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Report to Congressional Committees: 

July 2004: 

URANIUM ENRICHMENT: 

Decontamination and Decommissioning Fund Is Insufficient to Cover 
Cleanup Costs: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-692]: 

GAO Highlights: 

Highlights of GAO-04-692, a report to congressional committees 

Why GAO Did This Study: 

Decontaminating and decommissioning the nation’s uranium enrichment 
plants, which are contaminated with hazardous materials, will cost 
billions of dollars and could span decades. In 1992, the Energy Policy 
Act created the Uranium Enrichment Decontamination and Decommissioning 
Fund (Fund) to pay for the plants’ cleanup and to reimburse licensees 
of active uranium and thorium processing sites for part of their 
cleanup costs.

This report discusses (1) what DOE has done to reduce the cleanup costs 
authorized by the Fund, and (2) the extent to which the Fund is 
sufficient to cover authorized activities.

What GAO Found: 

The Department of Energy (DOE) has taken steps to reduce cleanup costs 
by taking actions that address recommendations made by the National 
Academy of Sciences and by pursuing an accelerated, risk-based cleanup 
strategy at the plants. In some cases, however, DOE has only partially 
addressed the Academy’s recommendations. For example, one 
recommendation suggested that DOE develop three plans—namely, 
headquarters level, plant-complex level, and site level—that address 
and integrate the decontamination and decommissioning of the 
facilities. Only one plant has developed a plan, however. 
Additionally, DOE is pursuing an accelerated, risk-based cleanup 
strategy at the plants that it believes will reduce cleanup costs. 
According to DOE officials, an accelerated, risk-based strategy will 
accelerate time frames for cleanup, and establish “realistic cleanup 
criteria” in DOE’s regulatory cleanup agreements. 

Despite DOE efforts to reduce costs, we found that based on current 
projected costs and revenues, the Fund will be insufficient to cover 
the cleanup activities at the three plants. Specifically, our Baseline 
model demonstrated that by 2044, the most likely time frame for 
completing cleanup of the plants, costs will have exceeded revenues by 
$3.5 billion to $5.7 billion (in 2004 dollars). Importantly, we also 
found that the Fund would be insufficient irrespective of which model 
we used, including models that estimated the final decommissioning at 
the plants under (1) accelerated time frames, (2) deferred time frames, 
or (3) baseline time frames, and with additional revenues from federal 
government contributions as authorized under current law. Because the 
Paducah and Portsmouth plants are now estimated to cease operations by 
2010 and 2006, respectively, extending the Fund by an additional 3 
years would give DOE an opportunity to develop plans, including more 
precise cost estimates, for the cleanup of these plants and to better 
determine if further Fund extensions will be necessary. 

Cleanup Costs Outweigh Fund Revenues: 

[See PDF for image]

[End of figure] 

What GAO Recommends: 

GAO recommends that the Congress consider reauthorizing the Fund for an 
additional 3 years and require DOE to reassess the Fund’s sufficiency 
before it expires to determine if further extensions will be necessary. 
GAO also recommends that DOE develop plans for the Paducah and 
Portsmouth plants that identify the most probable time frames and costs 
for completing the cleanup. DOE generally agreed with our 
recommendations, but stated its reluctance to develop plans for the 
plants now. GAO believes that without these plans, DOE will be unable 
to develop a more precise cost estimate or reassess the Fund’s 
sufficiency. 

www.gao.gov/cgi-bin/getrpt?GAO-04-692. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Robin Nazarro at (202) 
512-3841 or nazarror@gao.gov.

