Nuclear Material: Agencies Have Sound Procedures for Managing Exchanges but Could Improve Inventory Monitoring
Released: 2016-10-24T00:00:00

Letter

Background

This section describes the legal framework for obligation accounting, the uranium market and how obligations on uranium may be added at various stages of the nuclear fuel cycle, the mechanics of obligation exchanges, and the national security need for unobligated LEU.

Legal Framework for Obligation Accounting

The United States has negotiated nuclear cooperation agreements under section 123 of the Atomic Energy Act of 1954, as amended, with nuclear trading partners worldwide. These agreements establish obligations governing how nuclear material and equipment subject to the agreements are to be used. The United States had 22 nuclear cooperation agreements in force as of June 2016.

Once a nuclear cooperation agreement has been negotiated, U.S. government officials may negotiate an administrative arrangement that provides procedures for implementing the agreement, including details about accounting for foreign obligated material. Administrative arrangements with foreign partners may require DOE to produce annual reports on inventories of obligated material. For example, under the administrative arrangements for Australia, Canada, and EURATOM, the reports are to be conducted at the country level, not by facility. According to DOE documents, this is generally the case with its foreign partners. The annual obligation inventory reports summarize the import and export of foreign obligated material into and out of the United States in a given year. NMMSS produces summary information for these reports, which contain aggregated data for foreign obligation balances at all U.S. facilities by calendar year. After NMMSS generates data for the annual obligation inventory reports, NNSA provides these reports to U.S. foreign partners. These foreign partners use the reports to periodically reconcile their accounting records with those of the United States.

Other regulations, orders, guidance and an international agreement govern the accounting and reporting of nuclear material as well. For example, a DOE order and NRC regulations establish requirements for nuclear material control and accounting and the reporting of nuclear materials to NMMSS. The DOE order provides direction on the procedures that DOE contractors are to use in submitting data on certain quantities of 17 DOE-owned reportable nuclear materials. NRC regulations require NRC licensees to submit data to NMMSS on certain quantities of some of these nuclear materials. In addition, the United States has an agreement with the International Atomic Energy Agency (IAEA) on the safeguard of nuclear material, which requires the United States to maintain a system of accounting and control over certain nuclear material. Through the application of safeguards, IAEA seeks to verify that nuclear material subject to safeguards is not diverted to nuclear weapons or other proscribed purposes.

Uranium Market and How Obligations on Uranium May Be Added at Various Stages of the Nuclear Fuel Cycle

Uranium is a commodity that is necessary for commercial nuclear power. The market is global, and the vast majority of the uranium used to fuel U.S. commercial nuclear reactors is mined abroad. According to a 2016 U.S. Energy Information Administration, report, in 2015, only 6 percent of the 57 million pounds of uranium delivered to fuel U.S. nuclear reactors was of U.S. origin. Of the remaining 94 percent, 47 percent originated in Australia or Canada; 37 percent originated in Kazakhstan, Russia, or Uzbekistan; and the remaining 10 percent originated in Bulgaria, the Czech Republic, Malawi, Namibia, Niger, or South Africa.

After being mined, uranium undergoes a number of additional processing steps to become nuclear fuel for commercial reactors. These steps make up the nuclear fuel cycle. Obligations on nuclear material may be added at various stages in the cycle (see fig. 1). For example, if uranium is mined and milled in Australia and is then shipped to Canada, it may carry an Australian obligation. If the uranium goes through conversion at a plant using Canadian technology and is then shipped to Europe, it may carry a Canadian obligation. If the uranium is enriched at a plant using European technology and is then shipped to Japan, it may carry an obligation from EURATOM. Finally, if the uranium undergoes fuel fabrication at a plant using Japanese technology before export to a final user in the United States, it may carry a Japanese obligation. By the end of the process, the uranium may carry obligations to Australia, Canada, EURATOM, and Japan. Figure 1 illustrates how obligations may be added to uranium at various stages of the nuclear fuel cycle. Such obligations are tracked in NMMSS while the material remains in the United States.

