

transaction involving tails, and (b) that different circumstances 

may warrant utilization of different valuation methods. Our 

recommendation does not preclude DOE from establishing a 

valuation method that can be tailored to consider these 

nuances, but it does seek to ensure that DOE’s actions are 

consistent across transactions. Furthermore, it is our view 

that any valuation method established by DOE would seek to 

maximize the value received by the government.

• Regarding our fourth recommendation that the Secretary of 

Energy should take steps to mitigate the risks for each 

uranium transaction in accordance with federal internal 

control standards, DOE stated that the department will take 

steps to mitigate risks where appropriate or feasible, but that 

DOE cannot control the actions of third parties and must not 

attempt to exert control or influence third parties in a way that 

establishes an agency or apparent agency relationship.103

 103DOE’s reference to an agency or apparent agency relationship, as it explains further in 

its technical comments, is a reference to our 2011 report, GAO-11-846, in which we 

concluded that a uranium transaction with USEC constituted a sale through an agent, 

rather than a barter, and that DOE was required to deposit the proceeds of that sale into 

the Treasury. There is no prohibition on DOE conducting sales through an agent.

DOE’s separately-provided technical comments characterize 

the nature of the agreements among other parties to the May 

2012 tails transaction, which it repeatedly told us it had not 
Page 62 GAO-14-291 Department of Energy

seen or read. These technical comments acknowledge the 

possibility, however remote, that while the transaction could 

fall apart and fail to produce its intended result, the 

transaction would still result in an increased volume of 

domestic-origin LEU on the market. But DOE neglects to 

mention that, in the event this occurs, it has no contractual 

remedy to ensure that the government indeed would receive 

reasonable value for the material it transferred to initiate the 

transaction. We continue to believe that DOE did not take 

available steps to mitigate identified risks of the May 2012 

tails transaction, such as the potential remedies we 

suggested—a right of first refusal for the LEU. As such, we 

continue to believe that DOE should pay special attention to 

the steps it can take to mitigate the risks associated with 

third-party contracts.

• In response to our fifth recommendation that DOE conduct a 

rigorous and documented internal assessment consistent with 

contract provisions and DOE’s Information Quality Guidelines

of the quality of such studies and/or have an independent 

third party conduct a peer review, DOE stated that it will 

continue to consider the applicability of the Information 

Quality Guidelines to independent analyses of the potential 

market impact of the proposed transactions, and take 

appropriate steps if applicable. DOE did not comment on the 

second part of our recommendation—that consistent with 

DOE’s Information Quality Guidelines, DOE require that 

studies include information on the methods, data sources, 

and assumptions used in such a way that allows others to 

understand, interpret, and evaluate the studies. We continue 

to believe that DOE should require that its studies contain 

such information to ensure their quality, credibility, and 

transparency.

• Concerning our sixth recommendation that the Secretary of 

Energy seek and consider industry input both on the amount 

of DOE sales or transfers of uranium the market can absorb 

annually and on whether there is a need to reinstitute a 

guideline that limits annual uranium sales or transfers, DOE 

stated that it has met in the past and continues to meet with 

industry parties and is open to receiving related information 

under advisement as it makes future plans. However, we do 

not believe that DOE’s position is consistent with the 

Secretary of Energy’s 2008 Policy Statement on the 
Page 63 GAO-14-291 Department of Energy

transparent conduct of uranium transactions. Further, DOE’s 

apparent hesitancy to be transparent about the legal 

justifications for its uranium transactions contribute to overall 

concerns about DOE’s transparency in conducting uranium 

transactions.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the appropriate 

congressional committees, Secretary of Energy, and other interested 

parties. In addition, this report will be available at no charge on the GAO 

website at http://www.gao.gov.

If you or your staff members have questions about this report, please 

contact David Trimble at (202) 512-3841 or trimbled@gao.gov or Susan 

Sawtelle at (202) 512-6417 or sawtelles@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. Key contributors to this report are listed in 

appendix VIV.

David C. Trimble

Director, Natural Resources and Environment

Susan D. Sawtelle

Managing Associate General Counsel
Appendix I: Timeline Showing DOE’s Uranium 

and Financial Transactions Involving USEC 

Since 2012

Page 64 GAO-14-291 Department of Energy

Appendix I: Timeline Showing DOE’s 

Uranium and Financial Transactions 

Involving USEC Since 2012
Appendix II: Scope and Methodology

Page 65 GAO-14-291 Department of Energy

The objectives of our review were to assess (1) the details of the uranium 

transactions that the Department of Energy undertook in 2012 and 2013 

involving USEC Inc., (2) any legal concerns that may exist with respect to 

these uranium transactions, (3) any other issues that may be raised by 

these uranium transactions, and (4) the extent to which DOE assessed 

the market impact of these uranium transactions.

For our first objective regarding the details of the uranium transactions 

that DOE undertook in 2012 and 2013 involving USEC, we reviewed and 

analyzed DOE documents pertaining to all transactions that the 

department undertook in 2012 and 2013 involving USEC. These included 

contracts, cooperative agreements, internal memos and letters, public 

notices, internal analyses, budget documents, secretarial determinations, 

and fact sheets. We also reviewed USEC’s corporate financial filings with 

the U.S. Securities and Exchange Commission and contracts between 

other parties that were related to transactions that DOE undertook 

involving USEC. In addition, we interviewed officials at DOE’s 

headquarters in Washington, D.C., and from the Portsmouth/Paducah 

Project Office in Paducah, Kentucky, as well as, officials from DOE’s 

Office of Nuclear Energy, Loan Guarantee Program Office, Office of 

Environmental Management, and the National Nuclear Security 

Administration’s (NNSA) Tritium Readiness Subprogram Office regarding 

the details of and purposes for conducting its uranium transactions. We 

also interviewed officials from DOE’s Oak Ridge Office to learn about the 

Cooperative Agreement for Research, Development, and Demonstration 

(RD&D) of the American Centrifuge technology and the requirements and 

process for de-leasing the Paducah Gaseous Diffusion Plant (GDP) 

facilities following USEC’s decision to cease enrichment at this facility. 

Moreover, we interviewed USEC officials involved with the American 

Centrifuge project in Piketon, Ohio, and at the Paducah GDP in Paducah, 

Kentucky, as well as senior USEC officials, including its Chief Financial 

Officer, to learn more about the details of DOE’s uranium transactions. In 

addition, we interviewed officials from the Nuclear Regulatory 

Commission (NRC), Tennessee Valley Authority (TVA), and Energy 

Northwest. Using this information, we identified the number and types of 

uranium transactions that DOE undertook in 2012 and 2013. We then 

summarized the details of each transaction, noting the amount of funds 

and uranium (or enrichment services) transferred, as well as the 

Appendix II: Scope and Methodology
Appendix II: Scope and Methodology

Page 66 GAO-14-291 Department of Energy

estimated value of the material transferred,1

For our second objective regarding any legal concerns that may exist with 

respect to these uranium transactions, we reviewed statutes governing 

DOE’s uranium activities, including the Atomic Energy Act and USEC 

Privatization Act, regulations, legislative history, and other sources of law, 

and assessed DOE’s compliance with key statutes, reviewed our previous 

related work, examined contracts and other documents associated with 

these transactions, and obtained and reviewed key internal agency 

memorandums, including secretarial determinations that uranium 

transactions would have no adverse material impact on the domestic 

uranium market. Also, we interviewed senior officials from DOE, 

Department of State, TVA, and Energy Northwest.

and the purposes for those 

transactions.

For our third objective regarding any other issues that may be raised by 

these uranium transactions, we reviewed key agency documents and 

interviewed DOE and contractor officials from NNSA’s Y-12 National 

Security Complex in Oak Ridge, Tennessee, and Office of Fissile 

Materials Disposition regarding the potential alternatives that DOE 

considered, including using downblended highly enriched uranium (HEU) 

to provide unobligated low-enriched uranium (LEU) for tritium production 

instead of participating in the May 2012 tails transfer. Further, we 

interviewed senior officials from DOE’s Office of the Chief Financial 

Officer and NNSA’s Office of Management and Budget to discuss 

valuation methodologies. In addition, we reviewed DOE’s prior tails 

valuations and information pertaining to its former pricing policy. In 

addition, we interviewed senior officials from all four parties to the May 

2012 tails transfer (DOE, USEC, TVA, and Energy Northwest). We also 

reviewed internal memos and other agency documents to determine the 

risks that DOE had identified for the May 2012 tails transfer. In addition, 

 1

We did not did not attempt to independently verify the reliability of DOE’s estimates for 

the value of goods transferred between the agency and other parties because the amount 

and quality of data on how estimated costs and benefits were determined varied so greatly 

between the transactions. As a result, data on DOE’s reported estimated costs and 

benefits are of undetermined reliability.
Appendix II: Scope and Methodology

Page 67 GAO-14-291 Department of Energy

we reviewed the Standards for Internal Control in the Federal 

Government regarding practices for risk identification and mitigation.2

For our fourth objective regarding the extent to which DOE assessed the 

market impact of these uranium transactions, we analyzed two market 

impact studies that DOE contracted with ERI—a nuclear fuel consulting 

firm—an April 2012 study,3 and a January 2013 study.4

 2

In addition, we 

interviewed the principal author of the ERI studies and conducted followup correspondence with that ERI official. We also corresponded with 

DOE’s Contracting Officer and Contracting Officer’s Representative and 

interviewed officials from DOE’s Office of Nuclear Energy, which initiated 

the contract for the study from ERI. Moreover, we interviewed 

representatives from the uranium mining, conversion, and enrichment 

industries—including with Uranium Producers of America, an organization 

that promotes the viability of the domestic uranium industry, as well as 

with Uranium One, Cameco, Uranium Resources Inc., Uranium Energy 

Corp., Energy Fuels Inc., and ConverDyn—and we reviewed annual 

reports for domestic uranium producers. We also interviewed an official 

from TradeTech, a consulting company that specializes in nuclear fuel 

markets regarding the uranium market in general. Further, we reviewed 

determinations made by the Secretary of Energy stating that DOE’s 

uranium transfers would not have an adverse material impact on the 

domestic uranium market; DOE’s contracts with and task assignments for 

ERI; internal DOE memos and e-mails regarding evaluations of ERI’s 

contract performance; as well as DOE’s Information Quality Guidelines, 

which set forth quality assurance steps and procedures to ensure the 

quality and objectivity of information that DOE makes publicly available.

GAO/AIMD-00-21.3.1. These standards provide an overall framework for establishing 

and maintaining internal control and for identifying and addressing major performance and 

management challenges and areas at greatest risk of fraud, waste and abuse, and 

mismanagement.

