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entitled 'Nuclear Material: DOE Has Several Potential Options for 
Dealing with Depleted Uranium Tails, Each of Which Could Benefit the 
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United States Government Accountability Office: 
Washington, DC 20548: 

March 31, 2008: 

Congressional Requesters: 

Subject: Nuclear Material: DOE Has Several Potential Options for 
Dealing with Depleted Uranium Tails, Each of Which Could Benefit the 
Government: 

Since the 1940s, one mission of the Department of Energy (DOE) and its 
predecessor agencies has been processing uranium as a source of nuclear 
material for defense and commercial purposes. A key step in this 
process is the enrichment of natural uranium, which increases its 
concentration of uranium-235, the isotope of uranium that undergoes 
fission to release enormous amounts of energy. Before it can be 
enriched, natural uranium must be chemically converted into uranium 
hexafluoride. The enrichment process results in two principal products: 
(1) enriched uranium hexafluoride, which can be further processed for 
specific uses, such as nuclear weapons or fuel for nuclear power 
plants; and (2) leftover "tails" of uranium hexafluoride. These tails 
are also known as depleted uranium because the material is depleted in 
uranium-235 compared with natural uranium. 

Since 1993, uranium enrichment activities at DOE-owned uranium 
enrichment plants have been performed by the U.S. Enrichment 
Corporation (USEC), formerly a wholly owned government corporation that 
was privatized in 1998. However, DOE still maintains approximately 
700,000 metric tons of depleted uranium tails in about 63,000 metal 
cylinders in storage yards at its Paducah, Kentucky, and Portsmouth, 
Ohio, enrichment plants. It must safely maintain these cylinders 
because the tails are dangerous to human health and the environment. 
Uranium hexafluoride is radioactive and forms extremely corrosive and 
potentially lethal compounds if it contacts water. DOE also maintains 
large inventories of natural and enriched uranium that are also surplus 
to the department's needs. 

Tails have historically been viewed as a waste product because 
considerable enrichment processing is required to further extract the 
remaining useful quantities of uranium-235. In the past, low uranium 
prices meant that these enrichment services would cost more than the 
relatively small amount of uranium-235 extracted would be worth. 
However, an approximately tenfold increase in uranium prices--from 
approximately $21 per kilogram of uranium in the form of uranium 
hexafluoride in November 2000 to about $200 per kilogram in February 
2008--has potentially made it profitable to re-enrich some tails to 
further extract uranium-235. Even with the current higher uranium 
prices, however, only DOE's tails with higher concentrations of 
uranium-235 (at least 0.3 percent) could currently be profitably re-
enriched, according to industry officials. About one-third of DOE's 
tails contain uranium-235 concentrations at that level or higher. 

In this context, you asked us to determine (1) DOE's potential options 
for beneficially reusing or indefinitely storing its tails, and (2) the 
potential value of DOE's tails and factors that affect the value. 

To determine DOE's potential options for its tails, 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; our position is provided below. 
Specifically, the enclosure 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 uranium sales 
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, 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 this performance audit 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. 

Results in Brief: 

In general, DOE's potential options for its tails include selling the 
tails "as is," re-enriching the tails, or storing them indefinitely. 
However, we believe that DOE's current legal authority to sell its 
depleted uranium inventory in its current unprocessed form is doubtful 
and under rules of statutory construction, DOE likely lacks such 
authority. We found that DOE generally has authority to carry out the 
re-enrichment and storage options. The department has not finished a 
comprehensive assessment of these options and is still evaluating the 
details of how such options might be implemented. 

* DOE's authority to sell the tails in their current unprocessed form 
is doubtful. Because of specific statutory language in 1996 legislation 
governing DOE's disposition of its uranium, we believe that DOE's 
authority to sell the unprocessed tails is doubtful. DOE may only sell 
or transfer uranium in a manner consistent with the provisions of the 
statute. While the statute authorizes and regulates DOE's sale or 
transfer of a number of types of uranium, it does not specify 
conditions for the sale or transfer of depleted uranium tails. 
Therefore, under rules of statutory construction, DOE likely lacks such 
authority. However, if Congress were to provide the department with the 
needed authority, firms such as nuclear power utilities and enrichment 
companies may be interested in purchasing these tails and re-enriching 
them as a source of nuclear fuel. Industry officials told us that 
buyers would discount, perhaps steeply, their offered prices to make 
buying tails attractive compared with purchasing natural uranium on the 
open market. That is, DOE might get a discounted price for the tails to 
compensate buyers for additional risks, such as rising enrichment costs 
or buyers' inability to obtain sufficient enrichment services. 