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

DOE Has Taken Several Actions to Reduce Cleanup Costs: 

Based on Current Projected Costs and Revenues, the Fund Will Not Be 
Sufficient to Complete Cleanup at the Three Plants: 

Conclusions: 

Matters for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Scope and Methodology: 

Appendixes: 

Appendix I: Fund Modeling Methodology, Assumptions, and Results: 

Modeling Methodology: 

Baseline Model Data, Assumptions, and Uncertainties: 

Alternative Models: 

Results: 

Appendix II: DOE Actions Taken That Addressed the National Academy of 
Sciences' Cost Reduction Recommendations: 

Appendix III: Comments from the Department of Energy: 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Staff Acknowledgments: 

Tables: 

Table 1: Status of the Academy's Major Recommendations: 

Table 2: Comparison of Models: 

Table 3: Recommendations, Status, and Explanation of the Actions Taken 
by DOE: 

Figures: 

Figure 1: Location of the Three Uranium Enrichment Plants: 

Figure 2: The Decontamination and Decommissioning Process: 

Figure 3: Total Fund Expenditures, Fiscal Years 1994-2003: 

Figure 4: Baseline Model Results: 

Figure 5: Accelerated Model Results: 

Figure 6: Deferred Model Results: 

Figure 7: Revenue Added Model Results: 

Figure 8: Revenue Added Plus Interest Model Results: 

Figure 9: Present Value of Fund Balance for Baseline, Accelerated, and 
Deferred Models: 

Figure 10: Present Value of Fund Balance for Baseline, Revenue Added, 
and Revenue Added Plus Interest Models: 

Abbreviations: 

CERCLA: Comprehensive Environmental Response, Compensation and 
Liability Act of 1980, as amended: 

D&D: decontamination and decommissioning: 

DOE: Department of Energy: 

RCRA: Resource Conservation and Recovery Act of 1976, as amended: 

USEC: United States Enrichment Corporation: 

Letter July 2, 2004: 

Congressional Committees: 

Decontaminating and decommissioning the Department of Energy's three 
uranium enrichment plants--located near Oak Ridge, Tennessee; Paducah, 
Kentucky; and Portsmouth, Ohio--will cost billions of dollars and could 
span several decades. These plants, which encompass more than 30 
million square feet of floor space, miles of interconnecting pipes, and 
thousands of acres of land, are contaminated with radioactive and 
hazardous materials. The Department of Energy's (DOE) Office of 
Environmental Management is responsible for cleanup of the three 
plants. Cleanup activities include assessing, treating, and disposing 
of the contamination found at the plants and the decontamination and 
decommissioning (D&D) of inactive facilities. DOE conducts its cleanup 
activities under the requirements of several federal environmental laws 
and compliance agreements with relevant regulatory authorities, 
including the Environmental Protection Agency and state regulatory 
agencies. While DOE estimates that all cleanup work at the Oak Ridge 
plant will be complete by 2008, the Paducah and Portsmouth plants may 
continue operations for the next several years,[Footnote 1] and DOE has 
not determined when the final decontamination and decommissioning of 
these two plants will begin.

In 1992, the Energy Policy Act, as amended,[Footnote 2] established the 
Uranium Enrichment Decontamination and Decommissioning Fund (Fund) to 
pay for the cleanup of the three plants. The Fund also covers the 
reimbursement of a portion of the cleanup costs to licensees of active 
uranium and thorium[Footnote 3] processing sites that previously sold 
these materials to the federal government. The Congress authorized 
annual contributions to the Fund for 15 years (ending in 2007), to be 
made by government appropriations and payments from domestic utility 
companies that utilized the enriched uranium produced by these plants 
for nuclear power generation. The Congress specified that any unused 
balances in the Fund be invested in Treasury securities and any 
interest earned be made available to pay for activities covered under 
the Fund. In creating the Fund, the Congress also required the National 
Academy of Sciences (Academy) to undertake a study to assess the 
opportunities for cost reduction in carrying out the D&D work at the 
three plants. In response, the Academy issued a report in 1996 that 
included 13 major recommendations to reduce D&D costs at the three 
plants.[Footnote 4]

As directed by Public Law 107-222, we conducted a review of the 
sufficiency of the Fund. This report discusses (1) what actions DOE has 
taken to reduce the cleanup costs the Fund is authorized to support, 
and (2) the extent to which the Fund is sufficient to cover authorized 
activities.