Mechanics of Obligation Exchanges

To conduct an obligation exchange and record the transaction in NMMSS, both the facility “shipping” the obligation and the facility “receiving” the obligation must submit a DOE/NRC Form 741, “Nuclear Material Transaction Report,” to NMMSS. The shipper’s transaction report and the receiver’s transaction report should contain the same data. Following an obligation exchange, each facility will have the same total amount of a given material type, such as LEU, as it had before the exchange, but it will have different proportions of obligated and unobligated material (see fig. 2).

National Security Need for Unobligated LEU

Tritium is a key radioactive isotope used to enhance the power of nuclear weapons in the U.S. stockpile. Tritium is produced in nuclear reactors, and NNSA supports a program that produces tritium from LEU to help meet stockpile demands. NNSA’s tritium program requires that only unobligated LEU be used in reactors to produce tritium. The reactors that are under agreement to produce tritium for DOE belong to TVA, a government corporation, and, according to DOE, LEU fuel loaded into TVA reactors for tritium production must consist entirely of LEU that is unobligated.

It is DOE’s responsibility to ensure that TVA is supplied with unobligated fuel to support tritium production. DOE maintains an inventory of unobligated LEU. However, the United States lost its sole supplier of unobligated LEU when USEC ceased uranium enrichment operations in 2013. In 2014, NNSA projected that unobligated LEU fuel for tritium production would last through 2027. NNSA has since identified several actions that could extend that projected date from 2038 to 2041. These actions include “downblending” highly enriched uranium (HEU) from dismantled weapons to produce unobligated LEU, as well as conducting obligation exchanges to preserve unobligated LEU. According to DOE, to meet defense mission requirements in the future, the United States will eventually need to reestablish the capability to produce unobligated LEU. In the meantime, NNSA and TVA have been working together to identify actions to preserve DOE’s remaining quantities of unobligated LEU.

Over 800 Obligation Exchanges Have Taken Place Since October 2003, and Most Were Conducted for Commercial Reasons

From October 1, 2003, through November 30, 2015, 817 obligation exchanges took place in the United States, and most were conducted to meet commercial customer demand. The majority (98 percent) of these exchanges involved NRC-licensed commercial facilities; the rest were conducted by DOE contractors. NRC licensees told us they generally conducted exchanges to meet customer demand for material with obligations from certain countries and to avoid the need to physically transport uranium. DOE contractors told us they conducted a number of obligation exchanges primarily to accommodate the closure of the vault where the material was being stored.

Exchanges Typically Involved Commercial Nuclear Facilities, and Numbers of Exchanges Have Decreased in Recent Years

According to NMMSS data, there were 817 exchanges of foreign obligated nuclear material in the United States from October 1, 2003, through November 30, 2015. The majority of these obligation exchanges were between commercial nuclear facilities and involved particular material types and certain types of obligations. Specifics on the exchanges follow.

Of the 817 obligation exchanges, 802 (98 percent) were conducted by NRC-licensed commercial nuclear facilities; 14 were conducted by DOE contractors; and 1 was conducted by an NRC licensee that conducts work both for commercial purposes and for DOE.

The majority (99 percent) of the obligations exchanged involved LEU or natural uranium, and the remaining 1 percent consisted of two obligation exchanges involving plutonium and two involving depleted uranium.

The majority (99 percent) of obligation exchanges involved facilities exchanging obligated for unobligated material. The remaining 1 percent involved facilities exchanging obligated material for obligated material.

The majority (92 percent) of the obligations exchanged involved obligations from either Australia or Canada. Five percent were obligations from Argentina, Brazil, Chile, China, EURATOM, or Japan, and 3 percent involved material with layered obligations—that is, obligations to multiple countries.

The number of obligation exchanges peaked in 2007 with 107 exchanges and has generally declined since then, with steady declines since 2011. Figure 3 shows the number of obligation exchanges conducted in the United States from October 1, 2003, through November 30, 2015.

According to officials from Centrus Energy Corp. (formerly USEC), the company that conducted the most obligation exchanges from 2003 to 2015—the peak in 2007 resulted from increased demand that year for LEU. The officials noted that the demand for LEU fluctuates and can be cyclical, as most nuclear power plants operate on an 18-month cycle and must be shut down at regular intervals to replace spent fuel rods with new ones. The officials attributed the decline in obligation exchanges to decreased demand for LEU and to the May 2013 closure of the Paducah Gaseous Diffusion Plant, which meant that less unobligated LEU was available.

