Nuclear Material: Several Potential Options for Dealing with DOE's Depleted Uranium Tails Could Benefit the Government
Published: 2008-04-03T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since the 1940s, the Department of Energy (DOE) has been processing natural uranium into enriched uranium, which has a higher concentration of the isotope uranium-235 that can be used in nuclear weapons or reactors. This has resulted in over 700,000 metric tons of leftover depleted uranium, also known as "tails," that have varying residual concentrations uranium-235. The tails are stored at DOE's uranium enrichment plants in Portsmouth, Ohio and Paducah, Kentucky. Although the tails have historically been considered a waste product and an environmental liability, recently an about tenfold increase in uranium prices may give DOE options to use some of the tails in ways that could provide revenue to the government. GAO's testimony is based on its March 31, 2008, report entitled Nuclear Material: DOE Has Several Potential Options for Dealing with Depleted Uranium Tails, Each of Which Could Benefit the Government (GAO-08-606R). The testimony focuses on (1) DOE's potential options for its tails and (2) the potential value of DOE's tails and factors that affect the value. It also contains an analysis of DOE's legal authority to carry out the potential options. In its report, GAO recommended that Congress consider clarifying DOE's statutory authority to manage depleted uranium. GAO also recommended that DOE complete a comprehensive uranium management assessment as soon as possible.
section_title: What GAO Found
paragraphs: DOE's potential options for its tails include selling the tails "as is," re-enriching the tails, or storing them indefinitely. DOE's current legal authority to sell its depleted uranium inventory "as is" is doubtful, but DOE generally has authority to carry out the other 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 tails in unprocessed form is doubtful and that, 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. DOE could contract to re-enrich the tails. Although DOE would have to pay for re-enrichment, it might obtain more value from selling the re-enriched uranium instead of the tails if its re-enrichment costs were less than the discount it would have to offer to sell the tails as is. DOE could 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. The potential value of DOE's depleted uranium tails is currently substantial, but changing market conditions could greatly affect the tails' value over time. Based on February 2008 uranium prices and enrichment costs and assuming sufficient re-enrichment capacity is available, GAO estimates the value of DOE's tails at$7.6 billion. However, this estimate is very sensitive to changing uranium prices, which recently have been extremely volatile, as well as to the availability of enrichment capacity.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss our work on the Department of  Energy’s (DOE) inventory of depleted uranium as you consider options for  using this inventory in ways that could benefit the U.S. government. As  you know, since the 1940s the government has been processing natural  uranium into enriched uranium. This increases the concentration of the  isotope uranium-235 necessary to make the material useful in nuclear  weapons or reactors. The generation of enriched uranium over many  decades has resulted in approximately 700,000 metric tons of leftover  depleted uranium, also known as “tails,” that have varying residual  concentrations of uranium-235 remaining. DOE stores these tails at its  uranium enrichment plants in Portsmouth, Ohio, and Paducah, Kentucky.  DOE is faced with assessing its options to best manage this large  accumulation of tails. Although the tails have historically been considered  a waste product and an environmental liability, an about tenfold increase  in uranium prices in recent years may give DOE options to use that portion  of the tails with the higher residual concentrations of uranium-235 in ways  that could provide revenue to the government.
My testimony today, which is based on our March 31, 2008, report to the  House Committee on Energy and Commerce and the Senate Committee on  Energy and Natural Resources, discusses (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.
To address these objectives, we reviewed a draft uranium sales strategy  that DOE has been developing since 2005, as well as a March 2008 DOE  policy statement outlining how the department intends to manage its  inventory of uranium—including depleted, natural, and enriched uranium.  As part of our evaluation of DOE’s potential options, we reviewed relevant  statutes and regulations, court decisions, and other legal documents. We  also requested DOE’s position on its legal authority to implement options  for its tails, but DOE declined to provide its position. Appendix I contains  our analysis of DOE’s legal authority to sell or transfer the tails in their  current form, as well as to re-enrich and sell the tails and to store the tails  indefinitely. In addition to this legal analysis, we interviewed officials from  DOE’s Office of Nuclear Energy, which is developing the strategy, and  DOE’s Office of Environmental Management, which is in charge of the day- to-day management of DOE’s uranium inventories stored at Paducah and  Portsmouth. We also visited DOE’s Portsmouth and Paducah Project  Office in Lexington, Kentucky, to discuss depleted uranium management  issues with DOE officials. In addition, we interviewed officials from 10  U.S. nuclear power utilities, enrichment services companies such as  USEC, and others in the nuclear industry regarding their commercial  interests in the tails. To estimate the potential value of DOE’s tails, we  developed a model using standard formulas for the amounts of enriched  uranium and tails produced from given quantities of uranium and  enrichment services. We obtained data from DOE on the quantities and  uranium-235 concentrations of tails in the department’s inventory. The  model also used uranium price data obtained from nuclear industry trade  publications. These data are commonly used in the nuclear industry as  standard measures of the market price for uranium; we determined that  the data were sufficiently reliable for our purposes.