To determine what actions DOE has taken to reduce the cleanup costs the 
Fund is authorized to support, we reviewed the National Academy of 
Sciences' report that identified major cost reduction recommendations 
for the nation's three uranium enrichment plants. We met with Academy 
officials to gain further information about the study, and with DOE and 
its contractor officials at each of the plants to determine the extent 
to which DOE has taken actions to address the recommendations. While we 
were able to obtain information on actions taken to date, DOE could not 
determine whether the actions were taken as a result of the Academy's 
recommendations. DOE was also generally unable to provide information 
regarding the cost savings, if any, achieved by implementing these 
actions. To determine other steps DOE has taken to reduce cleanup 
costs, we visited all three plants and interviewed DOE and contractor 
officials from DOE headquarters, the Oak Ridge Operations Office, the 
Lexington Office, and the site offices at each of the three plants. 
Additionally, we obtained and analyzed documentation regarding DOE's 
accelerated cleanup strategy at the Oak Ridge and Paducah plants, as 
well as each of the three plants' draft risk-based end state vision 
documents, to better understand DOE's proposed options for 
consideration. We also interviewed regulatory authorities responsible 
for overseeing cleanup activities at the plants, including officials at 
the Environmental Protection Agency and state regulatory agencies in 
Kentucky, Ohio, and Tennessee.

To assess the sufficiency of the Fund to pay for the total projected 
costs of the Fund's authorized activities, we interviewed DOE and 
contractor officials responsible for the Fund's financial data and 
obtained DOE's current estimates for uranium and thorium reimbursement 
costs, the cleanup costs at the three plants, and the current and 
likely revenue projections. We assessed the reliability of this data 
and determined that the data were sufficient for the purposes of our 
report. We used the data to develop a number of simulation models that 
factored in the cost and revenue projections on an annual basis and 
uncertainties surrounding inflation rates, interest rates, costs, 
revenues, and the timing of the final D&D work at the Paducah and 
Portsmouth plants. See appendix I for a detailed description of our 
modeling methodology, assumptions, and results. We interviewed DOE and 
contractor officials from DOE Headquarters, the Oak Ridge Operations 
Office, the Lexington Office, and the site offices at each of the three 
plants, as well as officials from the federal and state regulatory 
offices party to the plants' cleanup agreements. We also toured the Oak 
Ridge plant to identify the major uncertainties that could impact 
future cleanup costs at the plants. Our scope and methodology are 
presented at the end of this report. We performed our work between 
September 2003 and March 2004 in accordance with generally accepted 
government auditing standards.

Results in Brief: 

DOE has attempted to reduce cleanup costs by taking actions consistent 
with recommendations made by the National Academy of Sciences (Academy) 
and by pursuing an accelerated, risk-based cleanup strategy at the 
three plants. DOE has adopted measures that address many of the 
Academy's recommendations, such as conducting focused technology 
demonstrations to improve the decontamination and decommissioning 
process. However, in some cases, DOE has only partially addressed the 
Academy's recommendations. For example, one recommendation suggested 
that DOE develop three plans--namely, headquarters level, plant-complex 
level, and site level--that address and integrate the decontamination 
and decommissioning of the facilities, among other cleanup activities 
at the sites. DOE has not developed a headquarters-level or plant 
complex-level plan that addresses and integrates the decontamination 
and decommissioning of all three plants. Oak Ridge is the only plant 
with an agreed-upon decontamination and decommissioning plan. 
Additionally, DOE is pursuing an accelerated, risk-based cleanup 
strategy at the plants that it believes will reduce cleanup costs. 
According to DOE officials, an accelerated, risk-based strategy will 
accelerate time frames for cleanup at the Oak Ridge and Paducah plants, 
and establish "realistic cleanup criteria" in their regulatory cleanup 
agreements. By implementing cleanup actions more quickly and ensuring 
that its cleanup efforts are both cost effective and environmentally 
sound, DOE hopes it can avoid unnecessary costs while reducing risks 
posed to human health and the environment. However, some state and 
federal regulators have suggested that if DOE proposes changes to 
current cleanup agreements, renegotiating those agreements could delay 
cleanup and, therefore, potentially increase costs.

