Uranium Enrichment: Extension of Decontamination and Decommissioning Fund May Be Needed to Cover Projected Cleanup Costs
Published: 2007-11-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Cleaning up the nation's three uranium enrichment plants will cost billions of dollars and could span decades. These plants--located near Oak Ridge, Tenn.; Paducah, Ky.; and Portsmouth, Ohio--are contaminated with radioactive and hazardous materials. In 1992, the Energy Policy Act created the Uranium Enrichment Decontamination and Decommissioning Fund (Fund) to pay for plant cleanup. Fund revenues come from an assessment on domestic utilities and federal government appropriations. In 2004, GAO reported on the Fund's sufficiency to cover authorized activities. GAO recommended that Congress consider reauthorizing the Fund for 3 more years, to 2010, and require the Department of Energy (DOE) to reassess the Fund's sufficiency before it expired to determine if further extensions were needed. Because decisions not yet made by DOE could affect the cost of cleanup and the Fund's sufficiency, GAO also recommended that DOE develop decontamination and decommissioning plans for the Paducah and Portsmouth plants that would identify the most probable time frames and costs for completing the cleanup work. This testimony is based on GAO's 2004 report. It summarizes the extent to which the Fund may be sufficient to cover authorized activities and the status of DOE's progress in developing decontamination and decommissioning plans for the Paducah and Portsmouth plants.
section_title: What GAO Found
paragraphs: GAO's analysis showed that the Fund will be insufficient to cover all authorized activities. Using DOE's estimates for the cleanup costs at the three plants and current and likely revenue projections, GAO developed a number of simulation models that factored in annual cost and revenue projections and uncertainties surrounding inflation rates, costs, revenues, and the timing of the final cleanup work at the Paducah and Portsmouth plants. Specifically, GAO's baseline model demonstrated that by 2044, the most likely date for completing all cleanup activities at the plants, cleanup costs will have exceeded revenues by $3.8 billion to $6.2 billion (in 2007 dollars). Importantly, GAO found that the Fund would be insufficient irrespective of which estimates were used or what time frames were assumed. DOE has not yet issued plans for the decontamination and decommissioning of the Paducah and Portsmouth plants as GAO recommended. According to DOE officials, the department is developing a report to Congress that will contain updated information for both plants. DOE did not make that information available to GAO, however, and hence GAO was unable to assess how any new schedule or cost estimates may affect the Fund's sufficiency. Until DOE issues plans that provide the most probable time frames and costs for completing decontamination and decommissioning at the Paducah and Portsmouth plants, it is not possible to more precisely determine the total funding needed to cover the authorized cleanup activities.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss our work on the sufficiency of  the Uranium Enrichment Decontamination and Decommissioning Fund  (Fund) as you consider its reauthorization. As you know, the 1992 Energy  Policy Act, as amended, established the Fund and authorized  contributions for 15 years (ending in 2007) to be made by federal  government appropriations and payments from domestic utility  companies. The Fund is the government’s principal source of funding for  the decontamination and decommissioning of the Department of Energy’s  (DOE) three uranium enrichment plants, located near Oak Ridge,  Tennessee; Paducah, Kentucky; and Portsmouth, Ohio. These plants,  which encompass more than 30 million square feet of floor space, miles of  interconnecting pipes, and thousands of acres of land, are contaminated  with radioactive and hazardous materials. The cleanup of these plants— the responsibility of DOE’s Office of Environmental Management—will  cost billions of dollars and could span several decades. Cleanup activities  include assessing, treating, and disposing of the contamination found at  the plants and the decontamination and decommissioning of inactive  facilities. DOE conducts its cleanup activities under the requirements of  several federal environmental laws and compliance agreements with  relevant regulatory authorities, including the Environmental Protection  Agency and state regulatory agencies.
In 2004, we reported on actions DOE had taken to reduce the cleanup  costs the Fund is authorized to support and the extent to which the Fund  is sufficient to cover authorized activities. Because we found that the  Fund would likely be insufficient, we recommended that Congress  consider reauthorizing the Fund for an additional 3 years, to 2010, and  require DOE to reassess the Fund’s sufficiency before the 2007 expiration  date to determine if extensions beyond 2010 would be needed.  Additionally, to reduce uncertainty regarding the Fund’s sufficiency, we  recommended that the Secretary of Energy develop decontamination and  decommissioning plans for the Paducah and Portsmouth plants that would  identify the most probable time frames and costs for completing the  cleanup work. My testimony today (1) includes findings from our 2004  report, which examined the extent to which the Fund was sufficient to  cover authorized activities, and (2) provides an update on DOE’s progress  in developing decontamination and decommissioning plans at the Paducah  and Portsmouth plants.