We conducted our work from July 2007 to March 2008 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.
In summary, we found the following:  DOE’s potential options for its tails include selling the tails “as is,” re- enriching the tails, or storing them indefinitely. However, 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 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.
DOE has not completed a comprehensive assessment to decide among its  sales, re-enrichment, or storage options. The department has been  developing a uranium management plan since 2005 and issued a March  2008 policy statement that established a general framework for how DOE  plans to manage its uranium inventories. However, the policy statement is  not a comprehensive assessment of the options for DOE’s tails. For  example, the policy statement does not discuss whether it would be more  advantageous to sell the higher-concentration tails as is (if authorized) or  to re-enrich them, and it does not contain details on when any potential  sales or re-enrichment may occur.
The potential value of DOE’s depleted uranium tails is currently  substantial, but changing market conditions could greatly affect the tails’  value over time. Based on February 2008 uranium prices and enrichment  costs and assuming sufficient re-enrichment capacity was available, we  estimate DOE’s tails to have a net value of $7.6 billion. This estimate is  very sensitive to changing uranium prices, which recently have been  extremely volatile, as well as to the availability of enrichment capacity.  For example, using the lowest and highest uranium prices over the past 8  years, our model shows the value of DOE tails could range from almost  nothing to more than $20 billion. In addition, excess re-enrichment  capacity currently is very limited, and the amount of available re- enrichment capacity for tails over the next decade is uncertain.  Accordingly, the actual amount of revenue that DOE could obtain from the  tails could be much higher or lower than our $7.6 billion estimate,  depending upon uranium prices at the time the material is marketed and  the department’s ability to obtain sufficient enrichment services, as well as  the price of those services.
We recommended that Congress consider clarifying DOE’s statutory  authority to manage depleted uranium, including explicit direction about  whether and how DOE may sell the tails in their current form. Depending  on the terms of such legislation, this could reap significant benefits for the  government because of the potentially large amount of revenue that could  be obtained. In any event, enacting explicit provisions regarding DOE’s  disposition of depleted uranium would provide stakeholders with  welcome legal clarity and could help avoid litigation that would interrupt  DOE’s efforts to obtain maximum value for its tails. We also recommended  that DOE complete a comprehensive uranium management assessment as  soon as possible to best take advantage of recent increases in uranium  prices.
In its review of our report, DOE did not comment either on our finding  that DOE’s legal authority to sell or transfer depleted uranium in its  current form is doubtful or on our recommendation that Congress  consider clarifying DOE’s statutory authority to manage depleted uranium.  Although DOE officials did not agree or disagree with our  recommendation that the department complete a comprehensive uranium  management assessment as soon as possible, they did request that we  clarify the recommendation to more explicitly outline what the assessment  should contain. We agreed and modified the report accordingly.
subsections: section_title: Background
paragraphs: Since the 1940s, one mission of 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 USEC, formerly a wholly  owned government corporation that was privatized in 1998. However,  DOE still maintains over 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. In  addition, DOE also maintains large inventories of natural and enriched  uranium that are also surplus to the department’s needs.
Tails have historically been considered 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 be profitably re-enriched, according to industry  officials. About one-third of DOE’s tails contain uranium-235  concentrations at that level or higher.
section_title: DOE Has Options for the Tails but Has Not Finished a Comprehensive Assessment of Them
paragraphs: DOE’s potential options for its tails include selling the tails “as is,” re- enriching them, or storing them indefinitely. However, DOE’s legal  authority to sell the tails in their current form is doubtful. Although 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 it is still evaluating the details of how  such options might be implemented.