Most Exchanges Were Conducted to Meet Commercial Customer Demand for Uranium with Specific Obligations and to Avoid Physically Transporting Material

According to NRC licensees, exchanges were generally conducted to meet commercial customer demand for material with obligations from certain countries and to avoid the need to physically transport uranium. In contrast, DOE contractors told us they conducted a number of obligation exchanges primarily to accommodate the closure of the vault where the material was being stored.

Obligation Exchanges Conducted by NRC Licensees

According to NRC licensees, obligation exchanges were conducted primarily to meet their customers’ demand for uranium with specific obligations. These customers were utility companies that may have had contracts that specified the delivery schedule and obligation requirements for LEU years in advance of delivery of material. NRC licensees told us that sometimes, as a result of these contracts, facilities needed to deliver uranium with specific obligations before they had physically obtained uranium with the required obligations, so they conducted obligation exchanges with other facilities to obtain and provide the material on the required schedule. Customers wanted either unobligated LEU or LEU with obligations from certain countries to help simplify their nuclear material accounting. For example, representatives from one facility stated that their customers prefer to obtain unobligated LEU to avoid having to maintain separate inventories of obligated and unobligated material, as each obligation type needs to be tracked separately in NMMSS. By having unobligated material, or limiting the number of different obligations, facilities were able to minimize the number of tracking steps.

According to some NRC licensees, conducting obligation exchanges also allowed them to obtain the obligations their customers wanted without physically transporting uranium from another NRC-licensed facility. They stated that obligation exchanges allowed them to avoid the high transportation costs and safety risks associated with physically shipping nuclear material. Overall, NRC licensees told us that obligation exchanges are a customary and normal business practice in the nuclear fuel industry. Representatives from one NRC licensee told us that the facility “could not operate” without conducting obligation exchanges and that it is an essential industry-wide practice.

In addition, we found that certain NRC licensees conducted obligation exchanges for national security purposes—that is, to obtain unobligated LEU for tritium production. Specifically, of the 802 obligation exchanges conducted by NRC licensees, 3 were conducted by licensees that supplied nuclear fuel to TVA, which produces tritium for NNSA. In 2014 and 2015, on behalf of TVA, three NRC-licensed facilities each conducted an obligation exchange to preserve unobligated LEU for tritium production at TVA’s Watts Bar 1 commercial nuclear power reactor. According to DOE officials, such obligation exchanges help extend the date when the United States will run out of unobligated LEU for tritium production. According to DOE officials, these obligation exchanges are necessary because the United States no longer has a domestic source of unobligated LEU for tritium production. TVA and DOE officials stated that additional exchanges for national security are anticipated in the future— perhaps one or two each year.

Obligation Exchanges Conducted by DOE Contractors

DOE contractors and on-site agency officials told us they conducted 14 obligation exchanges primarily to accommodate the closure of the vault where the material was being stored. Specifically, 13 of the 14 obligation exchanges were conducted to transfer obligations to accommodate DOE closure of a vault in a building at the Y-12 National Security Complex, which was scheduled for modernization. As part of the effort to empty the vault, contractors transferred the obligations on this material to other facilities, allowing them to relocate the now unobligated material from the vault. The other exchange was conducted to transfer obligated plutonium to a facility under IAEA safeguards at the Savannah River Site, according to DOE contractors.

DOE and NRC Have Procedures for Accurate Tracking and Reporting of Obligation Exchanges, but Conditions Exist That May Affect Agencies’ Abilities to Use NMMSS to Demonstrate Compliance With Nuclear Cooperation Agreements

DOE and NRC have three procedures designed to ensure accurate tracking and reporting of transaction data in NMMSS, including data on obligation exchanges. However, conditions exist that may affect agencies’ abilities to use NMMSS to demonstrate compliance with nuclear cooperation agreements in the future and monitor unobligated inventories effectively.

DOE and NRC Have Procedures for Accurate Tracking and Reporting of Obligation Exchanges

DOE and NRC have three procedures designed to ensure the accurate tracking and reporting of transaction data in NMMSS. These procedures apply to all transaction data in NMMSS, including data on obligation exchanges. The procedures are validation, reconciliation, and export records comparison.