In preparing our 2004 report, we obtained DOE’s estimates for cleanup  and other key costs at the three plants, and current and likely revenue  projections. We assessed the reliability of these data and determined that  they were sufficiently reliable for the purposes of our report. We used the  data to develop a number of simulation models, which factored in cost and  revenue projections on an annual basis, as well as uncertainties  surrounding inflation rates, interest rates, the costs and revenues, and the  timing of the final decontamination and decommissioning work at the  Paducah and Portsmouth plants. In addition, to prepare for this testimony,  we reviewed DOE’s status reports developed in response to our 2004  report and interviewed DOE headquarters officials to determine DOE’s  progress to date in developing decontamination and decommissioning  plans at Paducah and Portsmouth. We performed our work in accordance  with generally accepted government auditing standards.
The Fund will be insufficient to cover all of its authorized activities.
Specifically, our baseline model showed that by 2044, the most likely date  for completing all cleanup activities at the plants, cleanup costs will have  exceeded revenues by $3.8 billion to $6.2 billion (in 2007 dollars).  Irrespective of which model we used, we found that the Fund would be  insufficient. Each of the alternative models—(1) accelerated time frames,  (2) deferred time frames, and (3) baseline time frames with additional  revenues from government contributions as authorized under current  law—demonstrated that the cleanup costs would exceed revenues. We  recommended that Congress consider reauthorizing the Fund for an  additional 3 years, to 2010, and require DOE to reassess the Fund’s  sufficiency before the expiration date to determine if extensions beyond  2010 would be needed.
DOE has not yet issued plans for the decontamination and  decommissioning of the Paducah and Portsmouth plants as GAO  recommended. According to DOE officials, the department is now in the  process of finalizing a report that contains new schedule and cost  information for both plants and addresses the sufficiency of the Fund.  However, DOE did not make that information available to GAO and  therefore, we were unable to assess how any new schedule or cost  estimates may affect the Fund’s sufficiency. Until DOE issues plans that  provide the most probable time frames and costs for completing  decontamination and decommissioning at the Paducah and Portsmouth  plants, it is not possible to more precisely determine the total funding  needed to cover the authorized cleanup activities.
subsections: section_title: Background
paragraphs: The federal government has enriched uranium for use by commercial  nuclear power plants and for defense-related purposes for more than 40  years at three plants, located near Oak Ridge, Tennessee; Paducah,  Kentucky; and Portsmouth, Ohio (see fig. 1). The Oak Ridge plant, known  as East Tennessee Technology Park, is located on 1,500 acres of land; the  oldest of the three plants, it has not produced enriched uranium since  1985. The Paducah plant, located on about 3,500 acres, continues to enrich  uranium for commercial nuclear power plants under a lease to a private  company, the United States Enrichment Corporation (USEC). The  Portsmouth plant, a 3,700-acre site, ceased enriching uranium in May 2001  because of reductions in the commercial market for enriched uranium.  Later that year, the plant was placed on cold standby (an inactive status  that maintains the plant in a usable condition), so that production at the  facility could be restarted in the event of a significant disruption in the  nation’s supply of enriched uranium. USEC was awarded the contract to  maintain the plant in cold standby, a condition that continues today. Yet  because of newer, more efficient enrichment technologies and the  globalization of the uranium enrichment market, all three uranium  enrichment plants have become largely obsolete. Therefore, DOE now  faces the task of decontaminating, decommissioning, and undertaking  other remedial actions at these large and complex plants, which are  contaminated with hazardous industrial, chemical, nuclear, and  radiological materials.
In 1991, at the request of the House Subcommittee on Energy and Power,  GAO analyzed the adequacy of a $500 million annual deposit into a fund to  pay for the cost of cleanup at DOE’s three uranium enrichment plants. We  reported that a $500 million deposit indexed to inflation would likely be  adequate, assuming that deposits would be made annually into the fund as  long as cleanup costs were expected to be incurred, which, at the time of  our study, was until 2040. Additionally, in a related report, we concluded  that the decommissioning costs at the plants should be paid by the  beneficiaries of the services provided by DOE—in this case, DOE’s  commercial and governmental customers.