subsections: section_title: DOE’s Legal Authority to Sell the Tails in Their Current Form Is Doubtful
paragraphs: While selling the tails in their current unprocessed form is a potential  option, we believe that DOE’s authority to conduct such sales is doubtful  because of specific statutory language in 1996 legislation governing DOE’s  disposition of its uranium. Appendix I contains our analysis of DOE’s  authority to sell or transfer its depleted uranium in its current form, as  well as to re-enrich and sell the tails, and to store the tails indefinitely. As  our analysis explains, in 1996, Congress enacted section 3112 of the USEC  Privatization Act, which limits DOE’s general authority, under the Atomic  Energy Act 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 sale of natural and low-enriched uranium from DOE’s inventory. To  ensure the domestic uranium market is not flooded with large amounts of  government material, in section 3112(d), Congress required DOE to  determine that any such inventory sales will not have a material adverse  impact on the domestic uranium industry. Congress also required in  section 3112(d) that DOE determine it will receive adequate payment—at  least “fair market value”—if it sells this uranium and that DOE obtain a  determination from the President that such materials are not necessary for  national security.
Nowhere, however, does section 3112(d) or any other provision of section  3112 explicitly provide conditions for DOE to transfer or sell 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. While courts have  not addressed this question before and thus the outcome is not free from  doubt, this interpretation applies the plain language of the statute. It also  respects the policy considerations and choices Congress made in 1996  when presented with the disposition of DOE’s valuable uranium in a  crowded and price-sensitive market. Finally, this reading of DOE’s  authority is consistent with how courts address changes in circumstances  after a law is passed: Statutes written in comprehensive terms apply to  unanticipated circumstances if the new circumstances reasonably fall  within the scope of the plain language. Thus, under the current terms of  section 3112, DOE’s sale of its tails would be covered by the statute’s  general prohibition on sale of uranium, even if tails were not part of the  universe Congress explicitly had in mind when it enacted the statute in  1996.
Should Congress grant DOE the needed legal authority by amending the  USEC Privatization Act or through other legislation, firms such as nuclear  power utilities and enrichment companies would be interested in  purchasing at least that portion of the tails with higher concentrations of  extractable uranium-235 as a valuable source for nuclear fuel. Officials  from 8 of 10 U.S. nuclear utilities indicated tentative interest in such a  purchase. Individual utilities were often interested in limited quantities of  DOE’s tails because they were concerned about depending upon a single  source to fulfill all of their requirements. Multiple utilities acting together  as a consortium could mitigate these concerns and purchase larger  quantities of tails. Some enrichment firms also told us of some interest in  purchasing portions of the inventory, but their anticipated excess  enrichment capacity to process the tails into a marketable form affected  both the quantity of tails they would purchase and the timing of any  purchase.
Potential buyers suggested various commercial arrangements, including  purchasing the tails through a competitive sale, such as an auction, or  through negotiations with DOE. However, 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. In addition,  potential buyers noted that any purchase would depend upon confirming  certain information, such as that the tails were free of contaminants that  could cause nuclear fuel production problems and that the cylinders  containing the tails—some of which are 50 years old and may not meet  transportation standards—could be safely shipped.
section_title: DOE Could Re-enrich Its Tails
paragraphs: Although DOE’s legal authority to sell the tails in their current form is  doubtful, DOE has the general legal option, as discussed in appendix I, of  re-enriching the tails and then selling the resulting natural or enriched  uranium. DOE would have to contract for enrichment services  commercially because the department no longer operates enrichment  facilities itself. Furthermore, DOE would have to find a company with  excess enrichment capacity beyond its current operations, which may be  particularly difficult if large amounts of enrichment processing were  required. Within the United States today, for example, the only operating  enrichment facility is DOE’s USEC-run Paducah, Kentucky, plant, and  almost all of its enrichment capacity is already being used through 2012,  when the facility may stop operating. USEC and at least two other  companies are also constructing or planning to construct new enrichment  facilities in the United States that potentially could be used to re-enrich  DOE’s tails.
Although DOE would have to pay for re-enrichment, it might obtain more  value from selling the re-enriched uranium instead of the tails if its re- enrichment costs were less than the discount it would have to offer to sell  the tails as is. Enrichment firms with whom we spoke told us they would  be interested in re-enriching the tails for a fee. The quantity of tails they  would re-enrich annually would depend on the available excess  enrichment capacity at their facilities.