Validation. NMMSS completes automated validation checks for the completeness and accuracy of data on nuclear material transactions. There are two kinds of validation checks: (1) edit checks, which verify that the data are complete and properly formatted, and (2) compatibility checks, which verify that the shipper and receiver submit identical information about the obligation exchange. There are 550 separate types of edit checks and 74 types of compatibility checks. Validation checks control for data entry mistakes and omissions. Any errors identified through these checks can be corrected by NMMSS officials in consultation with authorized personnel at DOE sites and NRC-licensed facilities.

Reconciliation. Reconciliation is the process of comparing NMMSS nuclear material inventory data with other records. Reconciliation occurs at two levels: at the facility level and at the country level. At the facility level, NMMSS officials compare facilities’ reported physical inventory records—including their obligation balances—with the data in NMMSS and either confirm that these records are in agreement or alert facilities to make adjustments, if necessary. A DOE order and NRC regulations require U.S. facilities to reconcile their nuclear material inventories—including their foreign obligation balances—at least once annually. DOE contractors must report their inventories to NMMSS by September 30 of each year and reconcile any discrepancies with NMMSS. NRC licensees must report their inventories to NMMSS at least annually, depending on the type of material held, and reconcile any discrepancies with NMMSS. At the country level, NMMSS officials annually compare the inventory data with the records of foreign partners, including obligation balances. According to DOE officials, this inventory reconciliation process is conducted in accordance with the terms of certain administrative arrangements. Like reconciliation at the facility level, the officials told us that this process confirms whether NMMSS records are in agreement with other records and alerts officials to follow up, if necessary.

Export records comparison. A function in NMMSS compares foreign partners’ export records with NMMSS data. Foreign partners provide advance notification, as well as a confirmation of shipment, to the U.S. government when shipping nuclear material to the United States. NMMSS then compares these communications, as well as foreign partners’ export records obtained through IAEA, with data in NMMSS. Until January 2012, the communications were stored in documents, but since then, they have been recorded electronically in NMMSS.

We tested elements of these procedures and analyzed certain NMMSS data and found the data to be generally accurate with little evidence of inaccuracies or other problems with NMMSS data on obligation exchanges. For instance, we tested several elements of the records of compatibility and edit checks for all 817 obligation exchanges to verify that the shipper and receiver submitted identical information to NMMSS for each obligation exchange. We found that nearly all information submitted by the shipper and receiver—such as material type, element weight, and obligation country code—was identical for each of the obligation exchanges conducted from October 1, 2003 through November 30, 2015.

However, we found two issues in NMMSS obligation exchange data. We discussed these issues with DOE and NRC officials, who indicated that they planned to take steps to address one of the identified issues and explained that that other issue had already been addressed.

First, we found that according to NMMSS data, 2 of the 817 obligation exchanges conducted by NRC licensees involved uranium with assay levels of slightly more than 5 percent, which is contrary to NRC guidance that obligation exchanges are restricted to uranium enriched to 5 percent or less. According to DOE and NRC officials, these exceeded levels were isolated anomalies and may have been due to rounding errors in NMMSS. Nonetheless, as a result of our audit work, NMMSS officials stated that they intend to more closely monitor the potential exceedance of the 5 percent threshold by implementing a new edit check in NMMSS to identify obligation exchanges at licensed facilities on material with assay levels greater than 5 percent and flag that transaction as an error. According to NRC officials, the edit check will identify an error, which will prompt actions to resolve the transaction in NMMSS. Specifically, the licensee will have to consult with NMMSS program staff to determine whether the transaction requires additional U.S. approval before a manual authorization is given to override the error.

Second, we found five obligation exchanges where the shipping facility and receiving facility reported different activity dates. According to one of NMMSS’s compatibility checks, the date must be the same for the shipper and receiver of an obligation exchange. However, NMMSS did not detect the mismatched data in these five obligation exchanges, which occurred from 2004 to 2009. According to DOE officials, the five obligation exchanges with mismatched dates were not caught in NMMSS because they predated an edit check that was implemented in NMMSS in March 2013. DOE officials said that, since the edit check was implemented 3 years ago, there have been no obligation exchanges with mismatched activity dates. DOE officials told us that this issue has been addressed.