In 1992, the Congress passed the Energy Policy Act, which established the  Uranium Enrichment Decontamination and Decommissioning Fund to pay  for the costs of decontaminating and decommissioning the nation’s three  uranium enrichment plants. The Energy Policy Act also authorized the  Fund to pay remedial action costs associated with the plants’ operation, to  the extent that funds were available, and to reimburse uranium and  thorium licensees for the portion of their cleanup costs associated with  the sale of these materials to the federal government. The act authorized  the collection of revenues for 15 years, ending in 2007, to pay for the  authorized cleanup costs. Revenues to the Fund are derived from (1) an  assessment, of up to $150 million annually, on domestic utilities that used  the enriched uranium produced by DOE’s plants for nuclear power  generation and (2) federal government appropriations amounting to the  difference between the authorized funding under the Energy Policy Act  and the assessment on utilities. Congress specified that any unused  balances in the Fund were to be invested in Treasury securities and any  interest earned made available to pay for activities covered under the  Fund.
DOE’s Office of Environmental Management is responsible for managing  the Fund and plant cleanup activities, which, through fiscal year 2003,  were mostly carried out by DOE contractor Bechtel Jacobs. The  department’s Oak Ridge Operations Office in Oak Ridge, Tennessee, had  historically provided day-to-day Fund management and oversight of  cleanup activities at all three plants. In October 2003, however, DOE  established a new office in Lexington, Kentucky, to directly manage the  cleanup activities at the Paducah and Portsmouth plants. The Oak Ridge  Operations Office continues to manage the Fund and the cleanup activities  at the Oak Ridge plant.
Currently, the Fund is used to pay for the following activities:    Reimbursements to uranium and thorium licensees. The Energy Policy  Act provides that the Fund be used to reimburse licensees of active  uranium and thorium processing sites for the portion of their  decontamination and decommissioning activities, reclamation efforts, and  other cleanup costs attributable to the uranium and thorium they sold to  the federal government. From fiscal year 1994, when the Fund began  incurring costs, through fiscal year 2003, $447 million was used from the  Fund for uranium and thorium reimbursements (in 2004 dollars).
Cleanup activities at the uranium enrichment plants. Cleanup activities  at the plants include remedial actions, such as assessing and treating  groundwater or soil contamination; waste management activities, such as  disposing of contaminated materials; the surveillance and maintenance of  the plants, such as providing security and making general repairs to keep  the plants in a safe condition; the decontamination and decommissioning  of inactive facilities by either cleaning them up so they can be reused or  demolishing them; and other activities, such as covering litigation costs at  the three plants and supporting site-specific advisory boards. From fiscal  year 1994 through fiscal year 2003, a total of $2.7 billion from the Fund was  used for these cleanup activities (in 2004 dollars).
section_title: At Projected Costs and Revenues, the Fund Will Be Insufficient to Complete Cleanup at the Three Plants
paragraphs: Under a variety of models using DOE’s projected costs and revenues, the  Fund will be insufficient to cover all of its authorized activities. Using  DOE’s projections that 2044 would be the most likely date for completion  of cleanup at the plants, we estimated that cleanup costs would exceed  Fund revenues by $3.8 billion to $6.2 billion (in 2007 dollars). Because  DOE had not determined when decontamination and decommissioning  work would begin at the Paducah and Portsmouth plants, and because  federal contributions to the Fund have been less than the authorized  amount, we developed several alternative models to assess the effects of  different assumptions on the Fund’s sufficiency. Specifically, we  developed the following models:    Baseline model. This model was developed in consultation with DOE and  its contractor officials about what the most likely cleanup time frames  would be and used cost estimates assuming that cleanup at all plants  would be completed by 2044.
Accelerated model. Because DOE had not determined when the final  decontamination and decommissioning would begin at its Paducah and  Portsmouth plants, we developed the accelerated model under the  assumption that cleanup work could be completed faster than under the  baseline model, given unconstrained funding. DOE and its contractor  officials provided additional cost estimates, where Paducah’s final work  would begin in 2010 and be completed by 2024 and Portsmouth’s final  decontamination and decommissioning work would begin in 2007 and be  completed by 2024.
Deferred model. This model was developed under the assumption that,  given current funding constraints, it may not be realistic for two major  decontamination and decommissioning projects to be done concurrently.  Thus, deferred time frames were determined by DOE, assuming that all  work would be completed at the Portsmouth plant first and then initiated  at the Paducah plant. For the deferred model, Portsmouth’s final  decontamination and decommissioning work was estimated to be  completed from 2010 to 2037 and Paducah’s from 2038 to 2052.
Revenue-added model. This model was developed to assess the effect of  the government’s meeting its total authorized annual contributions on the  balance of the Fund, which by the start of fiscal year 2004, was   $707 million less than authorized under the Energy Policy Act. For the  revenue-added model, we used baseline time frames but assumed that  government contributions to the Fund would continue annually at the 2004  authorized level until all government contributions as authorized by law  had been met, which would occur in fiscal year 2009.