Additionally, as noted above, prior to selling any natural or enriched  uranium that results from re-enriching tails, DOE would be required under  section 3112(d) of the USEC Privatization Act to determine that sale of the  material would not have a material adverse impact on the domestic  uranium industry and that the price paid to DOE would provide at least  fair market value. Section 3112(d) also would require DOE to obtain the  President’s determination that the material is not needed for national  security.
section_title: DOE Could Store the Tails
paragraphs: DOE also has the general legal option, as discussed in appendix I, to store  the tails indefinitely. In the late 1990s, when relatively low uranium prices  meant that tails were viewed as waste, DOE developed a plan for the safe,  long-term storage of the material. DOE is constructing two new facilities  to chemically convert its tails into a more stable and safer uranium  compound that is suitable for long-term storage. DOE estimates that after  the conversion facilities begin operating in 2009, it will take approximately  25 years to convert its existing tails inventory.
Storing the tails indefinitely could prevent DOE from taking advantage of  the large increase in uranium prices to obtain potentially large amounts of  revenue from material that was once viewed as waste. DOE would also  continue to incur costs associated with storing and maintaining the  cylinders containing the tails. These costs amount to about $4 million  annually. Sale (if authorized) or re-enrichment of some of DOE’s tails  could also reduce the amount of tails that would need to be converted and,  thereby, save DOE some conversion costs.
Moreover, once the tails were converted into a more stable form of  uranium oxide, DOE’s costs to re-enrich the tails would be higher if it later  decided to pursue this approach. This is because of the cost of converting  the uranium oxide back to uranium hexafluoride, a step that would be  required for re-enrichment. However, according to DOE officials, after the  conversion plants begin to operate, the plants will first convert the lower  concentration tails because they most likely will not be economically  worthwhile to re-enrich. This would give DOE additional time to sell or re- enrich the more valuable higher-concentration tails.
section_title: DOE Has Not Completed a Comprehensive Assessment of Options for Its Tails
paragraphs: DOE has been developing a plan since 2005 to sell excess uranium from  across its inventories of depleted, natural, and enriched uranium to  generate revenues for the U.S. Treasury. In March 2008, DOE issued a  policy statement that established a general framework for how DOE plans  to manage its uranium inventories. One feature of this policy statement is  the establishment of an annual cap on total uranium sales from all of  DOE’s inventories. The cap is designed to minimize a material adverse  impact on domestic uranium producing companies that could result from  DOE depressing uranium prices by selling large amounts of uranium.  Thus, under this policy, the maximum amount of tails that DOE would sell  annually will depend on the amount of planned sales from its other  uranium inventories. In addition, because most uranium to be used as fuel  for U.S. nuclear power plants comes from foreign sources, DOE may also  choose to retain, rather than sell, some of its uranium as a reserve  stockpile to be used in case of a significant disruption in world supplies.
However, the March 2008 policy statement is not a comprehensive  assessment of the sales, re-enrichment, or storage options for DOE’s tails.  The policy statement lacks specific information on the types and quantities  of uranium that the department has in its inventory. Furthermore, the  policy statement does not discuss whether it would be more advantageous  to sell the higher-concentration tails as is (if authorized) or to re-enrich  them. It also does not contain details on when any sales or re-enrichment  may occur or DOE’s legal authority to carry out those options under  section 3112 of the USEC Privatization Act. It also lacks information on  the uranium market conditions that would influence any DOE decision to  potentially sell or re-enrich tails. Further, it does not analyze the impact of  such a decision on the domestic uranium industry, and it does not provide  guidance on how a decision should be altered in the event that market  conditions change. Although the policy statement states that DOE will  identify categories of tails that have the greatest potential market value  and that the department will conduct cost-benefit analyses to determine  what circumstances would justify re-enriching and/or selling potentially  valuable tails, it does not have specific milestones for doing so. Instead,  the policy statement states that this effort will occur “in the near future.”
section_title: DOE’s Depleted Uranium Inventory Is Potentially Worth Billions of Dollars, but Many Factors Could Greatly Change Its Value
paragraphs: At current uranium prices, we estimate DOE’s tails to have a net value of  $7.6 billion; however, we would like to emphasize that this estimate is very  sensitive to changing uranium prices, which recently have been extremely  volatile, as well as to the availability of enrichment capacity. This estimate  assumes the February 2008 published uranium price of $200 per kilogram  of natural uranium in the form of uranium hexafluoride and $145 per  separative work unit—the standard measure of uranium enrichment  services. Our model also assumes the capacity to re-enrich the higher- concentration tails and subtracts the costs of the needed enrichment  services. It also takes into account the cost savings DOE would realize  from reductions in the amount of tails that needed conversion to a more  stable form for storage, as well as the costs to convert any residual tails.