Despite DOE efforts to reduce costs, we found that based on current 
projected costs and revenues, the Fund will be insufficient to cover 
the activities authorized under the Fund. We determined that while the 
Fund is sufficient to cover reimbursements to uranium and thorium 
licensees, the Fund is insufficient to cover the complete cleanup at 
the three plants. Specifically, our Baseline model demonstrated that by 
2044, the most likely time frame for completing all cleanup activities 
at the plants, cleanup costs will have exceeded revenues by $3.5 
billion to $5.7 billion (in 2004 dollars). Importantly, we found that 
the Fund would be insufficient irrespective of what estimates were 
used, including models that estimated the final decommissioning at the 
plants under (1) accelerated time frames, (2) deferred time frames, or 
(3) baseline time frames, and with additional revenues from government 
contributions as authorized under current law. Further, until DOE has 
more specific information about such factors as the dates for beginning 
and completing the decommissioning work at the Paducah and Portsmouth 
plants, it is not possible to more precisely determine the total 
resources needed to cover the Fund's authorized activities. Because the 
Paducah and Portsmouth plants are now estimated to cease operations by 
2010 and 2006, respectively, DOE should be able to develop plans, 
including more precise cost estimates, for the decontamination and 
decommissioning of these plants. Extending the Fund by an additional 3 
years would give DOE an opportunity to develop these plans and a better 
estimate of the costs to clean up the plants. With this information, 
DOE could better determine if further extensions to the Fund will be 
necessary.

In order to better ensure that the Fund will be sufficient to cover the 
projected costs for the authorized activities, we are recommending that 
the Congress consider reauthorizing the Fund for an additional 3 years 
to 2010, and require DOE to reassess the sufficiency of the Fund before 
the expiration date to determine if additional extensions will be 
necessary. To further reduce the uncertainty surrounding the 
sufficiency of the Fund, we are also recommending that the Secretary of 
Energy develop decontamination and decommissioning plans that would 
identify the most likely time frames for completing the final work at 
the Paducah and Portsmouth plants.

DOE generally agreed that our report accurately presents the current 
status of the Fund and concurred with our recommendations that the 
Congress consider reauthorizing the Fund for 3 additional years and 
require DOE to reassess the sufficiency of the Fund before it expires 
in 2010 to determine if additional extensions will be necessary. DOE 
also stated that it would develop decontamination and decommissioning 
plans for the remainder of the facilities at Paducah and Portsmouth "at 
the appropriate time," but did not specify a date. We believe that 
unless DOE develops decontamination and decommissioning plans that 
include the most probable time frames and costs for completing final 
work at Paducah and Portsmouth, DOE will not be able to develop a more 
precise estimate of the total funds necessary to cover the authorized 
cleanup activities or assess the Fund's sufficiency and determine if 
further extensions are necessary.

Background: 

The federal government has enriched uranium for use by commercial 
nuclear power plants and for defense-related purposes for more than 40 
years at three plants located near Oak Ridge, Tennessee; Paducah, 
Kentucky; and Portsmouth, Ohio (see fig. 1). These uranium enrichment 
plants are largely obsolete, however, due to the emergence of newer, 
more efficient technologies and the globalization of the uranium 
enrichment market. DOE now faces the task of decontaminating, 
decommissioning, and undertaking other remedial actions[Footnote 5] at 
these large and complex plants that are contaminated with hazardous 
industrial, chemical, nuclear, or radiological materials.

Figure 1: Location of the Three Uranium Enrichment Plants: 

[See PDF for image]

[End of figure]

In 1991, at the request of the House Subcommittee on Energy and Power, 
GAO analyzed the adequacy of a $500 million annual deposit into a fund 
to pay for the cost of cleanup at DOE's three uranium enrichment 
plants.[Footnote 6] We reported that a $500 million deposit indexed to 
an inflation rate would likely be adequate, assuming that deposits 
would be made annually into the fund as long as cleanup costs were 
expected to be incurred, which at the time of the study was until 2040. 
Additionally, in a related report we concluded that the decommissioning 
costs at the plants should be paid by the beneficiaries of the services 
provided--in this case, DOE's commercial and governmental 
customers.[Footnote 7]