* DOE could contract to re-enrich the tails. Although DOE's authority 
to sell the unprocessed tails is doubtful, no such general legal 
impediment exists for the department to itself contract to re-enrich 
the tails and sell the resulting natural or enriched uranium. Although 
DOE would have to pay for re-enrichment, it could be better off selling 
the re-enriched uranium instead of the unprocessed tails if its re-
enrichment costs were less than the discount it would have to offer to 
compensate a buyer for the risks associated with arranging for re-
enrichment. 

* DOE could store the tails indefinitely. DOE also has the general 
legal option to store the tails indefinitely. While this option 
conforms to an existing DOE plan to convert tails into a more stable 
form for long-term storage, storing the tails indefinitely could 
prevent DOE from obtaining the potentially large revenue resulting from 
sales at currently high uranium prices. It would also continue to incur 
associated storage and maintenance costs that currently amount to about 
$4 million per year. Moreover, after converting the tails to a more 
stable form, DOE would incur higher costs to re-enrich the tails if it 
decided later to pursue such an approach. This is because DOE would 
have to chemically reconvert the tails to the uranium compound required 
for re-enrichment. 

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 DOE 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 substantial, but 
changing market conditions could greatly affect the tails' value. 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; 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. 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 are recommending 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 are recommending that the Secretary of Energy 
complete a comprehensive uranium management assessment as soon as 
possible, to best take advantage of recent increases in uranium prices. 

On March 25, 2008, we met with DOE officials, including the Deputy 
Assistant Secretary for Corporate Communications and External Affairs 
in DOE's Office of Nuclear Energy, to obtain oral comments on this 
report. DOE did not comment either on our finding that DOE's legal 
authority to sell or transfer depleted uranium in its current form was 
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. DOE also provided technical 
comments, which were incorporated as appropriate. 

DOE Has Potential Options for the Tails but Has Not Finished a 
Comprehensive Assessment of Them: 

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. 

DOE's Legal Authority to Sell the Tails in their Current Form Is 
Doubtful: 

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. The enclosure 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,[Footnote 
1] which limits DOE's general authority, under the Atomic Energy 
Act[Footnote 2] or otherwise, to sell or transfer uranium. In 
particular, section 3112 explicitly bars DOE from selling or 
transferring "any uranium"--including but not specifically limited to 
certain forms of natural and enriched uranium--"except as consistent 
with this section." Section 3112 then specifies conditions for DOE's 
sale or transfer of natural and enriched uranium of various types, 
including conditions in section 3112(d) for sales of natural and low-
enriched uranium from DOE's inventory. 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. Specifically, 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 likely 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. For example, 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, some 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. 

DOE Could Re-enrich Its Tails: 

Although DOE's legal authority to sell the tails in their current form 
is doubtful, DOE has the general legal option, as discussed in the 
enclosure, 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.[Footnote 
3] 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 
that 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. 

DOE Could Store the Tails: 

DOE also has the general legal option, as discussed in the enclosure, 
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.[Footnote 4] 

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. 

DOE Has Not Completed a Comprehensive Assessment of Options for Its 
Tails: 

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 any 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, and it does not contain details on 
when any sales or re-enrichment may occur or DOE's legal authority to 
carry out these 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." 

DOE's Depleted Uranium Inventory Is Potentially Worth Billions of 
Dollars, but Many Factors Could Greatly Change Its Value: 

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 about $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 will 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[Footnote 5] 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. 

Conclusions: 

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. 

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, it is important for the department as soon as possible to 
complete 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. 

Matter for Congressional Consideration: 

Congress should 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 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 help avoid litigation that could interrupt 
DOE's efforts to obtain maximum value for the tails. 

Recommendations for Executive Action: 

To determine the best options available for DOE's tails, the Secretary 
of Energy should complete the development of a comprehensive uranium 
management assessment as soon as possible. The assessment should 
contain detailed information on the types and quantities of depleted, 
natural, and enriched uranium the department currently manages and a 
comprehensive assessment of DOE's options for this material, including 
the department's authority to implement these options. Furthermore, the 
assessment should analyze the impact of each of these options on the 
domestic uranium industry and provide details on how implementation of 
any of these options should be adjusted in the event that market 
conditions change. 

Agency Comments: 

We provided a draft of this report to DOE for review and comment. On 
March 25, 2008, we met with DOE officials, including the Deputy 
Assistant Secretary for Corporate Communications and External Affairs 
in DOE's Office of Nuclear Energy, who provided us with oral comments 
on the draft. The officials did not comment on our finding that DOE's 
legal authority to sell or transfer depleted uranium is doubtful or on 
our recommendation that Congress consider clarifying DOE's statutory 
authority to manage depleted uranium. 