3

Energy Resources International, Inc., Quantification of the Potential Impact on 

Commercial Markets of Introduction of DOE Excess Uranium Inventory in Various Forms 

and Quantities During Calendar Years 2012 through 2033 (Washington, D.C.: Apr. 23, 

2012).

4

Energy Resources International, Inc., Quantification of the Potential Impact on 

Commercial Markets of Introduction of the Enrichment Services Component of DOE Low 

Enriched Uranium Inventory During Calendar Year 2013 (Washington, D.C.: Jan. 28, 

2013).
Appendix II: Scope and Methodology

Page 68 GAO-14-291 Department of Energy

To develop a general understanding of U.S. nuclear cooperation 

agreements and how peaceful use restrictions affect the goods and 

services that may be used for military or national security purposes, we 

interviewed officials from the Department of State’s Bureau of 

International Security and Nonproliferation and Office of the Legal Advisor 

and NNSA’s Office of Nonproliferation and International Security. In 

addition, we reviewed two relevant studies from the Congressional 

Research Service.5

We conducted this performance audit from January 2013 to May 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 5

CRS, Peaceful Use Restrictions on Uranium Enriched at the Urenco Uranium Enrichment 

Facility (Washington, D.C., May 21, 2012). CRS, Potential Sources of Nuclear Fuel for 

Tritium Production (Washington, D.C., May 15, 2012).
Appendix III: Summary of DOE’s Uranium and 

Financial Transactions Involving USEC Since 

2012

Page 69 GAO-14-291 Department of Energy

a

For the purposes of our review, uranium transfers involve the exchange of natural, enriched, or 

depleted uranium, or uranium enrichment services between DOE and another party.

Appendix III: Summary of DOE’s Uranium 

and Financial Transactions Involving USEC 

Since 2012
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 70 GAO-14-291 Department of Energy

As part of GAO’s review of four recent uranium transactions by the 

Department of Energy (DOE), we examined the consistency of these 

transactions with federal law governing uranium transactions. For the 

reasons discussed below, we found as follows:

Regarding DOE’s May 2012 depleted uranium tails transfer, we found 

that, under its plain meaning, the USEC Privatization Act likely prohibited 

DOE from making this transfer. In addition, DOE did not comply with the 

requirements of the Atomic Energy Act (AEA) provision upon which it 

solely relied for this transaction, in particular, with the requirement that 

DOE charge the tails recipient a “price” that is established to be 

nondiscriminatory and that provides reasonable compensation to the 

government. In fact, DOE did not charge the tails recipient any price at all. 

Regarding the March 2012 separative work units (SWU) procurement, we 

found that DOE did not properly take into account its transfer of natural 

uranium in subsequent market impact studies. 

Regarding DOE’s acceptance of depleted uranium tails from USEC in 

both the March 2012 SWU procurement and the June 2012 tails 

acceptance, we found that DOE failed to apply the governing statutory 

provision and consequently undercharged USEC Inc. (USEC) by an 

estimated $9 million in one of the transactions. 

Finally, regarding DOE’s transfer of low-enriched uranium (LEU) to USEC 

in March 2013, we found that DOE did not obtain a presidential 

determination that the material is not necessary for national security 

needs, as required by the USEC Privatization Act.

I. DOE Likely Lacked Authority to Transfer Depleted Uranium Tails in 

May 2012, and Even If DOE Had the Authority It Asserts, It Did Not 

Charge the Recipient a Price as Required

A. By Its Plain Meaning, the USEC Privatization Act Prohibits DOE from 

Transferring Depleted Uranium

On May 15, 2012, DOE entered into an agreement with Energy Northwest 

providing for, among other things, DOE’s transfer to Energy Northwest of 

between 9,082 and 9,156 metric tons of uranium (MTU) of unobligated 

Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Introduction and Summary 

of Conclusions

Analysis
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 71 GAO-14-291 Department of Energy

depleted uranium hexafluoride with a minimum average assay of 0.44% 

(so-called “high-assay tails”) over the period May 15, 2012 to April 30, 

2013.1 As we have reported, section 3112(a) of the USEC Privatization 

Act2 likely prohibits DOE from transferring depleted uranium tails,3 and 

thus we found that DOE’s 2012 transfer of depleted uranium tails to

Energy Northwest was likely unauthorized. As we noted in 2008, DOE 

has general authority to distribute “source material” such as depleted 

uranium under sections 63 and 161(m) of the AEA, 42 U.S.C. §§ 2093 

and 2201(m).4 Congress explicitly limited this general authority in 1996, 

however, in section 3112 of the USEC Privatization Act. As we previously 

explained:5

[I]n 1996, Congress enacted section 3112 of the USEC Privatization 

Act, which limits DOE’s general authority, under the AEA or otherwise, 

to sell or transfer uranium. In particular, section 3112 explicitly bars 

DOE from selling or transferring “any uranium”—including but not 

specifically limited to certain forms of natural and enriched uranium—

”except as consistent with this section.” Section 3112 then specifies 

conditions for DOE’s sale or transfer of natural and enriched uranium 

of various types, including conditions in section 3112(d) for sales of 

natural and low-enriched uranium from DOE’s inventory. . . . 

Nowhere, however, does section 3112(d) or any other provision of 

section 3112 . . . provide conditions for DOE to transfer or sell 

 1

See DOE and Energy Northwest, “Agreement Between the US Department of Energy 

and Energy Northwest for the Transfer of Depleted Uranium Hexafluoride and the Storage 

of Low Enriched Uranium” (May 15, 2012). DOE also agreed to accept further depleted 

uranium tails (“residual tails”) resulting from Energy Northwest’s enrichment of the highassay tails it received from DOE under the agreement, and DOE agreed to provide certain 

ancillary services, such as delivery and storage, on a cost reimbursement basis.

2

USEC Privatization Act of 1996, Pub. L. No. 104-134, § 3112(a), 42 U.S.C. §§ 2297h10(a) (2014). All references herein to the USEC Privatization Act are as amended.

3

GAO-08-606R. See also GAO, Nuclear Material: Several Potential Options for Dealing 

with DOE’s Depleted Uranium Tails Could Benefit the Government,GAO-08-613T 

(Washington, D.C.: Apr. 3, 2008); GAO-11-752T; GAO-11-846.

4

Both DOE and GAO have found that depleted uranium qualifies as “source material”

under the AEA. See DOE, Scott Harris, General Counsel, GC Guidance on Barter 

Transactions Involving DOE-Owned Uranium at 1, note 2 (June 16, 2010); GAO-08-606R 

at 15.

5

Legislation has been enacted concerning the USEC Privatization Act since GAO’s 2008 

report (GAO-08-606R), but no changes have been made that would compel a change to 

GAO’s prior interpretation of section 3112.
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 72 GAO-14-291 Department of Energy

depleted uranium. Because section 3112(a) states that DOE may not 

“transfer or sell any uranium. . . except as consistent with this section”

and because no other part of section 3112 sets out the conditions for 

DOE to transfer or sell depleted uranium, we believe that, under rules 

of statutory construction, DOE likely lacks authority to sell the tails. . . . 

It would also be incongruous to allow DOE to sell or transfer

potentially billions of dollars’ worth of federal assets without the 

scrutiny Congress gave to disposition of DOE’s valuable uranium in 

enacting section 3112.6

DOE disagrees with our finding that the USEC Privatization Act likely 

restricts its authority to dispose of depleted uranium. DOE does not 

believe that the USEC Privatization Act amended the department’s AEA 

authority by creating a blanket prohibition on uranium transfers or sales 

except as authorized by the USEC Privatization Act. Rather, in DOE’s

view, section 3112(a) simply requires that any uranium transfers or sales 

be “consistent with” section 3112 conditions and because the statute 

does not contain conditions explicitly pertaining to depleted uranium, 

DOE’s sale and transfer of depleted uranium under its AEA authority is 

“consistent” with the USEC Privatization Act. With respect to DOE’s 

specific 2012 transfer of depleted uranium to Energy Northwest, the 

department’s documentation indicates it relied on the AEA alone as 

authority for this transaction, principally AEA section 63 authorizing 

transfer of source material such as high-assay tails. AEA section 161(j), 

also identified as a possible source of authority by DOE, in fact does not 

apply to the tails that DOE transferred to Energy Northwest.

7

B. DOE Did Not Comply With Key Requirements of the AEA Provision It 

Relied Upon 

Even assuming that the USEC Privatization Act did not prohibit DOE from 

transferring depleted uranium to Energy Northwest and DOE retained its 

general authority under the AEA to make the transfer (which we do not 

 6

GAO-08-606R at 5, 17 (emphasis added). DOE declined to comment on these legal 

conclusions or provide its own legal position in its response to our 2008 report. DOE 

asserted that it had previously transferred depleted uranium tails under its AEA authority. 

7

AEA section 161(j), 42 U.S.C. § 2201(j), authorizes DOE “[to] make such disposition as it 

may deem desirable” of radioactive material if the department believes it is in the interest 

of national security. However, section 161(j) by its terms does not apply to property 

furnished to licensees in accordance with the provisions of subsection 161(m), as DOE 

asserts it has done here.
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 73 GAO-14-291 Department of Energy

believe it did), DOE did not comply with key AEA statutory conditions. Its 

transfer to Energy Northwest therefore was unauthorized for this reason 

as well. 

A transfer to Energy Northwest would be governed by AEA section 

63(a)(3), which authorizes distribution of source material for use under a 

commercial AEA section 103 license (Energy Northwest is a power utility 

holding a section 103 license from NRC).8

establish prices to be paid by licensees for material or services to be 

furnished by [DOE] pursuant to this subsection, which prices shall be 

established on such a nondiscriminatory basis as, in the opinion of 

[DOE], will provide reasonable compensation to the Government for 

such material or services and will not discourage the development of 

sources of supply independent of [DOE].

In contrast to distributions 

authorized under AEA sections 63(a)(1), (2) and (4) for which DOE “may”

make a “reasonable charge” pursuant to AEA section 63(c), section 63(c) 

requires DOE to impose a charge for transfers under AEA section 

63(a)(3): DOE “shall make a reasonable charge determined pursuant to 

section 161(m)” for source material distributed under section 63(a)(3) 

(emphasis added). Section 161(m), in turn, requires DOE to:

9

AEA sections 63(c) and 161(m), then, for depleted uranium such as DOE 

furnished to licensee Energy Northwest, would require DOE to: (1) make 

a reasonable charge, (2) based on an established price that will be paid 

by the recipient licensee, (3) which will provide reasonable compensation 

to the U.S. government, and (4) which price is nondiscriminatory.

DOE failed to satisfy any of these requirements. First, DOE did not make 

any charge to Energy Northwest for the uranium tails in its agreement. In 

addition, DOE documents we reviewed show the department’s legal 

analysis neither acknowledged the requirement to impose a “reasonable 

charge” nor asserted that DOE complied with the requirement of AEA 

section 63(c) to impose such a charge.