In 1992, the Congress passed the Energy Policy Act, which established 
the Uranium Enrichment Decontamination and Decommissioning Fund (Fund) 
to pay for the costs of decontaminating and decommissioning the 
nation's three uranium enrichment plants. The Energy Policy Act also 
authorized the Fund to pay remedial action costs associated with the 
operation of the plants to the extent funds are available and to 
reimburse uranium and thorium licensees for the portion of their 
cleanup costs associated with the sale of these materials to the 
federal government. The Energy Policy Act authorized the collection of 
revenues for 15 years to pay for authorized cleanup costs. The revenues 
are derived from: (1) an assessment on domestic utilities of up to $150 
million annually, based on a ratio of their purchases of enriched 
uranium to the total purchases from DOE, including those for defense; 
and (2) federal government appropriations for the difference between 
the authorized funding under the Energy Policy Act and the assessment 
on utilities.[Footnote 8] In addition, the Energy Policy Act provided 
that balances in the Fund be invested in Treasury securities and any 
interest earned be made available to pay for activities covered under 
the Fund.

DOE's Office of Environmental Management is responsible for management 
of the Fund and cleanup activities at the three plants, which, through 
fiscal year 2003, were mostly carried out by its contractor, Bechtel 
Jacobs. The department's Oak Ridge Operations Office in Oak Ridge, 
Tennessee, had historically provided the day-to-day management of the 
Fund and oversight of the cleanup activities at all three uranium 
enrichment plants. However, in October 2003, DOE established a new 
office in Lexington, Kentucky, to directly manage the cleanup 
activities at the Paducah and Portsmouth plants. The Oak Ridge 
Operations Office continues to manage the Fund and the cleanup 
activities at the Oak Ridge plant.

Currently, the Fund is used to pay for the following activities: 

* Reimbursements to uranium and thorium licensees. The Energy Policy 
Act provides that the Fund be used to reimburse licensees of active 
uranium and thorium processing sites for the portion of their 
decontamination and decommissioning activities, reclamation efforts, 
and other cleanup costs attributable to the uranium and thorium 
materials they sold to the federal government.[Footnote 9]

* Cleanup activities at the three uranium enrichment plants.[Footnote 
10] Cleanup activities at the plants include remedial actions, such as 
assessing and treating groundwater or soil contamination; waste 
management activities, such as disposing of contaminated materials; the 
surveillance and maintenance of the plants, such as providing security 
and making general repairs to keep the plants in a safe condition; the 
decontamination and decommissioning (D&D) of inactive facilities by 
either cleaning up the facilities so they could be reused or 
demolishing them; and other activities, such as litigation costs at the 
three plants and funding to support site-specific advisory 
boards.[Footnote 11] See figure 2 for an example of the D&D process, 
including before, during, and after D&D work is complete at a facility.

Figure 2: The Decontamination and Decommissioning Process: 

[See PDF for image]

[End of figure]

From fiscal year 1994, when the Fund began incurring costs, through 
fiscal year 2003, a total of $3.2 billion (in 2004 dollars) from the 
Fund has been spent on the uranium and thorium reimbursement program 
and cleanup activities--remedial actions, waste management, 
surveillance and maintenance, decontaminating and decommissioning, and 
other activities--at the three uranium enrichment plants (see fig. 3).

Figure 3: Total Fund Expenditures, Fiscal Years 1994-2003: 

[See PDF for image]

Note: Total Fund expenditures for fiscal years 1994 through 2003 were 
$3.2 billion, adjusted to fiscal year 2004 dollars.

[End of figure]

The Oak Ridge uranium enrichment plant, known as the East Tennessee 
Technology Park, is located on 1,500 acres of land just outside of Oak 
Ridge, Tennessee. It is the oldest of the three plants and has not 
produced enriched uranium since 1985. According to DOE officials, while 
most of the remedial actions and D&D work remain, the majority of the 
key regulatory decision documents are in place and the agency is now 
positioned to begin implementing the cleanup work. DOE currently plans 
to complete all cleanup at the plant and close the site by the end of 
fiscal year 2008.