Conditions Exist That May Affect Agencies’ Abilities to Use NMMSS to Demonstrate Compliance With Nuclear Cooperation Agreements and Monitor Unobligated Inventories Effectively

Two conditions exist that may affect DOE’s and NRC’s abilities to use NMMSS to demonstrate compliance with nuclear cooperation agreements and effectively monitor unobligated inventories. First, the agencies have not documented the conditions under which facilities may carry negative obligation balances. Second, the United States has a declining domestic inventory of unobligated LEU for national security purposes that is projected to last until 2038 to 2041, but NMMSS does not have a monitoring capability that could alert DOE when the inventory of unobligated LEU is particularly low.

Agencies Have Not Documented the Conditions under Which Facilities May Carry Negative Obligation Balances

Nuclear cooperation agreements and the administrative arrangements that we reviewed do not address whether or to what extent facilities may carry negative obligation balances but while DOE officials told us that the practice is not prohibited, DOE and NRC have not documented the conditions under which it is allowed. Negative obligation balances occur when a facility conducts an obligation exchange without having enough of a given nuclear material in inventory—similar to writing a check for an amount that is not currently in one’s checking account, with the assumption that enough funds will be deposited in time to cover the cashing of the check. DOE and NRC have not documented the conditions under which facilities are allowed to carry negative obligation balances.

Some NRC licensees stated that they carried negative balances for extended periods—including for several months or more than a year. DOE officials confirmed that certain facilities have carried negative obligation balances for brief periods, and others have carried them for extended periods of time. Specifically, according to DOE officials, 17 facilities in the United States have carried negative obligation balances between reconciliation dates. DOE officials attributed 6 of 17 instances to facility “business practices.” Specifically, they stated that certain facilities, such as uranium enrichment and fuel fabrication plants, need to deliver uranium with specific obligations to customers before they have physically obtained such uranium. As a result, the facilities may carry negative obligation balances for months at a time, with the assumption that sufficient obligations will be received on incoming shipments of nuclear material and that receipt of this material will eventually cover the negative obligation balance.

DOE officials attributed the negative obligation balances at 11 of the 17 facilities to the brief time lag in reporting information to NMMSS. Specifically, the DOE/NRC Form 741 that officially records the obligation exchange must be sent by the “shipping” facility to NMMSS within 1 business day, and the form that officially records the receipt of the material must be sent by the “receiving” facility to NMMSS within 10 days. Thus, it is possible for a facility to temporarily carry a negative obligation balance within this 10-day window.

However, we found that 1 of the 11 facilities had a negative obligation balance that was of significantly longer than 10 days: this negative obligation balance of LEU lasted 18 months and spanned multiple reconciliation periods. Specifically, an NRC-licensed facility carried a negative balance of foreign obligated LEU from February 2006 to August 2007. Representatives of the facility and DOE officials confirmed this negative obligation balance and that it lasted for about 18 months— spanning three reconciliation periods. According to officials from the facility, to remedy its negative balance, in August 2007 the facility conducted an obligation exchange with another facility to obtain foreign obligated LEU. DOE officials told us that since 2010, there have been no other instances of negative obligation balances persisting at any facility past reconciliation. Nevertheless, since one negative obligation balance persisted past multiple reconciliation periods, a risk remains that facilities may carry negative obligation balances for extended periods of time in the future.

Under federal standards for internal control, agency management should design control activities to achieve objectives and respond to risk, including by clearly documenting internal control, and the documentation may appear in management directives, administrative policies, or operating manuals. While NNSA’s procedures for foreign obligation reporting state that both the shipping and receiving facilities should verify that there is sufficient inventory of the given material type to support an obligation exchange, they do not document the conditions under which carrying a negative obligation balance is allowed. Moreover, some NRC licensees told us that it is unclear whether or to what extent facilities may carry negative obligation balances. Representatives from one facility stated that it would be helpful for NMMSS officials to help clarify when the practice of carrying negative obligation balances is allowed and for what duration.