 8

See Energy Northwest, Columbia Generating Station License Renewal Application at 

p.1.1-6 (January 2010); Renewed License No. NPF-21 Amendment No. 225, at 2-3 (May 

22, 2012).

9

AEA §161(m), 42 U.S.C. § 2201(m) (2014) (emphasis added).
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 74 GAO-14-291 Department of Energy

Second, DOE did not meet the requirement of section 161(m) to 

“establish a price” to be paid by the recipient. Although the AEA does not 

define the term “price,”10 DOE’s consistent practice in establishing prices 

under this provision has been to set them as standard, monetary charges. 

DOE historically maintained and revised from time to time a pricing 

schedule for the supply of uranium, including depleted uranium, in 

conjunction with its pricing policy for its provision of enrichment services 

and enriched uranium when DOE operated the Gaseous Diffusion Plants 

(GDP).11

The price for uranium depleted in the isotope U-235 (tails) will be 

established in consideration of the market value of the material at the 

time of sale, or on a negotiated basis if market value cannot 

reasonably be determined.

In its last such pricing policy published in the Federal Register in 

1982, DOE established a price for depleted uranium as follows:

12

Furthermore, although there is no pricing policy for uranium currently in 

effect, according to DOE officials, DOE regulations in effect for non 

 10The Supreme Court has discussed prices in the context of uranium sales. See U.S. v. 

Eurodif S. A., 555 U.S. 305 (2009) (discussing certain regulated uranium sales as 

including those with purchase prices in cash alone or cash combined with a commodity).

11See, e.g., DOE, “Uranium Hexafluoride; Base Charges, Use Charges, Special Charges, 

Table of Enriching Services, Specifications and Packaging,” 47 Fed. Reg. 17,110 (April 

21, 1982). See also 23 Fed. Reg. 4813 (June 28, 1958) (pricing policy of DOE 

predecessor Atomic Energy Commission); AEC, “Uranium Hexafluoride: Base Charges, 

Use Charges, Special Charges, Table of Enriching Services, Specifications, and 

Packaging,” 32 Fed. Reg. 16,289 (Nov. 29, 1967) (stating “[t]he base charge for depleted 

uranium requested without a specification as to assay is $2.50 per kilogram V. The assay 

furnished by the AEC in this case will normally be in the neighborhood of 0.20 wt. percent 

U235, of which large amounts are available.”).

1247 Fed. Reg. at 17,111.
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 75 GAO-14-291 Department of Energy

uranium materials and services under the same statutory provision, AEA 

section 161 define price as a monetary amount.13

Thus, in instances where DOE has interpreted section 161(m)—historical 

regulations applicable to uranium and current regulations applicable to 

non uranium items—DOE has established and published a standard 

pricing schedule in monetary terms or uniform criteria, such as 

commercial value or market value, that are to be applied in individual 

transactions to establish charges to recipients.

In the May 2012 agreement, however, DOE did not “establish a price to 

be paid by the licensee [recipient]” Energy Northwest. DOE documents 

we reviewed show the agency neither asserted it had established a price, 

nor acknowledged the statutory requirement that it do so. Instead of 

addressing this requirement or the requirement to make a reasonable 

charge, DOE documents show that the agency justified the agreement on 

its assertion that it would receive intangible benefits which amounted to 

 13See, e.g.,10 C.F.R. § 1009.3(a) (2014) (DOE policy is that the price or charge for 

materials and services sold to persons and organizations outside the federal government 

“shall be the Government’s full cost for those materials and services, unless otherwise 

provided in this part.”). Exceptions to this policy may be authorized but “[p]rices and 

charges for materials and services sold pursuant to 42 U.S.C. § 2201 shall be either the 

full cost recovery price or the commercial price, whichever is higher, except that lower 

prices and charges may be established by the department if it is determined that such 

lower prices and charges will provide reasonable compensation to the Government and 

will not discourage the development of sources of supply independent of the DOE of such 

material.” 10 C.F.R. § 1009.3(b)(2) (2014) (emphasis added). See also DOE, Order 522.1 

at 5 § 5(c) (Nov. 3, 2004). The regulation and order indicate that standard price and 

charge lists will be developed.
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 76 GAO-14-291 Department of Energy

“reasonable compensation” to the government.14 Under principles of 

statutory construction, however, “reasonable compensation” would have a 

broader meaning than “reasonable charge.”15 Whereas “compensation” is 

“something given or received as an equivalent for services,” “charge”

typically focuses on a monetary price or fee: “expense or cost,” “a fee or 

price charged.”16

Third, because DOE did not establish or impose any price paid by the 

recipient for the depleted uranium, DOE cannot satisfy the requirement 

that such price provide “reasonable compensation” to the government. A 

finding that, from a series of transactions, DOE received intangible 

benefits amounting to reasonable compensation does not meet the 

statute’s requirement to charge a price to the recipient of the source 

material—here, Energy Northwest—and a price that itself provides 

reasonable compensation. Even if the intangible benefits could be viewed 

 14According to DOE, it would receive intangible benefits from a series of transactions of 

which the May 2012 transfer of high-assay tails to Energy Northwest was one. The other 

transactions, according to DOE, were Energy Northwest’s agreement with USEC to enrich 

the uranium to LEU, Energy Northwest’s agreement with TVA for future deliveries of the 

unobligated LEU, and the DOE-NNSA agreement with TVA for the production of tritium. 

The intangible benefits identified by DOE include providing a source of unobligated LEU 

for TVA’s use in the tritium program, projected reduced rates for Bonneville Power 

Administration ratepayers, and the deferred and avoided costs for DOE’s Office of 

Environmental Management at the Paducah GDP associated with USEC’s continued 

operations of the plant for an additional year. By contrast, in 2005, DOE conducted a pilot 

project to enrich depleted uranium in which DOE did charge a price, according to a DOE 

Memorandum for the Deputy Secretary. DOE entered into agreements with Bonneville 

Power Administration and Energy Northwest, which states that DOE would transfer 5,720 

MTU as DUF6 of depleted uranium tails to Bonneville Power Administration in 2005-2006 

and Energy Northwest, on behalf of Bonneville, would pay DOE $10,450 per cylinder 

successfully enriched. 

15See, e.g., Walters v. Metropolitan Educational Enterprises, Inc., 519 U.S. 202 (1997) (it 

is a fundamental principle of statutory construction that words in a statute must be given 

their ordinary or natural meaning whenever possible).

16Random House Dictionary available at www.dictionary.com (2013).
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 77 GAO-14-291 Department of Energy

as reasonable compensation,17 these benefits did not come from Energy 

Northwest. Energy Northwest is expected to sell some of the resulting 

LEU to TVA, which in turn will use it in its performance of its contract for 

tritium production and charge DOE accordingly for the use of the 

material.18

Finally, because DOE did not establish any price paid by the recipient for 

the depleted uranium, DOE cannot satisfy the requirement of establishing 

a nondiscriminatory price. The statute requires DOE to set a price that is 

nondiscriminatory as to other nuclear power plants or other potential 

users of the tails. We believe that “discriminatory” in this context has its 

The statute requires that the “price” paid by the licensee

provide reasonable compensation to the government and any benefits 

expected to be received by DOE are too attenuated to constitute 

“reasonable compensation” from Energy Northwest. While DOE may 

receive intangible benefits from these transactions and such benefits may 

have been relevant to DOE’s decision to enter into the transactions, they 

do not constitute a price or a charge paid by Energy Northwest providing 

reasonable compensation to the government.

 17DOE cites several cases holding that “compensation” can include intangible benefits. 

We do not believe these cases are relevant in the current context. First, the statute or 

regulation at issue in those cases interpret the word “compensation” alone, not, as in AEA 

section 161(m) involved here, when there is a requirement to establish a price which in 

turn provides reasonable compensation. Second, the cases involve restrictions to be 

enforced by the agency rather than conditions imposed on the agency. See, e.g., Regents 

of the University of California v. Public Employment Relations Board, 485 U.S. 589 (1988) 

(interpreting the private hands exception to the Private Express Statute which prohibited 

private mail carriage, 18 U.S.C. § 1696(c); where the exception requires that the mail 

carriage be “without compensation,” Court held that “compensation” should be read by its 

normal meaning and not restrictively, explaining “[i]f we read the exception to include any 

private carriage so long as no direct payment is made, it quickly would swallow the rule.”); 

Clair Aero, Inc. v. Nat. Transp. Safety Board, 2007 WL 754789 (D.C. Cir. 2007) 

(unpublished case interpreting Federal Aviation Administration regulation, 14 C.F.R. § 

119.5(g), requiring commercial operators who carry persons or property by aircraft for 

compensation or hire to hold a valid certificate, where an operator without a certificate 

claimed to have provided a complimentary flight, that is, without compensation). The 

intangible benefits provided by sources other than the price paid by the recipient could, 

perhaps, be relevant to DOE’s decision as to whether to enter into the transaction, but 

they are not relevant to the statute’s requirements that DOE set a price and that the price 

itself provide reasonable compensation. 

18Energy Northwest officials told us that, because it holds title to the LEU resulting from 

re-enrichment, it could use the LEU in any way it chooses, including selling or leasing it. 

Energy Northwest is obligated only to provide TVA with unobligated LEU according to the 

schedule in their agreement. DOE is not a party to the Energy Northwest-TVA agreement.

See Interagency Agreement Between DOE and TVA for Irradiation Services (originally 

executed Dec. 21, 1999), as amended through modification 26 (May 15, 2012).
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 78 GAO-14-291 Department of Energy

plain meaning of “characterized by or showing prejudicial treatment.”19

Energy Northwest deemed it financially attractive to obtain the tails from 

DOE, and documents show that DOE was generally aware that other 

entities may also have wanted an opportunity to buy the high-assay 

tails.20 The statute does not expressly require that DOE offer the tails to 

other parties, but it does require DOE to establish the price in a 

nondiscriminatory manner, which DOE did not do. For example, 

subsequent to the May 2012 agreement with Energy Northwest, DOE 

sought buyers for depleted uranium, repeatedly using the word “sale” to 

describe the prospective agreements, and requiring payment in the form 

of natural uranium. Specifically, the DOE Request for Offers for the 

purchase of a portion of its depleted uranium inventory stated that DOE 

“will evaluate the form and method of payment to the department for the 

UF6 inventories,” and “DOE will only accept payment in the form of 

natural uranium, which must be provided at the time of the annual 

transfers of the UF6 inventories.”21 After reviewing the responses to this 

solicitation, DOE announced, in November 2013 that the department was 

in negotiations to “sell” the depleted uranium hexafluoride inventory.22

 19Random House Dictionary, available at www.dictionary.com (2013).