The DOE officials we met with did not agree or disagree with our 
recommendation that the department complete a comprehensive uranium 
management assessment as soon as possible. However, they did request 
that we clarify the recommendation to more explicitly outline what the 
assessment should contain. In response, we modified the report to 
include additional information on DOE's March 2008 uranium policy 
statement and how the policy lacks specific information on the types 
and quantities of uranium DOE manages, the market conditions under 
which DOE may choose to sell uranium, and the timing of any potential 
sales. 

DOE also provided technical comments, which were incorporated 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 date. At that time, we will send copies to the 
Secretary of Energy. In addition, the report will be available at no 
charge on GAO's Web site at [hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions or need additional 
information, please contact Robert A. Robinson at (202) 512-3841 or 
robinsonr@gao.gov. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. Major contributors to this report were Ryan T. Coles (Assistant 
Director), Ellen Chu, Terry Hanford, Karen Keegan, Omari Norman, and 
Franklyn Yao. 

Signed by: 

Robert A. Robinson: 
Managing Director, Natural Resources and Environment: 

Signed by: 

Susan D. Sawtelle: 
Managing Associate General Counsel: 

Enclosure: 

List of Requesters: 

The Honorable Jeff Bingaman:
Chairman: 
The Honorable Pete V. Domenici:
Ranking Member: 
Committee on Energy and Natural Resources:
United States Senate: 

The Honorable John D. Dingell:
Chairman: 
The Honorable Joe Barton:
Ranking Member: 
Committee on Energy and Commerce:
House of Representatives: 

The Honorable Bart Stupak:
Chairman:
Subcommittee on Oversight and Investigations:
Committee on Energy and Commerce:
House of Representatives: 

[End of correspondence] 

Enclosure: GAO's Legal Analysis of DOE's Current Authority to Manage 
Depleted Uranium: 

Introduction and Summary of Conclusions: 

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. 
[Footnote 6] 

Analysis[Footnote 7]:  

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 [depleted 
uranium] 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. 

As noted above, section 3112 of the USEC Privatization Act, entitled 
"Uranium transfers and sales," begins with a broad prohibition: 

"[DOE] 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."[Footnote 8] 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.[Footnote 9] 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.[Footnote 10] 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.[Footnote 11] 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.[Footnote 12] 

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).[Footnote 
13] 

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. 

Conclusion: 

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. 

[End of enclosure] 

Footnotes: 

[1] USEC Privatization Act, Pub. L. No. 104-134,  3112, 110 Stat. 
1321-344, 42 U.S.C.  2297h-10. 

[2] Atomic Energy Act of 1954, as amended, 42 U.S.C.  2011 et seq. 

[3] USEC plans to shut down the Paducah plant after it opens a new 
enrichment plant at Portsmouth that uses newer enrichment technology. 
Because this new plant's initial capacity will be less than the Paducah 
plant's current capacity, it may also have little excess enrichment 
capacity to re-enrich DOE's tails. 

[4] Although the amount of depleted uranium hexafluoride that would 
need to be converted to uranium oxide for long-term storage would be 
reduced if DOE decided to re-enrich its higher-assay tails, the need 
for conversion would not be completely eliminated. This is because the 
re-enrichment of higher-assay tails would create a new waste stream of 
lower-assay tails that would need storage. In addition, the majority of 
DOE's tails are lower assay that are not economical to re-enrich at 
current uranium prices and enrichment costs. It will therefore be 
necessary to convert these remaining tails for safe, long-term storage 
and eventual permanent disposition. 

[5] At current uranium prices, DOE's most economically attractive tails 
have a uranium-235 assay of greater than 0.30 percent. DOE estimates 
that it has about 260,000 metric tons of tails with an assay of greater 
than 0.30 percent. The remaining approximately 470,000 metric tons of 
tails have an assay of less than 0.30 percent and would therefore 
require additional enrichment processing to re-enrich. 

[6] We also examined whether DOE is authorized to sell or transfer its 
depleted uranium tails under section 314 of the 2006 Energy and Water 
Development Appropriations Act, Pub. L. No. 109-103, 119 Stat. 2247, 
2281 (Nov. 19, 2005), a position advanced to us by USEC. That provision 
states in part: "SALES OF URANIUM.--(a) IN GENERAL.--Notwithstanding 
any other provision of Federal law, including section 3112 of the USEC 
Privatization Act...and section 3302 of title 31, United States 
Code, [DOE] is authorized to barter, transfer or sell uranium 
(including natural uranium concentrates, natural uranium hexafluoride, 
or in any form or assay) and to use any proceeds, without fiscal year 
limitation, to remediate uranium inventories held by [DOE]." 