The Paducah plant, located on about 3,500 acres of land west of 
Paducah, Kentucky, continues to enrich uranium for commercial nuclear 
power plants under a lease to a private company, the United States 
Enrichment Corporation (USEC). According to USEC's director of 
communications, for planning purposes USEC assumes that the plant will 
continue operations until about 2010. Because the plant is still 
operating, DOE has initiated a limited amount of D&D. However, it is 
currently undertaking studies and implementing a series of remedial 
actions while the plant is in operation, and estimates that it will 
complete these actions by 2019. DOE has not yet determined when it will 
begin D&D of the facilities currently in use (final D&D).

The Portsmouth plant, a 3,700-acre site located north of Portsmouth, 
Ohio, ceased enriching uranium in May 2001, due to reductions in the 
commercial market for enriched uranium. Later that year, the plant was 
placed on cold standby, so that production at the facility could be 
restarted in the event of a significant disruption in the nation's 
supply of enriched uranium.[Footnote 12] Current plans call for 
maintaining the plant in cold standby until September 2006, though a 
recent DOE Inspector General's report found that DOE has not 
established a well-defined endpoint for the cold standby program and 
extensions to the program may be possible.[Footnote 13] While D&D of 
the facilities currently on cold standby (final D&D) has not yet been 
initiated, DOE has been working on remedial actions at several 
contaminated areas. DOE has not yet determined when final D&D will 
begin at the Portsmouth plant.

DOE Has Taken Several Actions to Reduce Cleanup Costs: 

DOE has taken several steps to reduce cleanup costs by taking actions 
consistent with the National Academy of Sciences' (Academy) cost 
reduction recommendations and by pursuing an accelerated, risk-based 
cleanup strategy at the uranium enrichment plants. DOE has adopted 
measures that address most of the Academy's major cost recommendations, 
such as conducting focused technology demonstrations to improve the 
decontamination and decommissioning process. DOE is also pursuing an 
accelerated cleanup strategy at the Oak Ridge and Paducah plants to 
accelerate the time frames for conducting cleanup, which it expects 
will reduce operational costs. In addition, DOE is revisiting each 
plant's envisioned end state--the anticipated land use after the 
completion of cleanup efforts--to determine if cleanup at each of the 
plants is based on a technical risk assessment appropriate for the 
sites' future land use. According to DOE, this risk-based end state 
approach focuses DOE's environmental cleanup efforts in a way that is 
both cost effective and protective of human health and the environment. 
However, state and federal regulators have voiced concerns that if 
cleanup agreements must be renegotiated, the cleanup could be delayed 
and result in increased costs.

DOE Has Taken Actions That Address the National Academy of Sciences' 
Cost Reduction Recommendations: 

DOE has taken actions consistent with most of the 13 major cost 
reduction recommendations made by the Academy in its 1996 report on 
opportunities for D&D cost reductions at the three plants.[Footnote 14] 
These recommendations suggested a variety of cost reduction measures, 
including developing specific technologies and suggestions for 
planning, management, and regulatory coordination. Table 1 shows the 
focus and status of the Academy's recommendations.

Table 1: Status of the Academy's Major Recommendations: 

Focus of recommendations: Management, including contract management, 
development of D&D strategic plans, and security; 
Number of recommendations: 5; 
Status of recommendations: Addressed: 1; 
Status of recommendations: Partially addressed: 4; 
Status of recommendations: Not applicable: 0.

Focus of recommendations: Development of D&D technologies; 
Number of recommendations: 4; 
Status of recommendations: Addressed: 2; 
Status of recommendations: Partially addressed: 1; 
Status of recommendations: Not applicable: 1.

Focus of recommendations: Regulatory coordination and stakeholder 
involvement; 
Number of recommendations: 2; 
Status of recommendations: Addressed: 1; 
Status of recommendations: Partially addressed: 1; 
Status of recommendations: Not applicable: 0.

Focus of recommendations: Recycling/waste disposal; 
Number of recommendations: 2; 
Status of recommendations: Addressed: 2; 
Status of recommendations: Partially addressed: 0; 
Status of recommendations: Not applicable: 0.

Total; 
Number of recommendations: 13; 
Status of recommendations: Addressed: 6; 
Status of recommendations: Partially addressed: 6; 
Status of recommendations: Not applicable: 1. 

Source: GAO analysis of DOE information.