The actions taken by DOE in 2013 to sell other depleted uranium and its 

requirement to be paid in natural uranium stand in contrast to its 

agreement with Energy Northwest, which involved no price at all, 

suggesting that DOE may have discriminated among the parties in its 

pricing approach.

20For example, in 2008 DOE received a proposal from Urenco, Inc. to purchase the tails. 

DOE declined to consider the proposal stating, among other things, that alternatives may 

be available to ensure that the price paid for the uranium is not less than its fair market 

value.

21DOE, Request for Offers for the Sale of Depleted and Off-Specification Uranium 

Hexafluoride Inventories, Request for Offers Number: DE-SOL-0005845 (July 3, 2013). 

The Request for Offers further stated that as one of the considerations for making a 

selection, DOE would consider the economic benefit to the United States taking into 

account a number of factors, such as the monetary value of the natural uranium to be 

transferred to DOE, the amount of the UF6 inventories transferred over the course of the 

agreement, any incidental economic benefits resulting from the agreement, and managing 

the costs for the Paducah site.

22DOE, Press Release: Energy Department Selects Global Laser Enrichment for Future 

Operations at Paducah Site (Nov. 27, 2013), available at

http://energy.gov/em/articles/energy-department-selects-global-laser-enrichment-futureoperations-paducah-site.
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 79 GAO-14-291 Department of Energy

In sum, DOE did not meet the requirements of AEA section 63(c) in its 

May 2012 transfer of high-assay tails to Energy Northwest. Section 63(c) 

requires DOE to make a reasonable charge determined pursuant to 

section 161(m), which in turn requires DOE establish, on a 

nondiscriminatory basis, a price to be paid by the recipient, that itself 

provides reasonable compensation for the source material. DOE made no 

charge, and did not establish any price—nondiscriminatory or otherwise—

that was paid by Energy Northwest. To the extent that DOE received 

intangible benefits, the benefits were not provided by Energy Northwest 

pursuant to the agreement but were a consequence of actions outside the 

agreement and involving third parties and, moreover, are not guaranteed.

II. DOE Failed to Apply Proper Legal Authorities Governing Its 

Transfer of Natural Uranium and Acceptance of Tails in the March 

2012 SWU Procurement

On March 13, 2012, DOE entered an agreement with USEC which DOE 

labeled a contract to procure SWU.23 Under this agreement, DOE (1) took 

title to and disposal responsibility for 13,073 MTU of depleted uranium 

tails24 and (2) provided 409 MTU of Russian-origin natural uranium as 

uranium hexafluoride in exchange for receiving 48 MTU of U.S.-origin 

LEU from USEC.25

 23See Agreement between the DOE and USEC Inc., March 13, 2012 at 3 (2012 

Agreement) (“this barter contract for commercial items is to acquire separative work units 

(SWU) in exchange for DOE’s accepting title to, and disposal responsibility for, a quantity 

of depleted uranium tails (DUF6). DOE will also provide feedstock in the form of Russianorigin natural uranium from its inventory; United States Enrichment Corporation (USEC) 

will provide an amount of low-enriched uranium (LEU) as specified.”).

We found that DOE neither recognized the transfer of 

natural uranium it conducted pursuant to this agreement, nor the legal 

authority governing the transfer, and consequently did not account for it in 

subsequent market analyses. Further, we found that DOE’s acceptance 

of depleted uranium from USEC in this transaction is governed by section 

3113 of the USEC Privatization Act, and DOE did not meet the 

requirement of that provision to charge its full costs of disposal.

24See USEC, Annual Report (Form 10-K) (Mar. 13, 2012) at 15 (stating that the disposal 

of the depleted uranium tails in the 2012 agreement freed up $44 million USEC was using 

to secure bonds for disposal costs). 

25See 2012 agreement at 1.
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 80 GAO-14-291 Department of Energy

A. DOE Failed to Recognize Its Transfer of Natural Uranium and 

Consequently Failed to Account for the Transfer in Subsequent Market 

Impact Studies

We conclude subsection 3112(b) of the USEC Privatization Act governed 

DOE’s transfer of natural uranium under this agreement.26 As noted, 

subsection 3112(a) mandates that DOE “shall not provide enrichment 

services or transfer or sell any uranium (including natural uranium . . .) to 

any person except as consistent with [section 3112].” Subsections 

3112(b), (c), (d), and (e) then each impose conditions on a particular 

subset of uranium transfers and sales. As relevant here, subsection 

3112(b) applies to DOE sales of uranium hexafluoride that it received 

pursuant to the Russian HEU Agreement.27

 26DOE documents that we reviewed identified a governmentwide contract authority that 

authorizes use of noncompetitive procedures. 41 U.S.C. § 3304(a)(1) (2014). None of the 

documents that we reviewed, however, identified DOE’s authority for the uranium 

transfers themselves. For example, AEA section 55 generally authorizes acquisition of 

special nuclear material such as LEU. 42 U.S.C. §§ 2075 (authorizing acquisition of 

special nuclear material), 2014 (aa) (defining special nuclear material). In any case, GAO 

found subsection 3112(b), 42 U.S.C. 2297h-10(b), to govern the transfer of the subject 

Russian-origin natural uranium, under the terms of subsection 3112(a) and the principle of 

statutory interpretation that “[w]here there is no clear intention otherwise, a specific statute 

will not be controlled or nullified by a general one.” Morton v. Mancari, 417 U.S. 535, 550-

51 (1974).

According to a DOE official, 

the natural uranium that DOE provided to USEC pursuant to the March 

13, 2012, agreement was Russian-origin natural uranium that was a 

portion of the HEU Agreement feed component from 1995 through 1998. 

As we have previously reported, section 3112, entitled “Uranium transfers 

and sales,” directs DOE how to carry out virtually every step of the 

2742 U.S.C. § 2297h-10(b)(1), (b)(2). Pursuant to the Russian HEU Agreement—a nuclear 

non-proliferation pact between the U.S. and the Russian Federation—and subsequent 

extension agreement the U.S. purchased weapons grade uranium from the Russian 

Federation and then blended it down to create lower grade uranium for commercial use. 

Although subsection 3112(b)(2) expressly applies to DOE sales “[w]ithin 7 years of April 

26, 1996,” in the view of both GAO and DOE this statutory provision did not expire. GAO, 

Department of Energy: December 2004 Agreement with the United States Enrichment 

Corporation, B-307137 (Washington, D.C.: Jul. 12, 2006) at 8-12. As DOE and GAO 

found, citing settled Supreme Court holdings, “if a statute does not specify a consequence 

for noncompliance with statutory timing provisions, the federal courts will not in the 

ordinary course impose [a] coercive sanction of terminating the agency’s authority to act.” 

See id. at 6 (quoting Barnhart v. Peabody Coal Co., 537 U.S. 149, 159 (2003) (internal 

quotations omitted)). Given that section 3112(b)(2) did not specify a consequence for noncompliance, DOE and GAO agreed that the authority was not terminated on April 26, 

2003.
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 81 GAO-14-291 Department of Energy

disposition of both Russian-origin and other uranium in DOE’s inventory.28

Subsection 3112(b) specifically concerns Russian-origin uranium, and 

subsection 3112(b)(2) governs DOE’s disposition of the Russian-origin 

natural uranium that the department received under the HEU Agreement, 

as here, specifying that DOE “shall” sell it.29

With respect to DOE’s transfer of the Russian-origin uranium, this transfer 

was not subject to subsection 3112(d)(2) and hence a secretarial 

determination was not required. When DOE prepared secretarial 

determinations for its other uranium transfers conducted in 2012,

Thus, the natural uranium 

was subject to subsection 3112(b)(2).

30

however, subsection 3112(d)(2)(B) required that the assessment of the 

impact of those transfers on the domestic uranium industry account for 

Russian-origin uranium. That is, when the Secretary of Energy makes a 

determination that a given sale of uranium will not have an adverse 

material impact on the uranium industry under subsection 3112(d)(2)(B), 

the determination is to “tak[e] into account the sales of uranium under the 

Russian HEU Agreement and the Suspension Agreement.”31 Accordingly, 

DOE should have accounted for this transfer in the market impact 

analyses that it conducted under subsection 3112(d)(2)(B) for other 

uranium transfers,32 but the May 15, 2012, secretarial determination did 

not do so.33

 28See GAO, Department of Energy: December 2004 Agreement with the United States 

Enrichment Corporation, B-307137 at 10 (Washington, D.C.: Jul. 12, 2006); 42 U.S.C. § 

2297h-10 (2014).

2942 U.S.C. § 2297h-10(b)(2) (2014).

30The secretarial determination of May 15, 2012, includes the transfer of up to 2,400 MTU 

per year from 2012-2021 to DOE contractors for cleanup services at the GDPs, and up to 

400 MTU NU-equivalent of LEU per year from 2012-2020 to NNSA contractors for 

downblending HEU, and also notes the transfer of depleted uranium discussed herein. 

The determination states that the Secretary has “taken into account the sales of uranium 

under the Russian Highly Enriched Uranium Agreement and the Suspension Agreement.”

3142 U.S.C. § 2297h-10(d)(2)(B) (2014).

32Energy Resources International, Inc., Quantification of the Potential Impact on 

Commercial Markets of Introduction of DOE Excess Uranium Inventory in Various Forms 

and Quantities During Calendar Years 2012 through 2033 (Washington, D.C.: Apr. 23, 

2012).

33Secretarial Determination for the Sale or Transfer of Uranium (May 15, 2012).
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 82 GAO-14-291 Department of Energy

DOE officials state that the agency did not “transfer” the natural uranium 

at issue.34 If DOE did not transfer the Russian-origin natural uranium, 

arguably section 3112 may not apply. We conclude that DOE did transfer 

this uranium, however. Under rules of statutory construction, unless 

otherwise defined, statutory terms are generally interpreted in accordance 

with their ordinary, plain meaning.35 “Transfer” is not defined in the USEC 

Privatization Act or the AEA, nor explained in relevant legislative history; 

hence, “transfer” must be interpreted in accordance with its plain 

meaning. The verb “to transfer” means “to convey or remove from one 

place or one person to another,” or “to pass or hand over from one to 

another, especially to change over the possession or control of.”36

The evidence shows that DOE, in fact, did transfer the natural uranium. 

First, DOE prepared Nuclear Material Transaction Reports for the 

transaction, documenting that it transferred natural uranium from DOE to 

USEC.

Accordingly, a uranium transfer occurs when there is a “change over [in] 

the possession or control of” uranium.