As noted above, this estimate is very sensitive to price variations for  uranium as well as to the availability of enrichment services. Uranium  prices are very volatile, and a sharp rise or fall in prices could greatly  affect the value of the tails. For example, since 2000, uranium prices have  varied from a low of about $21 per kilogram in November 2000 to a high of  about $360 per kilogram in mid-2007, before falling to their recent level of  about $200 per kilogram. Substituting the high and low end of historical  uranium prices over the past 8 years for current prices results in a range of  values for the tails from being nearly worthless, assuming $21 per kilogram  of uranium, to over $20 billion, assuming $360 per kilogram of uranium.  There is no consensus among industry players whether uranium prices  will fall or rise in the future or on the magnitude of any future price  changes. Furthermore, the introduction of additional uranium onto the  market by the sale of large quantities of DOE depleted, natural, or  enriched uranium—assuming DOE obtains authority to sell depleted  uranium—could also lead to lower uranium prices. Therefore, according  to DOE officials, DOE’s uranium sales strategy, when completed, will  likely call for limits on the quantity of uranium the department would sell  annually to help achieve DOE’s goal of minimizing the negative effects on  domestic uranium producers. However, this would lengthen the time  necessary to market DOE’s uranium, increasing the time the department is  exposed to uranium price volatility. These factors all result in great  uncertainty of the valuation of DOE’s tails.
In addition, the enrichment capacity available for re-enriching tails may be  limited, and the costs of these enrichment services are uncertain. For  example, USEC currently only has a small amount of excess enrichment  capacity at its Paducah plant. If it used the spare capacity, USEC would  only be able to re-enrich about 14 percent of DOE’s most economically  attractive tails between now and the possible closing of the plant in 2012.  Although USEC officials told us the company was willing to explore  options to extend the Paducah plant’s operations beyond 2012 and  dedicate Paducah’s capacity solely to re-enriching DOE’s tails after this  point, negotiations between the company and DOE would be needed to  determine the enrichment costs that would be paid by DOE. The Paducah  plant uses a technology developed in the 1940s that results in relatively  high production costs. Even if the Paducah plant were to be dedicated  entirely to re-enriching DOE tails after 2012, over a decade would be  required to complete the work because of limitations on the annual  volume of tails that can be physically processed by the plant. This lengthy  period of time would expose DOE to risks of uranium price fluctuations  and increasing maintenance costs.
USEC and other companies are constructing or planning to construct  enrichment plants in the United States that utilize newer, lower-cost  technology. However, these facilities are not expected to be completed  until various times over the next decade. It is unclear exactly when these  facilities will be fully operating, the extent to which they will have excess  enrichment capacity to re-enrich DOE’s tails, and what enrichment costs  DOE could expect to pay. For example, the size of the fee DOE may have  to pay an enrichment company to re-enrich its tails would be subject to  negotiation between DOE and the company.
section_title: Conclusions
paragraphs: Recent dramatic increases in uranium prices present the U.S. government  with an opportunity to gain some benefit from material that was once  considered a liability. Under current law, however, one potential avenue  for dealing with DOE’s depleted uranium tails—sale of the material in its  current form—is likely closed to the department. Obtaining legal authority  from Congress to sell depleted uranium under USEC Privatization Act  section 3112 or other legislation would provide the department with an  additional option in determining the best course of action to obtain the  maximum financial benefit from its tails. We therefore recommended that  Congress consider clarifying DOE’s statutory authority to manage depleted  uranium, under the USEC Privatization Act or other legislation, including  explicit direction about whether and how DOE may sell or transfer the  tails. Depending on the terms of such legislation, this could reap  significant benefits for the government because of the potentially large  amount of revenue that could be obtained. In any event, enacting explicit  provisions regarding DOE’s disposition of depleted uranium would  provide stakeholders with welcome legal clarity and help avoid litigation  that could interrupt DOE’s efforts to obtain maximum value for the tails.
Unfortunately, DOE has not completed a comprehensive assessment of its  options with sufficient speed to take advantage of current market  conditions. Despite working since 2005 to develop a plan for its uranium  inventories, DOE’s March 2008 policy statement on the management of its  excess uranium inventories lacks detailed information on the types and  amounts of uranium that the department plans to potentially sell, further  enrich, or store. Although pledging to conduct appropriate cost-benefit  analyses as well as analyses on the impact of any proposal on the domestic  uranium industry, the policy statement lacks specific milestones for doing  so. Because of the potentially significant amounts of revenue that could be  obtained from DOE’s uranium inventories and the extreme volatility of the  uranium market, we recommended that the department complete, as soon  as possible, a comprehensive uranium management assessment that  details DOE’s options, its authority to implement these options, and the  impact of these options on the domestic uranium industry. Without such  an assessment that contains detailed information on each of its options,  DOE will be unable to quickly react to rapidly changing market conditions  to achieve the greatest possible value from its uranium inventories.