DOE officials told us they strongly encourage facilities to avoid carrying negative obligation balances but acknowledge that they have not documented in guidance when the practice is allowed. Specifically, DOE and NRC officials said that they discourage this practice through informational presentations that they provide to NRC licensees and DOE contractors at trainings and conferences. However, DOE officials told us that the practice of carrying negative obligation balances is not prohibited and that they have not documented the conditions under which carrying a negative obligation balance is allowed. Instead, DOE officials stated that their main internal control for negative obligation balances is to review facilities’ inventory once each year as part of the annual reconciliation process. Through this process, NMMSS analysts expect facilities to correct any negative obligation balances by the time of reconciliation. However, as we noted, this process did not address the negative obligation balance carried by one facility through several reconciliation cycles. According to NNSA documents, additional internal control procedures have been implemented in NMMSS in the past 6 years—such as developing new edit checks to detect incidences of negative obligation balances at the time of reconciliation—which NNSA officials believe will prevent facilities in the future from carrying negative obligation balances past reconciliation. However, we were unable to test these internal controls to verify whether there have been any additional incidences of facilities carrying negative obligation balances past reconciliation. As the inventory of LEU continues to decline, there is a growing risk that facilities carrying negative obligation balances between reconciliation periods may not be able to correct their negative obligation balances at year end. Without DOE and NRC clarifying in guidance the conditions under which facilities can carry negative balances, facilities may be at risk in the future of conducting exchanges that they ultimately cannot fulfill, putting the U.S. government at risk of not complying with its nuclear cooperation agreements.

NMMSS Does Not Have a Capability to Alert DOE When the Inventory of Unobligated LEU Is Particularly Low

NMMSS does not have a capability to alert DOE when the inventory of unobligated LEU is low, placing facilities with negative obligation balances at risk of not being able to reconcile them. According to NMMSS data, there have been significant decreases in the inventory of unobligated LEU, particularly from 2014 to 2015, which DOE officials attributed in part to the closure of the Paducah Gaseous Diffusion Plant in 2013, when the United States lost its sole supplier of unobligated LEU. DOE officials project that the inventory of unobligated LEU will continue to decrease without a domestic source. DOE documents estimate that the inventory will run out at some point from 2038 to 2041.

Federal standards for internal control state that management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. Ongoing monitoring is to be built into the entity’s operations, performed continually, and responsive to change and may include automated tools, which can increase objectivity and efficiency by electronically compiling evaluations of controls and transactions. DOE officials acknowledged that they do not have a specific capability in NMMSS that could serve as an early-warning system to alert them when the inventory of unobligated LEU becomes low enough to put facilities at risk of running negative obligation balances that they may not be able to reconcile. They also told us that no such capability is currently needed because the inventory of unobligated LEU is currently sufficient to limit such risk. Moreover, DOE officials added that they would step in to cover a negative obligation balance that could not otherwise be covered out of a facility’s own inventory, by transferring unobligated LEU from the U.S. national security inventory.

Nevertheless, while the U.S. national security inventory of unobligated LEU could be used to correct any future negative obligation balances, if the decline in this U.S. inventory of unobligated LEU continues, and if it is possible to carry a negative obligation balance beyond reconciliation, there is a risk that, at some point in the future, a facility may conduct an exchange for nuclear material that it cannot fulfill—essentially bouncing a check. DOE officials acknowledged that the decline in the national security inventory of unobligated LEU may change the way senior DOE officials need to use NMMSS in the future and that additional monitoring may be needed to ensure compliance with nuclear cooperation agreements. Without DOE and NRC developing an early-warning monitoring capability in NMMSS to alert senior DOE officials when the inventory of unobligated LEU becomes low, DOE cannot know when supplies of unobligated LEU are no longer available to correct negative obligation balances, thereby putting the U.S. government at risk of noncompliance with its nuclear cooperation agreements.

Conclusions

Under terms of its nuclear cooperation agreements, the United States must account for foreign obligated nuclear material, and NMMSS has been designated as the system to track and report on that material as it enters, leaves, and moves within the country. DOE and NRC have developed procedures designed to ensure that the transaction data in NMMSS, including data on obligation exchanges, are accurate. With the exception of a few issues, which NNSA has fixed or plans to fix by developing new internal controls, we found that these procedures are working as expected and that NMMSS data on obligation exchanges appear to be reliable.