37 According to the forms used for the transfer, “[t]his information is 

required for IAEA accounting reports that show changes in inventory of 

nuclear materials.”38

 34In commenting on a draft of this report, DOE stated “the natural uranium provided to 

USEC as feed, when combined with the SWU purchased, was included in the LEU 

returned to DOE. Put another way, the uranium market views the feed material provided 

by DOE as having been enriched by USEC and returned to DOE as LEU. As such, the 

natural uranium was never ‘provided’ to USEC for USEC’s subsequent ownership and 

control.”

On one of the forms, the party indicates the shipper 

and the receiver, and has space to indicate the “transfer” authority. NRC’s 

instructions and supporting materials describe the subject of the forms as 

“transfers.” In addition, DOE officials acknowledged that they did not 

expect that the natural uranium DOE gave USEC would actually be 

35See, e.g., BP America Production Co. v. Burton, 549 U.S. 84, 91 (2006).

36Black’s Law Dictionary (9th ed. 2009).

37DOE, summary of Form 741 reports provided to GAO (“a. Natural uranium from DOE to 

USEC: 2 transactions totaling 409 MTU”).

38NRC, Form 741 at upper right box. See also NRC, Instructions for Completing Nuclear 

Material Transaction Reports (DOE/NRC Forms 741 and 740M) NUREG/BR-0006, Rev. 7 

at 1 (effective Jan. 1, 2009 ) (“Licensees use DOE/NRC Form 741 to report physical 

transfers of nuclear materials between facilities.”).
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 83 GAO-14-291 Department of Energy

enriched and returned to DOE as LEU.39 DOE also acknowledged that 

USEC would own the natural uranium provided by DOE. Furthermore, 

USEC provided the same natural uranium to DOE as consideration40 in a 

subsequent transaction under a different agreement.41 If USEC did not 

own that uranium, it could not have provided it to DOE as consideration. 

In light of the forms, the shift in ownership of the natural uranium, and 

DOE’s subsequent receipt of the same material as consideration under a 

different agreement,42

B. DOE Failed to Recognize and Apply the Governing Legal Authority for 

its Acceptance of Tails

DOE’s argument that it merely “provided” and did 

not “transfer” the natural uranium is not supported by the record. We 

conclude that the transfer was subject to subsection 3112(b) and should 

have been accounted for in market analyses supporting secretarial 

determinations for that time period.

We conclude that Section 3113 of the USEC Privatization Act governed 

DOE’s acceptance of title and disposal responsibility for USEC’s tails 

under the March 2012 agreement. Subsection 3113(a) provides in 

relevant part:

(1) The Secretary, at the request of the generator, shall accept for 

disposal low-level radioactive waste, including depleted uranium if it 

were ultimately determined to be low-level radioactive waste, 

generated by—

 39That is, as is customary in the uranium industry, feed material may be provided with a 

SWU contract but it is not necessary that the enriched product returned to the SWU 

purchaser utilize that particular feed material.

40Consideration is a legal term meaning something (such as an act, a forbearance, or a 

return promise) bargained for and received by a promisor from a promisee. Black’s Law 

Dictionary (9th ed. 2009). More simply, consideration is the promise, object, or other thing 

given by one party to persuade another to enter into a contract. Collins English Dictionary 

(2009).

41Secretarial Determination, March 15, 2013 (regarding DOE transfer of LEU “in exchange

for DOE receiving approximately 409 metric tons of uranium hexafluoride, the equivalent 

amount of natural uranium feed component”) (emphasis added). DOE officials also stated 

that it was the same uranium hexafluoride.

42We note that the May 13, 2012, agreement uses the language “provide” in reference to 

the natural uranium, but this language does not shed light on whether the transaction was 

a transfer.
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 84 GAO-14-291 Department of Energy

(A) [USEC] as a result of the operations of the gaseous diffusion 

plants or as a result of the treatment of such wastes at a location 

other than the gaseous diffusion plants

***

(3) In the event depleted uranium were ultimately determined to be 

low-level radioactive waste, the generator shall reimburse the 

Secretary for the disposal of depleted uranium pursuant to paragraph 

(1) in an amount equal to the Secretary’s costs, including a pro rata 

share of any capital costs.43

Since passage of the USEC Privatization Act, NRC has determined that 

depleted uranium, when intended for disposal, is low-level radioactive 

waste.44 Thus, depleted uranium that DOE, on the request of the 

generator, accepts for disposal is subject to the conditions of subsection 

3113(a)(3).45

According to DOE documents we reviewed, USEC made an offer to DOE 

for SWU services in exchange for DOE taking the depleted uranium. 

These documents further show that DOE was accepting the depleted 

uranium for disposal. For example, DOE noted it would assume liability 

for the disposal of depleted uranium, and it analyzed the cost of DOE 

 4342 U.S.C. § 2297h-11(a) (2014).

44See NRC Memorandum and Order, filed in Louisiana Energy Services, L.P., Docket No. 

70-3192-ML, CLI-05-05, at 17 (Jan. 18, 2005) (hereinafter LES Adjudication). In the LES 

Adjudication, the Nuclear Information and Resource Service and Public Citizen 

(hereinafter Intervenors) argued that LES did not have a “plausible strategy” for the 

disposal of the depleted uranium produced at its facility. On the other side, LES argued 

that DOE was obligated to dispose of its depleted uranium tails pursuant to section 3113. 

USEC, while not a party to the dispute, filed its own brief supporting LES’s contention that 

depleted uranium should be classified as low-level radioactive waste under section 3113. 

According to the NRC’s Memorandum and Order, “the Commission finds that depleted 

uranium, assuming it is not treated as a resource, is appropriately categorized as a lowlevel radioactive waste,” id. at 15, and concludes, “depleted uranium is properly 

considered a form of low-level radioactive waste.” Id. at 17. Intervenors appealed on 

separate grounds, but NRC’s finding that depleted uranium was low-level radioactive 

waste was not contested. See Nuclear Information and Resource Service v. NRC, 509 

F.3d 562, 569-70 (D.C. Cir. 2007) (“[p]etitioners do not challenge the plausibility of giving 

the waste to the Department of Energy; they acknowledge that the department is legally 

required to take title to the waste at LES’s request, with LES bearing disposal cost.”).

45In the LES Adjudication, NRC noted that when depleted uranium is treated as a 

“resource,” rather than a waste, section 3113 does not apply. See NRC, In re Louisiana 

Energy Services, L.P. (National Enrichment Facility), No. CLI-05-05 (Jan. 18, 2005), at 1, 

3, 15, 17.
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 85 GAO-14-291 Department of Energy

conversion and disposal of the depleted uranium. The DOE analysis 

assumed 25 years of storage before conversion and disposal, based on 

the volume of material already scheduled for disposition.46

Subsection 3113(a)(3) requires that generators reimburse DOE “in an 

amount equal to [DOE’s] costs, including a pro rata share of any capital 

costs.” DOE documents we reviewed show that the agency had 

previously provided a unit cost estimate for DOE’s conversion and 

disposal of depleted uranium to private companies planning new 

enrichment facilities, and that target cost estimate of $4.13 per kilogram 

(kg) of DUF6 included capital costs. In determining the costs to be 

charged USEC in the March 13, 2012, agreement, however, DOE 

subtracted the capital cost component, to arrive at a figure of $3.43 per kg 

of DUF6. As a result, DOE undercharged USEC by an estimated $9 

million.

The 

documents identify potential uncertainties such as that disposition costs 

could increase, or conversely that uranium prices could increase to the 

point where re-enriching the depleted uranium becomes economical. At 

the time of the agreement, however, DOE documents show the agency 

believed it was accepting the depleted uranium for disposal and based its 

charge to USEC on DOE disposal costs. Moreover, the agreement itself 

treated the depleted uranium as a liability, not a resource.

DOE officials stated that the agency has never accepted tails under 

section 3113. In DOE’s view, in order for depleted uranium to be 

governed by section 3113, the generator must first “declare” the material 

to be waste.47

 46The fact that depleted uranium would be stored before disposal does not affect whether 

its acceptance by DOE falls under section 3113. In 2004, Congress enacted an 

amendment to section 3113 indicating that depleted uranium accepted under this section 

would typically be stored. Pub. L. No. 108–447 § 311 (Dec. 8, 2004) (providing that “In the 

event that a licensee requests the Secretary accept for disposal depleted uranium 

pursuant to this subsection, the Secretary shall be required to take title to and possession 

of such depleted uranium at an existing DUF6 storage facility.”).

The statute, however, contains no such requirement. On 

the contrary, NRC’s order interpreting the statute states that depleted 

uranium is a low-level radioactive waste unless it is treated as a 

47DOE also commented on a draft of this report: “DOE has not declared its depleted 

uranium tails to be ‘waste;’ the tails are nuclear material which is distinct from a waste 

product in many ways, including for example in regard to requirements for storage, 

management and disposition. . . . [DOE] has never indicated that it considers the tails 

‘waste.’”
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 86 GAO-14-291 Department of Energy

resource.48

Further, DOE documents that we reviewed did not indicate the authority 

under which DOE believed it accepted the tails. For example, a key 

justification document identifies a procurement authority, but does not 

identify any authority regarding transfers of uranium.

Further, the agreement itself and DOE documents indicate 

that the parties viewed the material as requiring disposal, and that it was 

being transferred for disposal by DOE. Conversely, there is no evidence 

that the parties viewed the material as a resource.

In sum, the evidence shows that DOE transferred Russian-origin uranium 

to USEC, and DOE was required to have accounted for this material in its 

May 15, 2012, secretarial determination that DOE prepared for other 

uranium transfers it conducted. In addition, we believe that DOE’s

acceptance of depleted uranium under this agreement was governed by 

section 3113 of the USEC Privatization Act and, as such, DOE should 

have charged USEC the price for full cost recovery, without subtracting 

capital costs amounting to an estimated $9 million. Its failure to do so 

resulted in a loss to the government of $9 million.

III. DOE Failed to Recognize and Apply the Governing Legal 

Authority for Its June 2012 Acceptance of Tails

In June 2012, DOE entered into a cooperative agreement with USEC to 

provide funding for the American Centrifuge Research, Development, and 

Demonstration (RD&D) program. To fulfill the first installment of its 

financial commitment under the agreement, DOE accepted from USEC 

low-assay depleted uranium tails. Specifically, for the first budget period, 

DOE agreed to accept title to, and eventual disposal responsibility for, 

about 39,200 metric tons of depleted uranium hexafluoride of USEC’s 

tails, according to DOE and USEC’s cooperative agreement, which 

allowed USEC to free up $87.7 million in surety bonds committed to the 

future disposal obligation of these tails. USEC applied this funding toward 

DOE’s financial commitment to supporting the development of the 

American Centrifuge RD&D program. The agreement cites two sources of 

authority: 42 U.S.C. § 7256(a) (general DOE authority for contracts, 

 48According to the NRC’s Memorandum and Order, “the Commission finds that depleted 

uranium, assuming it is not treated as a resource, is appropriately categorized as a lowlevel radioactive waste.” LES Adjudication at 15. 
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 87 GAO-14-291 Department of Energy

cooperative agreements) and 42 U.S.C. § 2011 et seq. (the entire AEA, 

including the USEC Privatization Act).

