**GAO-08-606R**                      Published: Mar 31, 2008. Publicly Released: Apr 02, 2008.                  

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## Highlights

Since the 1940s, one mission of the Department of Energy (DOE) and its predecessor agencies has been processing uranium as a source of nuclear material for defense and commercial purposes. A key step in this process is the enrichment of natural uranium, which increases its concentration of uranium-235, the isotope of uranium that undergoes fission to release enormous amounts of energy. Before it can be enriched, natural uranium must be chemically converted into uranium hexafluoride. The enrichment process results in two principal products: (1) enriched uranium hexafluoride, which can be further processed for specific uses, such as nuclear weapons or fuel for nuclear power plants; and (2) leftover "tails" of uranium hexafluoride. These tails are also known as depleted uranium because the material is depleted in uranium-235 compared with natural uranium. Since 1993, uranium enrichment activities at DOE-owned uranium enrichment plants have been performed by the U.S. Enrichment Corporation (USEC), formerly a wholly owned government corporation that was privatized in 1998. However, DOE still maintains approximately 700,000 metric tons of depleted uranium tails in about 63,000 metal cylinders in storage yards at its Paducah, Kentucky, and Portsmouth, Ohio, enrichment plants. It must safely maintain these cylinders because the tails are dangerous to human health and the environment. Uranium hexafluoride is radioactive and forms extremely corrosive and potentially lethal compounds if it contacts water. DOE also maintains large inventories of natural and enriched uranium that are also surplus to the department's needs. Tails have historically been viewed as a waste product because considerable enrichment processing is required to further extract the remaining useful quantities of uranium-235. In the past, low uranium prices meant that these enrichment services would cost more than the relatively small amount of uranium-235 extracted would be worth. However, an approximately tenfold increase in uranium prices--from approximately $21 per kilogram of uranium in the form of uranium hexafluoride in November 2000 to about $200 per kilogram in February 2008--has potentially made it profitable to re-enrich some tails to further extract uranium-235. Even with the current higher uranium prices, however, only DOE's tails with higher concentrations of uranium-235 (at least 0.3 percent) could currently be profitably re-enriched, according to industry officials. About one-third of DOE's tails contain uranium-235 concentrations at that level or higher. In this context, Congress asked us to determine (1) DOE's potential options for beneficially reusing or indefinitely storing its tails, and (2) the potential value of DOE's tails and factors that affect the value.

In general, DOE's potential options for its tails include selling the tails "as is," re-enriching the tails, or storing them indefinitely. However, we believe that DOE's current legal authority to sell its depleted uranium inventory in its current unprocessed form is doubtful and under rules of statutory construction, DOE likely lacks such authority. We found that DOE generally has authority to carry out the re-enrichment and storage options. The department has not finished a comprehensive assessment of these options and is still evaluating the details of how such options might be implemented. DOE's authority to sell the tails in their current unprocessed form is doubtful. Because of specific statutory language in 1996 legislation governing DOE's disposition of its uranium, we believe that DOE's authority to sell the unprocessed tails is doubtful. DOE may only sell or transfer uranium in a manner consistent with the provisions of the statute. While the statute authorizes and regulates DOE's sale or transfer of a number of types of uranium, it does not specify conditions for the sale or transfer of depleted uranium tails. Therefore, under rules of statutory construction, DOE likely lacks such authority. However, if Congress were to provide the department with the needed authority, firms such as nuclear power utilities and enrichment companies may be interested in purchasing these tails and re-enriching them as a source of nuclear fuel. Industry officials told us that buyers would discount, perhaps steeply, their offered prices to make buying tails attractive compared with purchasing natural uranium on the open market. That is, DOE might get a discounted price for the tails to compensate buyers for additional risks, such as rising enrichment costs or buyers' inability to obtain sufficient enrichment services. DOE could contract to re-enrich the tails. Although DOE's authority to sell the unprocessed tails is doubtful, no such general legal impediment exists for the department to itself contract to re-enrich the tails and sell the resulting natural or enriched uranium. Although DOE would have to pay for re-enrichment, it could be better off selling the re-enriched uranium instead of the unprocessed tails if its re-enrichment costs were less than the discount it would have to offer to compensate a buyer for the risks associated with arranging for re-enrichment. DOE could store the tails indefinitely. DOE also has the general legal option to store the tails indefinitely. While this option conforms to an existing DOE plan to convert tails into a more stable form for long-term storage, storing the tails indefinitely could prevent DOE from obtaining the potentially large revenue resulting from sales at currently high uranium prices. It would also continue to incur associated storage and maintenance costs that currently amount to about $4 million per year. Moreover, after converting the tails to a more stable form, DOE would incur higher costs to re-enrich the tails if it decided later to pursue such an approach. This is because DOE would have to chemically reconvert the tails to the uranium compound required for re-enrichment.

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## Topics

Energy

Agency missionsCost analysisEnvironmental protectionHazardous substancesHazardous waste disposalHazardous waste sitesHazardous wastesHealth hazardsNuclear energyNuclear facilitiesNuclear fuel plantsNuclear materialsNuclear powerplantsNuclear radiation monitoringNuclear waste disposalNuclear waste managementNuclear waste storageNuclear weaponsRadiation exposure hazardsRadioactive materialsRadioactive pollutionRadioactive waste disposalRadioactive wastesUraniumWater pollution control