[End of table]

As table 1 shows, DOE took actions that address 6, or almost half, of 
the Academy's 13 recommendations. For example, the Academy recommended 
that DOE convert depleted uranium hexafluoride--a byproduct of the 
uranium enrichment process--to a more stable chemical form for storage 
or disposal. DOE recently awarded a contract to construct and operate 
conversion facilities at both Paducah and Portsmouth. In March 2004, 
DOE began shipping the cylinders of depleted uranium hexafluoride 
stored at Oak Ridge to Portsmouth for conversion.

For another 6 recommendations, DOE took actions that partially 
implemented the recommendations--either initially taking actions that 
implemented the recommendation and then later modifying its approach, 
or taking actions that addressed only a portion of the recommendation 
or only one of the three plants. For example, the Academy recommended 
that DOE develop three plans--namely, headquarters level, plant-complex 
level, and site level--that address and integrate the D&D of the 
facilities, environmental remediation activities, and the management of 
depleted uranium hexafluoride. DOE has not developed a headquarters-
level or plant complex-level D&D plan that addresses and integrates D&D 
of all three plants with other DOE activities. Oak Ridge is the only 
plant with an agreed-upon D&D plan that incorporates D&D, other cleanup 
activities, and the management of depleted uranium hexafluoride. The 
Paducah plant currently has a plan that lays out DOE's approach for a 
portion of its cleanup, but the plan does not address final D&D. DOE 
does not have a D&D plan for the Portsmouth plant. However, the DOE 
site manager said the agency is currently working to develop a 
Portsmouth strategic plan that will address final D&D, other cleanup 
activities, and management of depleted uranium hexafluoride.

DOE officials told us they have achieved cost savings as a result of 
the actions they have taken that address the Academy's recommendations. 
However, in most cases they were not able to quantify the cost savings 
achieved because the actions taken were either improvements to 
processes or procedures already in place or because they have not 
quantitatively evaluated the savings. For example, the Academy 
recommended that DOE consider the technical and management approaches 
successfully used for the D&D of the Capenhurst uranium enrichment 
plant in the United Kingdom. According to DOE officials, they 
considered the technical and management approaches used at both the 
Capenhurst plant and other U.S. D&D projects before beginning D&D 
efforts at Oak Ridge and have, in several cases, contracted with 
experienced environmental management contractors (who have 
participated in decommissioning activities at these sites) to take 
advantage of their expertise and knowledge. However, DOE has not 
quantitatively evaluated the financial savings from these efforts.

In one instance, DOE has not taken action to implement the Academy's 
recommendation because the recommendation made by the Academy is no 
longer applicable. The Academy recommended that DOE establish a modest 
research program to develop methods to decontaminate diffusion barrier 
material[Footnote 15] effectively. According to DOE officials, such 
research is no longer needed because the material is placed into an on-
site disposal facility, eliminating the need for decontamination. DOE 
has constructed an on-site disposal facility at Oak Ridge, and similar 
facilities are being considered for both Paducah and Portsmouth. 
Appendix II provides additional details on the Academy's 
recommendations and the actions that DOE has taken to address them.

DOE Is Pursuing an Accelerated, Risk-Based Cleanup Strategy at the 
Plants to Reduce Costs: 

DOE is pursuing an accelerated cleanup strategy at the Oak Ridge and 
Paducah plants. Adopted after a 2002 review of DOE's environmental 
management program found that only about one-third of the program's 
budget went to actual cleanup work, this accelerated cleanup strategy 
is intended to reduce the time needed to complete the cleanup of 
sites.[Footnote 16] DOE says that by implementing cleanup actions more 
quickly, it can reduce the amount it spends on maintenance, fixed 
costs, and other activities required to support safety and security. At 
the Oak Ridge plant, DOE plans to accelerate the plant's cleanup and 
closure time frame from 2016 to 2008. DOE estimates that this 
acceleration in cleanup and closure could achieve cost savings of $465 
million.[Footnote 17] DOE has also proposed an accelerated cleanup plan 
for the Paducah plant. This plan, submitted to state and federal 
regulatory authorities for approval in November 2003 and approved in 
April 2004, establishes (1) a series of prioritized response actions, 
(2) ongoing site characterizations to support future response action 
decisions, and (3) decontamination and decommissioning of the currently 
operating gaseous diffusion plant once it ceases operations.[Footnote 
18] DOE's plan reduces the time frame for completing the prioritized 
response actions from 2030 to 2019 and could, according to DOE 
estimates, save about $288 million. DOE is continuing negotiations with 
state and federal regulatory authorities in hopes of further reducing 
the time frame for completion of the prioritized response actions. 
However, as we reported in April 2004, the total scope of the cleanup 
at Paducah is unclear. Furthermore, DOE has not yet determined when D&D 
of the plant facilities currently in use will begin.