As with DOE’s acceptance of low-assay tails from USEC as part of the 

SWU Procurement in March 2013, we believe this action was governed 

by section 3113 of the USEC Privatization Act. Documents that we 

reviewed show that beginning in spring 2011 or earlier, USEC 

approached DOE concerning DOE taking USEC’s depleted uranium tails 

to reduce USEC’s liabilities and free up cash to support the American 

Centrifuge RD&D program. Specifically, these documents indicate that 

USEC initially submitted a formal unsolicited proposal for a transfer of 

depleted tails from USEC to DOE in April 2011, followed by proposals in 

October 2011 and May 2012 for the purpose of supporting development 

of the American Centrifuge technology. We find these documents to 

support the proposition that USEC “requested” DOE to take the tails.

Additionally, as with the March 2012 transaction, DOE supporting 

documents that we reviewed show that DOE was accepting the depleted 

uranium for disposal. For example, DOE noted it would assume liability 

for the disposal of depleted uranium, and it analyzed the cost of DOE 

conversion and disposal of the depleted uranium. DOE documents show 

the agency believed it was accepting the depleted uranium for disposal 

and based its charge to USEC on DOE disposal costs. Moreover, the 

agreement itself treated the depleted uranium as a liability, not a 

resource.

Accordingly, we believe that section 3113 applied to this transaction. DOE 

officials, however, stated that DOE has never accepted tails under section 

3113.49 We conclude that DOE nonetheless charged USEC the amount 

that was required by section 3113: “an amount equal to [DOE’s] costs, 

including a pro rata share of any capital costs.”50

 49As noted above, DOE documents we reviewed did not clearly identify the specific 

authority under which DOE accepted the tails. The agreement cited a general contract 

authority and the AEA generally.

DOE documents we 

reviewed show that the agency had previously provided a unit cost 

estimate for DOE’s conversion and disposal of depleted uranium to 

50USEC Privatization Act section 3113(a)(3), 42 U.S.C. § 2297h-11(a)(3) (2014). In the 

context of a cooperative agreement with a cost-share component, “reimbursement” would 

be reflected in the cost-share amount attributed to DOE as a result of the agency 

accepting the tails. 
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 88 GAO-14-291 Department of Energy

private companies planning new enrichment facilities, and that the cost 

estimate, with a target of $4.13 and a high end of $5.13 per kg of DUF6 

(in fiscal year 2012 dollars) included capital costs. In determining the 

costs to be charged USEC in the June 12, 2012, agreement, DOE used 

the high end of the range of costs that it had provided other private 

enrichment companies ($5.13 per kg of DUF6).

In sum, we believe that DOE’s acceptance of tails under the June 2012 

cooperative agreement was governed by section 3113 and hence was 

subject to the condition that full costs be reimbursed. We found that DOE 

charged the proper cost, despite not recognizing, and not technically 

applying, the proper authority with respect to the tails. If DOE does not 

cite the applicable authority when it enters into agreements, it may not be 

clear what conditions apply to the transaction, and the agency may not 

take steps to ensure the applicable conditions are met, as we found in the 

March 2012 transaction.

IV. DOE Failed to Obtain the Required Presidential Determination for 

Its March 2013 LEU Transfer

DOE transferred 48 MTU LEU to USEC in March 2013 to satisfy payment 

under its RD&D Cooperative Agreement. DOE acknowledged that the 

transaction was subject to the conditions of section 3112(d) of the USEC 

Privatization Act. Section 3112(d) authorizes sales and transfers of LEU, 

among other things, subject to three conditions.51 The first condition is 

that “the President determines that the material is not necessary for 

national security needs.”52

DOE officials told us they believed they satisfied this condition by 

reviewing whether the July 2011 Nuclear Weapons Stockpile Plan 

(NWSP) included this material as being necessary for national security 

needs. The NWSP is DOE’s and the Department of Defense’s 

overarching plan that specifies the size and composition of the nuclear 

We conclude that DOE did not meet this 

condition.

 5142 U.S.C. §§ 2297h-10(d)(1), (2) (2014).

5242 U.S.C. § 2297h-10(d)(2)(A) (2014).
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 89 GAO-14-291 Department of Energy

stockpile for a projected multiyear period.53

We find DOE’s reliance on the NWSP to satisfy the presidential 

determination requirement of USEC Privatization Act section 3112 to be 

unfounded, at least with respect to this particular transaction. DOE 

officials told us they determined that the LEU that DOE transferred to 

USEC in the March 2013 agreement was not included in the NWSP and 

that this meant the material was unnecessary for national security needs. 

Even assuming that an NWSP can satisfy the legal requirement for a 

presidential determination under the USEC Privatization Act, however, 

which we do not decide, the specific July 2011 NWSP that DOE relies on 

as constituting the presidential determination for its March 2013 

transaction was signed by the President before the material was in DOE’s 

inventory. The July 2011 document therefore could not have included 

inventory that DOE did obtain until March 2012.

The NWSP, which is 

classified, is based on the Nuclear Weapons Stockpile Memorandum (the 

Memorandum) submitted by DOE and DOD to the President, 

accompanied by a presidential directive; when the directive is signed, the 

Memorandum goes into effect as the NWSP. Thus, the NWSP is 

approved by the President.

54

We also note that the NWSP does not in fact identify any LEU needed for 

national security, and question whether the lack of inclusion of specific 

uranium has the significance DOE ascribes to it. Internal DOE documents 

in fact suggest the opposite: that the LEU was necessary for national 

Because the NWSP 

predated the time that the agency acquired the LEU, we find DOE’s 

reliance unfounded.

 5342 U.S.C. § 2121(a)(2) (2013). See also 10 U.S.C. § 179 (2013) (discussing duties of 

the Nuclear Weapons Council).See Office of the Assistant Secretary of Defense for 

Nuclear, Chemical, and Biological Defense Programs, The Nuclear Matters Handbook (c. 

2011) at 26, 33 (discussing the “Nuclear Weapons Stockpile Plan (NWSP) that authorizes 

specific quantities of warheads, by type, by year, for a multi-year period”), 36, App. A, 289 

(“The Nuclear Weapons Stockpile Plan (NWSP) authorizes the production, conversion, or 

elimination of specific types and quantities of nuclear weapons by specifying authorized 

weapons quantities to be in the stockpile at the end of each fiscal year.”).

54DOE takes the same position as it did when we discussed this issue with DOE officials 

in 2011. See GAO-11-846. DOE officials told us at that time that the Nuclear Weapons 

Stockpile Memorandum identifies inventories of uranium for national defense needs and 

therefore if uranium is not included in the Memorandum, the uranium has been 

determined to be unnecessary for national security purposes. The uranium at issue in our 

2011 review had been in DOE’s inventory for many years, however, and we did not review 

the Memorandum or the NWSP at that time. 
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 90 GAO-14-291 Department of Energy

security needs. The documents state that when the department acquired 

this same LEU in March 2012, it would be used in the tritium program—

which supports national security purposes.55 In addition, DOE has 

repeatedly linked unobligated LEU with national security, for example 

stating that the transfer of high-assay depleted uranium tails to Energy 

Northwest and its enrichment to LEU would “deliver important benefits to 

U.S. national security,” “advance America’s national security interests at a 

reduced cost to taxpayers,” and “ensur[e] a supply of nuclear fuel 

essential for national security missions.”56 Similarly, DOE has justified its 

support of USEC’s American Centrifuge technology as rooted in the need 

for LEU for national security.57 We are aware of no case law or legislative 

history interpreting the presidential determination requirement under the 

USEC Privatization Act and when DOE was asked to explain the 

department’s basis for using the absence of inclusion of certain material 

in the NWSP to meet the section 3112(d)(2)(A) presidential determination 

requirement, DOE could not provide documentation.58 We note that, in 

contrast, DOE satisfies the similar requirement for a secretarial 

determination under section 3112(d)(2)(B) with individual determinations 

signed by the Secretary of Energy for each transaction or group of 

transactions.59

In sum, even assuming that DOE generally may rely on the absence of 

the designation of certain material in the NWSP as satisfying the 

presidential determination requirement of the USEC Privatization Act, 

which we do not decide, it could not rely on the July 2011 NWSP as the 

presidential determination for LEU that it did not obtain until nearly 8 

months later. We conclude that DOE did not satisfy the section 3112(d)(1) 

 55See DOE, Notice of Intent-USEC, Solicitation Number: DE-NE0000481 (Jan. 20, 2012).

56See DOE, “DOE Announces Transfer of Depleted Uranium to Advance the U.S. National 

Security Interests, Extend Operations at Paducah Gaseous Diffusion Plant” (May 15, 

2012), DOE, Office of Environmental Management, “Paducah Plant Begins Enrichment 

Operations after Five Parties Strike Agreement” (May 1, 2012).

57See, e.g., Letter from Stephen Chu, Secretary of Energy, to Representative Whitfield 

(Jan. 13, 2012).

58DOE did, however, provide several documents showing that referencing the NWSP has 

been the department’s longstanding approach to satisfying this condition.

59Compare section 3112(d)(2)(A) (“the President determines that...”) with section 

3112(d)(2)(B) (“the Secretary determines that...”).
Appendix IV: Legal Analysis of DOE’s Four 

Uranium Transactions

Page 91 GAO-14-291 Department of Energy

condition that “the President determines that the material is not necessary 

for national security needs.”

Conclusions

In 2012 and 2013, DOE conducted four uranium transactions involving 

USEC. In these transactions, DOE transferred depleted uranium, natural 

uranium, and LEU and accepted title to USEC’s depleted uranium tails. 