Mr. Chairman, this completes my prepared statement. I would be happy to  respond to any questions that you or other Members of the Subcommittee  may have at this time.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: If you have any questions or need additional information, please contact  Robert A. Robinson at (202) 512-3841 or robinsonr@gao.gov. Major  contributors to this statement were Ryan T. Coles (Assistant Director),  Ellen Chu, Terry Hanford, Karen Keegan, Omari Norman, Susan Sawtelle,  and Franklyn Yao.
section_title: Appendix I: GAO’s Legal Analysis of DOE’s Current Authority to Manage Depleted Uranium
subsections: section_title: Introduction and Summary of Conclusions
paragraphs: As part of the Government Accountability Office’s review of the  Department of Energy’s (DOE) potential options for managing its  inventory of excess depleted uranium (also known as “tails”), we  examined DOE’s legal authority to implement three basic options: (1) re- enriching the tails and then selling or transferring them, (2) storing the un- enriched tails indefinitely, and (3) selling or transferring the inventory of  tails “as is.”
We conclude that DOE has general authority under the Atomic Energy Act  to carry out the first and second options—to re-enrich and then sell or  transfer the tails, as well as to store them indefinitely. However, we  believe that because of constraints on DOE’s Atomic Energy Act authority  in the USEC Privatization Act, the department’s authority to carry out the  third option—to sell or transfer the tails in their current form—is doubtful.  We believe that under rules of statutory construction, DOE likely lacks  such authority under current law.
Because this is an issue of first impression, and because the question  could significantly affect the public interest and DOE’s development of a  comprehensive strategy for its excess-uranium inventory, we recommend  that Congress consider enacting legislation clarifying the conditions (if  any) under which DOE may sell or transfer its depleted uranium.  Depending on the terms of such legislation, this could reap benefits for the  government because of the potentially significant revenue that could be  obtained. In any event, such clarification would provide stakeholders with   welcome legal clarity, potentially enhance the attractiveness to interested  purchasers, and help avoid litigation that could interrupt DOE’s efforts to  obtain maximum value for the public.
section_title: Analysis
paragraphs: A. DOE authority to re-enrich and sell or transfer the tails  DOE has general authority under the Atomic Energy Act of 1954, as  amended, 42 U.S.C. § 2011 et seq. (AEA), to re-enrich its depleted uranium  inventory to natural or low-enriched levels and then to sell or transfer the  re-enriched product. First, AEA section 41, 42 U.S.C. § 2061, authorizes  DOE to re-enrich depleted uranium to low-enriched levels, and AEA  sections 63 and 66, 42 U.S.C. §§ 2093, 2096—which authorize DOE’s  acquisition and distribution of source material—implicitly authorize DOE  to re-enrich depleted uranium to natural levels. Second, AEA sections 53,  63, and 161m, 42 U.S.C. §§ 2073, 2093, 2201(m), authorize DOE to transfer  this re-enriched uranium, subject to certain conditions, to appropriately  licensed entities such as nuclear power reactor operators.
This general AEA authority is limited by any applicable restrictions in the  USEC Privatization Act, enacted in 1996. Section 3112(a) of the act, 42  U.S.C. §§ 2297h-10(a), prohibits DOE from transferring or selling “any  uranium (including natural uranium concentrates, natural uranium  hexafluoride, or enriched uranium in any form) . . . except as consistent  with this section.” The remaining provisions of section 3112 then specify  the conditions under which DOE may sell or transfer various types of  natural and enriched uranium. Thus, DOE is authorized to sell or transfer  re-enriched depleted uranium provided such transactions satisfy the  remaining section 3112 conditions.