Without expressing a view on whether these terms might otherwise 
authorize DOE's sale of its uranium inventories, we conclude that this 
provision is not permanent legislation and thus not a continuing source 
of authority, as USEC has suggested. DOE officials told us they agree 
with this conclusion. Generally, provisions of an annual appropriations 
act are considered temporary unless Congress indicates otherwise. B-
309704, Aug. 28, 2007. The question is whether section 314 contains 
words of futurity indicating that Congress intended the provision to be 
permanent. It does not. The language "notwithstanding any other 
provision of law" refers to other provisions of law in effect during 
the fiscal year covered by the appropriations act. The language 
"without fiscal year limitation" authorizes DOE to obligate without 
fiscal year limitation any proceeds from uranium sold during the period 
section 314 was in effect. Because section 314 contained no words of 
futurity, it is no longer in effect. Thus, whatever the scope of 
authority in section 314, it does not authorize future DOE sales or 
transfers. 

[7] GAO's practice when rendering legal opinions regarding agency-
related matters is to solicit the agency's position on the subject 
matter of the request. GAO, Procedures and Practices for Legal 
Decisions and Opinions, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-06-1064SP] (Washington, D.C.: Sept. 5, 2006), available 
at [hyperlink, http://www.gao.gov/legal/cgdecisions-faq.html] (last 
visited March 20, 2008). We requested DOE's position on its authority 
to manage depleted uranium under the Atomic Energy Act and the USEC 
Privatization Act, as well as any related documents. Letters from Susan 
D. Sawtelle, GAO Managing Associate General Counsel, to David R. Hill, 
DOE General Counsel, December 12, 2007, and to Eric J. Fygi, DOE Deputy 
General Counsel, January 11, 2008. DOE declined to 
provide its position on these issues. Letter from Eric J. Fygi to Susan 
D. Sawtelle, December 21, 2007. The department subsequently provided 
certain documents, Letter from Eric J. Fygi to Susan D. Sawtelle, 
January 25, 2008, but later told us these did not necessarily reflect 
the department's legal position. 

[8] See, e.g., Walters v. Metropolitan Educational Enterprises, Inc., 
519 U.S. 202 (1997) (it is a fundamental principle of statutory 
construction that words in a statute must be given their ordinary or 
natural meaning whenever possible); Ali v. Federal Bureau of Prisons, 
128 S. Ct. 831 (U.S. Jan. 22, 2008) ("[R]ead naturally, the word 'any' 
has an expansive meaning that is, 'one or some indiscriminately of 
whatever kind.'"). 

[9] The 2005 DOE Memorandum (which DOE indicated may not represent its 
legal position) states, "it is relatively clear that [section 3112(a)] 
is applicable to depleted uranium given that it states 'any uranium.' 
The examples of types of uranium are merely a listing and should not be 
interpreted as a limitation to the broader phrase, 'any uranium.'" 

[10] See generally Hearing before the Committee on Energy and Natural 
Resources on S. 755, a Bill to Amend the Atomic Energy Act of 1954 to 
Provide for the Privatization of the United States Enrichment 
Corporation, S. Hrg. No. 104-105, at 5, 9 (June 13, 1995). 

[11] Secretary of Energy's Policy Statement on Management of the 
Department of Energy's Excess Uranium Inventory, March 11, 2008, 
available at [hyperlink, 
http://www.ne.doe.gov/newsroom/2008PRs/nePR031208.html] (last visited 
March 20, 2008) (2008 DOE Policy Statement), at 4. 

[12] The 2008 DOE Policy Statement similarly asserts that DOE has 
"broad authority" under the AEA to "loan, sell, transfer or otherwise 
utilize" the department's depleted, natural and enriched uranium 
inventories, and that "[i]n exercising this authority, the Department 
must act consistently with other relevant statutory provisions, such as 
section 3112...which imposes limitations on certain specified 
transactions." Id. at 1 (emphasis added). 

[13] Section 3112(d) of the USEC Privatization Act authorizes DOE's 
sale of its natural and low-enriched uranium inventories only if it 
receives "not...less than fair market value," determines that the 
domestic uranium mining, conversion, and enrichment industry will not 
suffer adverse material impact from the sale, and obtains a 
determination by the President that the material is not needed for 
national security. By contrast, AEA section 161m authorizes sale of 
DOE's depleted uranium inventory to NRC licensees if there is 
"reasonable compensation to the government." 

[End of section] 

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