We found that DOE likely lacked authority to transfer depleted uranium 

per the USEC Privatization Act and that, even if the department retained 

general authority to transfer depleted uranium under the AEA as it 

believes, DOE failed to follow the AEA requirement to charge the 

recipient a price that is established to be nondiscriminatory and that 

provides reasonable compensation to the government. In the other 

transactions, we found that DOE failed to recognize, and in some cases 

apply, the proper legal authority governing the uranium transfer. For 

example, in two cases where DOE accepted depleted uranium tails from 

USEC for disposal, DOE did not recognize or apply section 3113 of the 

USEC Privatization Act as the governing authority and, in one of them, 

undercharged USEC by an estimated $9 million as a result. Finally, in the 

March 2013 transfer of LEU to USEC, DOE acknowledged that section 

3112(d) of the USEC Privatization Act governed the transfer, but did not 

meet one of the conditions—that the President determine the material is 

not necessary for national security needs. While the AEA, as amended, 

provides DOE with broad authority to manage its uranium inventory in 

keeping with the department’s statutory responsibilities, the USEC 

Privatization Act restrains and conditions these authorities. In the four 

transactions we reviewed, DOE has failed to acknowledge, and in several 

instances to comply with, the legal authorities governing its uranium 

transactions.
Appendix V: DOE’s Actions to Comply with the 

National Environmental Policy Act

Page 92 GAO-14-291 Department of Energy

In addition to the Atomic Energy Act (AEA) and the USEC Privatization 

Act, the National Environmental Policy Act (NEPA) imposes legal 

requirements on the Department of Energy’s (DOE) transfers of excess 

uranium. Accordingly, we reviewed the actions DOE took, under NEPA 

with respect to the May 2012 tails transfer.

NEPA requires federal agencies to assess the effects of major federal 

actions—those they propose to fund, carry out, or permit—that may 

significantly affect the environment.1 The purpose of NEPA is to ensure 

that: (1) the agency, in reaching its decision, will have available and will 

carefully consider detailed information concerning significant 

environmental impacts and (2) relevant information about the proposed 

project will be made available to the public, so that it may play a role in 

both the decision-making process and implementation of the decision.2

Council of Environmental Quality regulations implementing NEPA 

generally require an agency, before undertaking a major action which 

may significantly affect the environment, to either prepare an 

Environmental Assessment (EA)3

 1

National Environmental Policy Act of 1969 § 102, 42 U.S.C. § 4332 (2014). See also

DOE NEPA regulations at 10 C.F.R. pt. 1021 (2014) (for example, defining action as a 

project, program, plan, or policy that is subject to DOE’s control and responsibility, § 

1021.104(b)).

or an Environmental Impact Statement 

2

See, e.g., Hodges v. Abraham, 300 F.3d 432, 446 (4th Cir. 2002), citing Hughes River 

Watershed Conservancy v. Glickman, 81 F.3d 437, 443 (4th Cir.1996).

3

An Environmental Assessment: 

(a) “[m]eans a concise public document ... that serves to:

(1) Briefly provide sufficient evidence and analysis for determining whether to 

prepare an environmental impact statement or a finding of no significant impact.

(2) Aid an agency’s compliance with the Act when no environmental impact 

statement is necessary.

(3) Facilitate preparation of a statement when one is necessary.

(b) Shall include brief discussions of the need for the proposal, of alternatives as 

required by section 102(2)(E), of the environmental impacts of the proposed action 

and alternatives, and a listing of agencies and persons consulted.”

40 C.F.R. § 1508.9 (2014).

Appendix V: DOE’s Actions to Comply with 

the National Environmental Policy Act
Appendix V: DOE’s Actions to Comply with the 

National Environmental Policy Act

Page 93 GAO-14-291 Department of Energy

(EIS).4 If an EA finds that the proposed action will have no significant 

impacts, the agency prepares a Finding of No Significant Impact (FONSI). 

DOE regulations do not address the specific circumstance when a 

proposed major federal action is changed after an EA is prepared. 

However, they do provide that “DOE may prepare a NEPA document for 

any DOE action at any time in order to further the purposes of NEPA.”5 In 

addition, DOE may revise a FONSI at any time, so long as the revision is 

supported by an EA.6 DOE regulations require NEPA documents—

including an EA, FONSI, or Mitigation Action Plan, among others—to be 

available to the public.7 NEPA regulations define effects as including 

ecological, aesthetic, historic, cultural, economic, social, or health, 

whether direct, indirect, or cumulative.8

With respect to its general plans for disposition—that is, transfer or sale—

of excess uranium, in 2009, DOE prepared a final Environmental 

Assessment for the Disposition of DOE Excess Depleted Uranium, 

Natural Uranium, and Low-Enriched Uranium (“2009 EA”).9

 4

“Environmental impact statement means a detailed written statement as required by 

section 102(2)(C) of the Act.” 40 C.F.R. §§ 1501.4, 1508.11 (2014); see also National 

Environmental Policy Act of 1969 § 102, 42 U.S.C. § 4332 (c) (2014); Cal. Wilderness 

Coalition v. United States Dep’t of Energy, 631 F. 3d 1072, 1103-06 (9th Cir. 2011) 

(discussing the need for NEPA documents and noting the differences between when to 

prepare an EA from an EIS). 

The 2009 EA 

proposed the disposition of excess depleted uranium, low-enriched 

uranium (LEU), and/or natural uranium, by (1) enriching it, followed by 

storing or selling it; (2) selling it; or (3) a combination of the two. The 2009 

EA defined “sale” as including direct sales, transfers, or other transactions 

for disposition of the department’s excess uranium inventory. The 2009 

EA assumed “the Proposed Action would result in the annual enrichment 

and/or sale of amounts of the excess inventory that, combined with other 

5

10 C.F.R. § 1021.300(b).

6

10 C.F.R. § 1021.322(f).

7

10 C.F.R. §§ 1021.104, 1021.314(c)(3), 1021.331(d).

8

40 C.F.R. § 1508.8 (2014).

9

DOE/EA-1607 (June 2009). See also Secretary of Energy’s Policy Statement on 

Management of the Department of Energy’s Excess Uranium Inventory (2008) (“Before 

making any final decision on a particular action, the Department must comply with 

applicable requirements of [NEPA]. This may include the preparation of an [EA}, {EIS}, or 

other analyses, as appropriate.”).
Appendix V: DOE’s Actions to Comply with the 

National Environmental Policy Act

Page 94 GAO-14-291 Department of Energy

DOE sales or transfers to the market, generally would not exceed 10 

percent of the total annual fuel requirements of all licensed U.S. nuclear 

power plants—that is, approximately 2,000 [Metric Tons Natural Uranium 

(MT NU)].”10 The 2009 EA stated that “[t]he specific annual amounts 

would be determined on an ongoing basis; the amounts would depend 

upon market analyses for particular sales...[F]or purposes of assessing 

environmental impacts in this EA, DOE assumes that the Proposed 

Action could result in the annual enrichment and/or sale of excess 

inventory sufficient to introduce into the domestic market in a given year 

up to approximately 2,000 MT NU equivalent.”11 The 2009 EA also 

identified the possibility that DOE could determine that introduction of 

more uranium was warranted for certain special purposes, such as the 

provision of initial core loads for new reactors, and analyzed a doubling of 

the amount of uranium introduced into the market in a given year (i.e., 

4,000 MT NU, rather than 2,000 MT NU).12 The 2009 EA analyzed 

various impacts, with detailed, quantitative analysis focused on 

transportation and related safety impacts.13

In July 2009, DOE issued a FONSI and Mitigation Action Plan (MAP), 

which under department regulations is to include commitments to 

mitigation that are essential to render the impacts of the proposed action 

not significant.14 Based on the 2009 EA and the MAP, the FONSI 

concluded that the proposed action did not constitute a major federal 

action significantly affecting the quality of the human environment under 

NEPA and, therefore, did not require the preparation of an EIS.15 In the 

MAP, DOE committed to conduct a market impact analysis, prior to 

particular sales or transfers of depleted uranium, to determine the 

potential impacts of the proposed sale or transfer on the domestic 

uranium industry, taking into account other uranium sales and transfers.16

 10EA at vii.

Further, the MAP stated that “should the market impact analysis indicate 

11EA at 11-12 (section titled “Maximum Annual Amount and Program Duration”).

12EA at 12.

13EA at 57-80.

1474 Fed. Reg. 31,420 (July 1, 2009), 10 C.F.R. § 1021.331(b).

1574 Fed. Reg. at 31,422.

16Id. at 31,421.
Appendix V: DOE’s Actions to Comply with the 

National Environmental Policy Act

Page 95 GAO-14-291 Department of Energy

potentially significant impacts on the domestic uranium industry, the 

proposed sale or transfer would be adjusted as necessary to ensure that 

such potentially significant impacts are avoided or mitigated.”17 Thus, the 

2009 EA, FONSI, and MAP contemplate that market impact studies will 

be conducted for each action proposed under the EA, and DOE will adjust 

the action to ensure there would be no significant market impact.18

While the 2009 EA analyzed impacts of a maximum of 4,000 MT NU 

equivalent from all DOE transfers and sales that may occur in a given 

year, several DOE documents we reviewed indicate that in 2012 DOE 

actually transferred considerably more than that. Because DOE’s 

agreement with Energy Northwest provided for DOE’s transfer of tails 

from May 2012 through April 2013, DOE first projected the amounts that 

would be transferred in 2012 and 2013. Then, DOE considered the timing 

and amount of other departmental transfers and added them. These 

documents show that the total transfers for 2012 were projected to be 

from approximately 37 percent, to as much as 62 percent, greater than 

the analyzed maximum. Agency regulations allow, but do not require, 

DOE to prepare additional NEPA documents, such as a supplemental 

analysis or revised EA and FONSI, and DOE elected not to do so. 

Instead, DOE considered NEPA consequences of the action in internal 

documents.19 The internal documents relied upon the market impact 

analysis required by the MAP; for example, one key document asserted 

that the combined 2012 uranium transfers will not have significant 

impacts on the domestic uranium industry.20

 17Id. at 31,422.

The documents also noted 

18DOE posted the market impact analyses on its website after they were completed, but 

DOE did not provide an opportunity for public review and comment on them.

19To the best of our knowledge, NEPA compliance for DOE’s May 2012 uranium transfer 

was not discussed in any publicly released document. DOE prepared a NEPA compliance 

memorandum that identified several other activities associated with the depleted uranium 

transaction subject to NEPA, and stated that the activities had each been previously 

reviewed and analyzed in other NEPA documents, such as the EA for Certification of 

Gaseous Diffusion Plants and the Final Environmental Impact Statement for operation of 

the DUF6 conversion facility, among others.

20We note that DOE transferred tails to Energy Northwest over a 12 month period 

spanning 2012 and 2013; however, the market impact analysis did not analyze the entry 

of this uranium into the market at the time of transfer. Rather, the market analysis 

contractor projected the impacts of the resulting LEU entering in the market over a 15 year 

period, relying on information provided by DOE concerning the third-party agreements 

(e.g., the Energy Northwest-TVA agreement). 
Appendix V: DOE’s Actions to Comply with the 

National Environmental Policy Act

Page 96 GAO-14-291 Department of Energy

that the transportation impacts were adequately addressed by the EA and 

FONSI, because the proposed action involves only on-site transportation 

(e.g., the material to be transferred would remain at the Paducah plant).