Certain obligation exchange practices, combined with trends in the inventory of unobligated LEU, may change the information DOE and NRC officials need and the actions required to ensure compliance with nuclear cooperation agreements in the future. While DOE’s procedures for foreign obligation reporting state that facilities should verify that there is sufficient inventory of the given material type to support an obligation exchange, neither the procedures nor other guidance document the conditions under which carrying a negative obligation balance is allowed. In addition, the United States has a declining domestic inventory of unobligated LEU, but NMMSS does not have an early-warning monitoring capability to alert DOE when this inventory is particularly low. Without such an early- warning monitoring capability in NMMSS to alert senior DOE officials when the inventory of unobligated LEU is particularly low, facilities carrying negative balances could put the U.S. government in the position of potential non-compliance with its nuclear cooperation agreements.

Recommendations for Executive Action

We are making two recommendations to the Under Secretary for Nuclear Security, as the Administrator of the National Nuclear Security Administration, and the Nuclear Regulatory Commission to help ensure compliance with the United States’ nuclear cooperation agreements: 1. Clarify in guidance the conditions under which facilities may carry negative obligation balances. 2. Develop an early-warning monitoring capability in NMMSS to alert senior DOE officials when the inventory of unobligated LEU is particularly low.

Agency Comments and Our Evaluation

We provided drafts of this report to DOE, NRC, and TVA for review and comment. DOE and NRC provided written comments, which are summarized below and reproduced in appendix I and II, respectively. TVA did not comment on our findings and recommendations. In addition, all three agencies provided technical comments, which we incorporated as appropriate.

In their written comments, DOE and NRC did not explicitly state whether they concur with the recommendations. DOE and NRC described actions they are implementing or planning to implement to address our recommendations.

Concerning our first recommendation that DOE and NRC clarify in guidance the conditions under which facilities may carry negative obligation balances, NRC stated that it is currently reviewing its guidance on nuclear material reporting and will consider our recommendation when updating this guidance. We will continue to monitor NRC’s implementation of this recommendation. DOE said that it is deferring to NRC’s response on this recommendation. DOE also stated that NNSA has no authority to regulate negative balances that may occur as a result of commercial business practices. DOE’s response suggests that it believes our recommendation was limited to NRC licensees engaged in commercial transactions. However, we recommended both NRC and NNSA develop guidance to clarify when facilities with materials under their jurisdiction may carry negative obligation balances because the practice of carrying negative obligation balances at either a NRC-licensed facility or DOE facility could put the United States in a position of noncompliance with international agreements in the future if balances of unobligated LEU become particularly low. Developing guidance could mitigate this risk.

Concerning our second recommendation that DOE and NRC develop an early-warning monitoring capability in NMMSS to alert senior DOE officials when the inventory of unobligated LEU is particularly low, DOE noted that it has been directed by Congress to biennially update its Tritium and Enriched Uranium Management Plan through 2060. DOE stated it will address our recommendation through these updates, which will assess the inventory of unobligated enriched uranium for national security applications. We agree that updating the plan will help DOE monitor its inventory of unobligated LEU, and we acknowledge that for now, biennial updates to the plan may be sufficient to monitor the declining inventory of unobligated LEU. However, the inventory of unobligated LEU has rapidly declined in recent years—about 10 percent in 1 year alone—as noted in this report. As the inventory of unobligated LEU continues to decline, more frequent monitoring may be necessary to ensure that facilities do not conduct obligation exchanges for nuclear material that they cannot fulfill, which could put the United States at risk of noncompliance with its nuclear cooperation agreements. We continue to believe that our recommendation for DOE to develop an early-warning monitoring system will help mitigate the chance of DOE officials being unable to address a sudden decline in the inventory unobligated LEU. In its written response to our second recommendation, NRC stated that DOE has notified it that DOE will complete biennial updates to the plan and that NRC will support DOE as appropriate.

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’s date. At that time, we will send copies to the appropriate congressional committees, the NNSA Administrator, the Chairman of the Nuclear Regulatory Commission, TVA’s Board of Directors, 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 me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.

Appendix I: Comments from the Department of Energy

Appendix II: Comments from the Nuclear Regulatory Commission

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Nathan Anderson (Assistant Director), Eric Bachhuber, and Tyler Kent made key contributions to this report. Also contributing to this report were Alison B. Bawden, Antoinette Capaccio, Julia Coulter, Kaitlin Farquharson, Ellen Fried, Cindy Gilbert, Mitch Karpman, Amanda K. Kolling, Jeff Philips, Dan C. Royer, and Vasiliki Theodoropoulos.