B. DOE authority to store the un-enriched tails indefinitely  DOE has general authority under the AEA to store its unenriched depleted  uranium indefinitely, as well as to convert the tails to a more stable form  for storage. We believe this authority is implicit under AEA sections 63 and  66, which, as discussed above, authorize DOE to acquire and distribute  source material. This authority is also implicit under AEA section 41,  which authorizes DOE to enrich uranium, a process which inevitably  generates depleted uranium. In addition, to the extent the department’s  depleted uranium is “hazardous waste,” AEA section 91a(3), 42 U.S.C.  § 2121(a)(3), explicitly authorizes DOE to store, process, transport, and  dispose of “hazardous waste (including radioactive waste) resulting from  nuclear materials production, weapons production and surveillance  programs, and naval nuclear propulsion programs.”
Again, this AEA authority is limited by any applicable restrictions in the  USEC Privatization Act. Section 3112 of that act does not apply to, and  thus does not restrict, storage of DOE’s uranium. Section 3113, 42 U.S.C.  § 2297h-11, does not apply to or restrict storage of its own depleted  uranium, but it is relevant in that it reinforces DOE’s authority to store this  type of uranium under the AEA. Section 3113(a) requires DOE to accept  depleted uranium from other entities for storage and disposal in the event  the depleted uranium is determined to be “low-level radioactive waste.” If  the waste generator is a Nuclear Regulatory Commission (NRC) licensee,  DOE must take title and possession of the depleted uranium “at an existing  DUF6  storage facility.” Implicit in these provisions is  that DOE may store and dispose of its own depleted uranium waste as  well, under its AEA or other authority.
C. DOE authority to sell or transfer the tails in their current form  DOE has general authority under the AEA to sell or transfer depleted  uranium in its current form. As noted, sections 63 and 161m authorize  DOE to distribute or sell “source material” to appropriately licensed  entities, provided certain conditions are met, and depleted uranium is  “source material.” AEA section 11z, 42 U.S.C. § 2014(z).
Again, this AEA authority is limited by any applicable restrictions in the  USEC Privatization Act. While this is an issue of first impression, we  believe DOE’s authority to sell or transfer depleted uranium in its current  form is doubtful. We believe courts applying rules of statutory  construction would likely find DOE lacks such authority under current  law. “ shall not . . . transfer or sell any uranium (including natural uranium  concentrates, natural uranium hexafluoride, or enriched uranium in any form) to any  person except as consistent with this section.” (Emphasis added.) The remainder of section 3112 then prescribes the  conditions under which DOE may sell or transfer particular types of  uranium, namely, so-called Russian-origin uranium (subsection (b));  natural and enriched uranium transferred to USEC (subsection (c));  natural and low-enriched uranium sold from DOE’s inventory (subsection  (d)); and enriched uranium transferred to federal agencies, state and local  agencies, nonprofit, charitable or educational institutions, and others  (subsection (e)). No provision explicitly addresses depleted uranium.
Read naturally and in accordance with its plain language, section 3112  prohibits DOE from selling or transferring its depleted uranium. The tails  consist of uranium-235 and uranium-238, whether they are deemed a waste  or a valuable commodity, and a DOE Office of Environmental Management  official confirmed to us that operationally, the department treats depleted,  natural, and enriched uranium all as “uranium.” Thus, depleted uranium  would be covered by section 3112 as a type of “any uranium.” This plain  meaning is reinforced by the fact that section 3112(a) lists nonexclusive  examples of uranium—”any uranium (including natural uranium . . . or  enriched uranium in any form)”—making clear that additional types of  uranium are covered by section 3112. A 2005 DOE internal legal  memorandum (2005 DOE Memorandum) reaches the same conclusion.  Thus, because DOE may sell or transfer uranium only as consistent with  the terms of sections 3112(b)-3112(e), and because none of those  provisions specifies conditions under which depleted uranium may be  sold, the plain words of the statute prohibit it.
The statutory structure and legislative history support this conclusion. It is  clear that when Congress passed the USEC Privatization Act in 1996, it  was familiar with depleted uranium as a category of uranium requiring  management. Because depleted uranium was only considered as a  valueless waste at that time, Congress only explicitly referred to one  management option in the statute: disposal. As noted, in section 3113,  Congress required DOE to take responsibility for disposal of other entities’  depleted uranium, should it ever be determined to be a “low-level  radioactive waste.” As NRC noted recently in making such a  determination, however, 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. In that event—where depleted  uranium is a resource to be sold or transferred—section 3112, by its terms,  would apply. The fact that Congress did not specify section 3112  conditions under which depleted uranium may be sold, as it did for DOE’s  other valuable uranium, reflects only that depleted uranium was not  deemed valuable in 1996. It does not reflect congressional intent that  valuable depleted uranium is not subject to section 3112’s general  prohibition against sales of “any uranium.” While this result may appear  anomalous because depleted uranium is now considered a potentially  highly valuable commodity and a potential source of revenue for the  federal government, that is a matter for Congress to remedy, if it so  chooses.