Revenue-added-plus-interest model. For this model, we built on the  revenue-added model to include the effect of forgone interest that the  Fund could have earned had the government contributed the full  authorized amount. We assumed that these additional payments would be  made to the Fund in the same amounts as the 2004 annual authorized  amount and extended payments through fiscal year 2010.
Irrespective of which model we used, we found that the Fund would be  insufficient to cover the projected cleanup costs at the uranium  enrichment plants (see table 1). At best, assuming no additional funding is  provided beyond the 2007 authorized amount, Fund costs could outweigh  revenues by $3.8 billion (in 2007 dollars). Even with current authorized  amounts extended out through fiscal year 2010, the Fund could still be  insufficient by close to $0.46 billion (in 2007 dollars).
Although our analysis was able to capture several uncertainties potentially  affecting the Fund—including interest rates, inflation rates, cost and  revenue variances, and the timing of decontamination and  decommissioning—additional uncertainties exist that we could not  capture. These uncertainties included possible changes to the scope of the  cleanup; whether the Fund would be required to pay for additional  activities, such as long-term water monitoring once the plants were closed;  and the extent of potential future litigation costs that the Fund would have  to support. For example, a risk analysis completed by DOE in 2004 for the  Paducah plant indicated that changes in the scope of cleanup could  increase cleanup costs by more than $3 billion and extend the time frame  for cleanup to more than 30 years past the original scheduled date of  2019. In addition, when they developed their cleanup cost estimates, DOE  officials assumed that the costs of long-term stewardship activities—such  as groundwater monitoring, which may continue after all necessary  cleanup costs have been completed—would be covered by a separate  funding source. DOE officials acknowledged, however, that if another  funding source were not available, they may be required to use resources  from the Fund.
section_title: Uncertainty Over the Extent of the Fund’s Insufficiency Remains Because DOE Has Yet to Issue Plans for the Paducah and Portsmouth Plants
paragraphs: Uncertainty over the extent of the Fund’s insufficiency remains because  DOE has not issued plans that identify the most probable time frames and  costs for the decontamination and decommissioning of the Paducah and  Portsmouth plants. DOE was required to develop a report to Congress  containing such information, but because DOE was significantly revising  its cost estimates, it determined the report would not be accurate and did  not finalize it. According to DOE officials, it is now in the process of  finalizing a report that contains new schedule and cost information for  both plants and addresses the sufficiency of the Fund. This report was  due to Congress in October 2007 but has yet to be issued by DOE. Because  the report has not been finalized, DOE officials were unwilling to provide  us with updated information on current schedule and cost estimates. As a  result, we are unable to assess how any new information may affect the  Fund’s sufficiency. Until DOE resolves uncertainties surrounding the  plants’ cleanup, including when cleanup activities are expected to both  begin and end, it is not possible to more precisely determine the total  funding needed to cover the authorized cleanup activities. If, however,  closure and cleanup time frames extend past the originally projected  schedules at the plants, then the total costs the Fund is authorized to  support may increase, particularly costs for maintenance, safety, and  security activities and other fixed costs that must be maintained until  cleanup work at the plants is complete.
In closing, we believe that an extension to the Fund may be necessary to  cover cleanup costs at the nation’s three uranium enrichment plants. The  information currently available on the projected costs and revenues  authorized by the Fund suggests that it may be insufficient by up to several  billion dollars. DOE appears to be taking steps to develop new, detailed  time frames and cost estimates for the decontamination and  decommissioning of its uranium enrichment plants. However, until this  detailed information is made available, we cannot assess how DOE’s  updated time frames and cost estimates may affect the Fund’s sufficiency.  As a result, we believe that DOE should finalize plans for the Paducah and  Portsmouth plants so that it can better determine the extent to which  Fund extensions may be needed. Unless the Fund is extended beyond its  current expiration in 2007, cleanup activities that could not be paid for  from the Fund because of a shortfall may have to be financed entirely by  the federal government and could add an additional fiscal burden at a time  when our government is facing already significant long-term fiscal  challenges.
Mr. Chairman, this completes my prepared statement. I would be happy to  respond to any questions you or other Members of the Committee may  have at this time.
section_title: Contact and Acknowledgments
paragraphs: For further information, please contact Robin M. Nazzaro at (202) 512-3841  or nazzaror@gao.gov. Sherry L. McDonald, Assistant Director;   Ellen W. Chu, Alyssa M. Hundrup, Mehrzad Nadji, and Barbara  Timmerman made key contributions to this statement.
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