In summary, DOE documents we reviewed show that, in 2012, DOE 

projected it would transfer more uranium than was analyzed in its 2009 

EA. DOE regulations do not require that an EA be updated in such 

circumstances, and no update was prepared. In addition to relying on the 

2009 EA, DOE used the market impact study and an internal 

memorandum to consider environmental impacts, draw conclusions about 

the significance of those impacts, and determine NEPA compliance for 

the May 2012 transfer of depleted uranium.
Appendix VI: GAO Analysis of DOE-Contracted 

Market Impact Studies

Page 97 GAO-14-291 Department of Energy

To support the USEC Privatization Act requirement that the Secretary of 

Energy determine that certain uranium transfers will not have an adverse 

material impact on the domestic uranium market, for 2012 and 2013, 

DOE contracted with Energy Resources International, Inc. (ERI), a 

nuclear fuel consulting firm, to develop two studies analyzing the potential 

impact of certain planned uranium transfers on the market.1 Overall, we 

found that ERI’s studies provided limited details about their methodology, 

data sources, and assumptions. Because those details were limited, we 

were able to conduct only a limited assessment of the studies. Based on 

the information contained in the studies, as well as interviews conducted 

with the principal author of the ERI studies and with the Department of 

Energy (DOE) officials and subsequent correspondence with ERI officials, 

we were able to review ERI’s general approach, such as how ERI 

considers the supply and demand changes in the uranium market due to 

the transfer of material. However, without a detailed methodology, we 

were not able to conduct the in-depth review needed to verify the studies’

conclusions.

Based on our review of ERI’s studies, we did not identify significant flaws, 

but we did identify several areas of concern about how they were 

conducted. For example, we found that ERI did not have complete 

information when it developed its term market models, and it did not 

request data from members of the uranium producing industry to develop 

and complete the production information it needed. In addition, we 

identified shortcomings with ERI’s spot market analyses that could lead to 

inconclusive results.2

 1

Energy Resources International, Inc., Quantification of the Potential Impact on 

Commercial Markets of Introduction of DOE Excess Uranium Inventory in Various Forms 

and Quantities During Calendar Years 2012 through 2033 (Washington, D.C.: Apr. 23, 

2012). Also see: Energy Resources International, Inc., Quantification of the Potential 

Impact on Commercial Markets of Introduction of the Enrichment Services Component of 

DOE Low Enriched Uranium Inventory During Calendar Year 2013 (Washington, D.C.: 

Jan. 28, 2013).

As a result, we believe that ERI’s definitive 

conclusions that DOE’s uranium transfers will have no adverse material 

2

Uranium buyers, such as utilities, purchase uranium and the services to convert it into 

nuclear fuel in one of two ways. First, buyers can obtain uranium under long-term 

contracts with sellers in the “term” market. In the long and medium term market, fuel 

material will first be delivered 1 year to 4 years after the signing of the contract. Second, 

sellers can make their uranium available for immediate sale in a forum called the “spot”

market. In the spot market, fuel material will be delivered within a year of signing a 

contract.

Appendix VI: GAO Analysis of DOEContracted Market Impact Studies

Market Impact Studies’

Overall Approach Appears 

Reasonable, but We 

Identified Concerns with 

the Studies’

Implementation and 

Conclusions
Appendix VI: GAO Analysis of DOE-Contracted 

Market Impact Studies

Page 98 GAO-14-291 Department of Energy

impact on the uranium market implies a level of precision that cannot be 

supported based on these studies.

Overall, ERI’s approach for its term market analysis appears to be 

generally reasonable, but we identified areas of concern, including those 

related to the completeness of ERI’s data and ERI’s use of a 

noncumulative analysis. Conceptually, we found that ERI’s market 

clearing methodology was a generally accepted approach for analyzing 

the impacts of DOE’s transfers, as this type of analysis is used in 

assessing the impacts of changes in the market. In addition, constructing 

supply and demand schedules to represent the appropriate markets, as 

ERI indicated it has done, is a common method used by economists to 

study market behavior. However, the accuracy of results using such an 

approach depends on the availability of necessary data and the 

reasonableness of assumptions made to construct the model for a 

specific market.

• Completeness of data: We identified concerns about the 

completeness of the data ERI used to develop the market supply 

curves that were fundamental to its market analysis. ERI’s report 

states that it developed an annual supply curve from each mining and 

conversion company using cost and production data. The studies’

principal author told us that ERI obtained this data from publically 

available sources, such as corporate annual reports and filings with 

the U.S. Securities and Exchange Commission and industry 

conference presentations.3

 3

As discussed above, ERI’s studies did not disclose its data sources or identify any 

limitations of those sources. ERI also did not provide us detailed information about its 

specific data sources, but ERI’s principal author told us that they used uranium supply 

information from approximately 120 existing and potential new uranium production 

centers.

According to representatives from the 

mining and conversion industries, some, but not all, of its cost of 

production data is available from such sources. These representatives 

told us that additional detailed data would be needed by ERI to 

conduct a complete analysis and could only be obtained by directly 

contacting the companies. They added that, to their knowledge, ERI 

did not contact them to request such information. ERI confirmed that it 

did not directly contact any companies to supplement its cost data 

because ERI did not believe that companies would provide cost data 

beyond public filings that are already available to ERI. In the absence 

of complete production and cost data, analysts often rely on general 

ERI’s Analysis of the Uranium 

Term Market Was Generally 

Reasonable, but We Identified 

Areas of Concern
Appendix VI: GAO Analysis of DOE-Contracted 

Market Impact Studies

Page 99 GAO-14-291 Department of Energy

industry information. Although general industry information may not be 

inaccurate, it is imprecise, and using imprecise data cannot generate 

precise results. Nonetheless, ERI did not qualify its conclusion and 

continued to state that there would be no adverse material impact of 

transfers on the domestic uranium market.

• Assumption that the uranium transfers would not have a 

cumulative effect: ERI’s April 2012 analysis estimated the effect of 

each uranium transfer in the term market independently of other 

transfers occurring in prior years. By analyzing the impact of each 

transfer independently, ERI, in effect, assumed that the impact on the 

term price of one transfer will dissipate before the next transfer.4

We found that the model ERI developed for its analysis of the spot 

market—which it used in its April 2012 study to project the potential price 

impact on the spot market—accounts for some, but not all, factors that 

can affect spot market prices. ERI’s econometric model relied on the 

historical relationship between spot market prices, quantity demanded, 

and quantity supplied and assumed that future spot market prices, the 

quantity of demand, and the quantity of supply would follow the same 

relationship they had from 2004 through 2012.

In 

general, the amount of time required for any price change to return to

the level expected without any DOE transfers would vary due to, 

among other things, the quantity of uranium that was sold on the 

market, as well as the total number of transactions in that market 

during the same time period. However, it cannot be assumed with 

certainty, as ERI did, that the price effect of each transfer dissipates 

within the given time and before the next transfer, especially in the 

thinly traded uranium market—which has relatively few sales within 

any given year. As a result, we believe that by estimating the effects 

of each transfer independently—and thus ignoring the cumulative 

effects of transfers on market prices—ERI presented an overly 

simplified view of dynamics of the market and price adjustments. 

Although ERI may have needed to make such assumptions in order to 

develop a simplified and workable model for its analysis, such 

simplification raises questions about the definitive conclusions 

reached by ERI.

5

 4

Specifically, ERI assumed that transfers were sold on the term market annually, and the 

effect of each transfer was estimated independently of any other transfer.

ERI then used this model 

5

Econometric models estimate mathematical relationships between factors such as 

supply, demand, and prices using historical data. Such relationships can then be used to 

project future values for one factor, such as price, given projected values for other factors.

ERI’s Spot Market Analysis Did 

Not Account for All Relevant 

Factors That May Affect 

Uranium Prices
Appendix VI: GAO Analysis of DOE-Contracted 

Market Impact Studies

Page 100 GAO-14-291 Department of Energy

to predict future spot market price changes resulting from DOEtransferred material that may be sold in the spot market. ERI used the 

same methodology in its 2010 market impact analysis, which we found to 

have shortcomings in our 2011 report.6

 6

Specifically, we found that in 

relying exclusively on historic spot market relationships, ERI’s model 

excluded many other factors that can affect the behavior of suppliers and 

buyers and consequently spot market prices. For example, the demand 

for uranium depends on uranium prices relative to other fuel sources such

as oil, gas, or coal. If the prices of these alternatives are projected to 

change, then the demand for uranium and its price will also change. As a 

result, if the model does not identify and incorporate such factors, then it 

will be too simplistic to accurately assess the impact of DOE-transferred 

material that may be sold in the spot market. ERI officials acknowledged 

in its 2010 and 2012 studies that it is very difficult, if not impossible, to 

accurately predict the specific change in spot market price that might 

result from a particular future event. Nevertheless, ERI continued using 

the same spot price model in its analyses and concluded that the 

potential effect on spot prices of DOE transfers did not constitute an 

adverse material impact on the domestic uranium market.

GAO-11-846.
Appendix VII: Comments from the Department 

of Energy

Page 101 GAO-14-291 Department of Energy

Appendix VII: Comments from the 

Department of Energy
Appendix VII: Comments from the Department 

of Energy

Page 102 GAO-14-291 Department of Energy
Appendix VII: Comments from the Department 

of Energy

Page 103 GAO-14-291 Department of Energy
Appendix VII: Comments from the Department 

of Energy

Page 104 GAO-14-291 Department of Energy
Appendix VIII: Comments from the Nuclear 

Regulatory Commission

Page 105 GAO-14-291 Department of Energy

Appendix VIII: Comments from the Nuclear 

Regulatory Commission

The Nuclear Regulatory 

Commission’s letter was 

signed electronically by 

Michael F. Weber,

Deputy Executive 

Director for Materials, 

Waste, Research, State, 

Tribal, and Compliance 

Programs.
Appendix IX: GAO Contacts and Staff 

Acknowledgments

Page 106 GAO-14-291 Department of Energy

David C. Trimble, (202) 512-3841 or trimbled@gao.gov

Susan D. Sawtelle, (202) 512-6417 or sawtelles@gao.gov

In addition to the individuals named above, Allison B. Bawden, Assistant 

Director; Eric Bachhuber; Elizabeth R. Beardsley; Delwen A. Jones; 

Amanda K. Kolling; Mehrzad Nadji; and Karen Villafana made key 

contributions to this report. Also contributing to this report were Antoinette 

Capaccio; Doreen Eng; Karen K. Keegan; Risto Laboski; Jerry B. 

Leverich; Dr. Timothy M. Persons; Dan C. Royer; and Rebecca Shea.

Appendix IX: GAO Contacts and Staff 

Acknowledgments

GAO Contacts

Staff 

Acknowledgments

(361498)
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