A recently issued DOE policy on disposition of its excess uranium  inventory recognizes this increase in value for depleted uranium. To take  advantage of this development, department officials suggested to us that  they would be authorized to sell the tails in their current form using DOE’s  general AEA section 161m authority, without regard to the prohibitions in  the USEC Privatization Act. They suggested such an approach might be  reconciled as “consistent with” section 3112, as section 3112(a) requires,  because none of the provisions in section 3112 specifies conditions of sale  for depleted uranium. The 2005 DOE Memorandum makes a similar  argument, pointing to the fact that the legislative history contains no  explicit mention of restricting DOE’s existing AEA authority to sell  depleted uranium.
We disagree with this interpretation. DOE in effect reads a depleted  uranium exception into the unqualified term “any uranium,” and rewrites  section 3112 to say that only sale and transfer of uranium categories  explicitly identified in that section are restricted. That is not what the  statute says, and this reading would violate the principle that statutory  exceptions are to be narrowly construed. See, e.g., Commissioner v.  Clark, 489 U.S. 726, 738-39 (1989) (“Given that Congress has enacted a  general rule . . ., we should not eviscerate that legislative judgment  through an expansive reading of a somewhat ambiguous exception.”). Nor  does the legislative history support this result. The fact that there was no  mention of limiting DOE’s existing depleted uranium sales authority under  the AEA is unremarkable, because in 1996, there was no valuable depleted  uranium to sell.
Finally, it would not be consistent with section 3112 to allow DOE to sell  depleted uranium under the AEA. It would violate the statute’s prohibition  against sales of “any uranium,” because there are no section 3112  exceptions under which its sale is permitted. 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. Section 3112 represents  Congress’ more specific and later-enacted intent regarding the types of  factors to be considered in selling DOE’s uranium inventories, including  price, protection of the domestic uranium industry, and safeguarding the  national security, and therefore takes precedence. See, e.g., Smith v.  Robinson, 468 U.S. 992 (1984) (more specific and recent statute takes  precedence).
In sum, we believe our reading of section 3112 carries out the plain words  of the act and respects the policy considerations and choices Congress  made in 1996 when presented with the disposition of DOE’s valuable  uranium in a crowded and price-sensitive market. Our reading is also  consistent with how courts interpret broad statutes when circumstances  change: laws written in comprehensive terms apply to unanticipated  circumstances if they reasonably fall within the scope of the plain  language. See, e.g., Unexcelled Chemical Corp. v. United States, 345 U.S.  59 (1953). Thus, depleted uranium sales are covered by the prohibition in  section 3112, even if depleted uranium was not part of the universe  Congress explicitly had in mind when it enacted the statute in 1996.
The same concerns that led Congress to legislate explicit conditions of  sale for DOE’s other uranium inventories in 1996 may apply equally with  regard to sale of its depleted uranium inventory today. Congress now has  the opportunity to address the intervening increase in uranium values and  balance the competing concerns associated with its sale. Because the  question of DOE’s authority to sell its depleted tails would be a statutory  construction issue of first impression and thus is not free from doubt, and  because the question is an issue of significant public interest and  importance, we recommend that Congress consider enacting legislation  setting forth the explicit conditions (if any) under which DOE may sell or  transfer its depleted uranium. Depending on the terms of such legislation,  this could reap significant benefits for the government because of the  potentially significant revenue that could be obtained. In any event,  enacting explicit provisions regarding DOE’s sale or transfer of its  depleted uranium would provide stakeholders with welcome legal clarity  and help avoid litigation that could interrupt DOE’s efforts to obtain  maximum value for the public.
section_title: Conclusion
paragraphs: In summary, we conclude that DOE has general authority under the  Atomic Energy Act to re-enrich and then sell or transfer the tails, provided  the transaction meets the conditions of section 3112 of the USEC  Privatization Act. DOE also has general AEA authority to store the tails  indefinitely. However, we believe that because of constraints on DOE’s  AEA authority in the USEC Privatization Act, the department’s authority to  sell or transfer tails in their current form is doubtful and that under rules  of statutory construction, DOE likely lacks such authority under current  law. We recommend that Congress consider enacting legislation explicitly  addressing the scope of DOE’s authority to sell and transfer depleted  uranium.
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