DOE is also revisiting each plant's envisioned end state to determine 
if cleanup at each plant is based on a technical risk assessment 
appropriate for the sites' future land use. The 2002 environmental 
management review found that the current cleanup approach and, in some 
cases, interpretations of DOE's policy orders and requirements, as well 
as laws, regulations, and cleanup agreements, were too conservative and 
created obstacles to achieving the timely cleanup of the plants. As a 
result, DOE required each of its environmental management sites, 
including the three plants, to develop a risk-based "vision" to 
identify acceptable risk levels consistent with the site's future land 
use, including an analysis that identified the differences between the 
current end state and one that is based on a risk assessment. Each of 
the uranium enrichment plants has developed a draft risk-based end 
state vision that is currently under review by DOE headquarters, state 
and federal regulatory officials, and local stakeholders. Once these 
visions are approved, the plants will re-evaluate their strategic 
approaches and cleanup activities to determine if renegotiating cleanup 
agreements is appropriate. According to DOE officials, if it is 
determined that changes are necessary, any changes would be made in 
accordance with all applicable requirements and procedures, including 
public involvement and regulatory approval. However, state and federal 
regulators with whom we spoke are concerned that if the plants are 
required to renegotiate cleanup agreements as a result of proposed 
changes, the cleanup process could be delayed, in turn resulting in 
increased costs. For instance, federal and state regulatory officials 
at Oak Ridge are concerned that, given the amount of work remaining and 
the short time frame for the plant's closure, DOE might be unable to 
meet its projected 2008 closure date if respective parties have to 
renegotiate already agreed-upon cleanup standards.

Based on Current Projected Costs and Revenues, the Fund Will Not Be 
Sufficient to Complete Cleanup at the Three Plants: 

Despite DOE efforts to reduce costs, we found that based on current 
projected costs and revenues, the Fund will be insufficient to cover 
authorized activities. We determined that the Fund will be sufficient 
to cover the reimbursements to the uranium and thorium licensees. 
However, our Baseline model demonstrated that by 2044, the most likely 
time frame for completion of cleanup at the three plants, cleanup costs 
will have exceeded revenues by $3.5 billion to $5.7 billion (in 2004 
dollars). Importantly, we found that the Fund would be insufficient 
irrespective of which estimates we used, including models that 
estimated the final cleanup work at the plants under (1) accelerated 
time frames, (2) deferred time frames, or (3) baseline time frames, and 
with additional contributions to the Fund equaling the difference 
between the amounts that have been appropriated to date and the total 
amount authorized under the Energy Policy Act. Given the numerous 
uncertainties surrounding the cleanup work at the nation's three 
uranium enrichment plants, it is not possible to more precisely 
determine the total resources needed to cover the Fund's authorized 
activities until DOE has better information about such factors as the 
dates for beginning and completing the decommissioning work at the 
Paducah and Portsmouth plants.

Our Baseline model demonstrated that by the time all cleanup at the 
plants is completed, costs will have exceeded revenues by $3.5 billion 
to $5.7 billion (in 2004 dollars). The Baseline model was developed 
using cost estimates that assumed cleanup, including the 
decontamination and decommissioning of all facilities (final D&D), 
would occur by 2044. This time frame was developed in consultation with 
DOE officials about what the most likely cleanup time frames would be. 
It is important to note, however, that DOE has not yet made a decision 
about when the final D&D will occur at the Paducah and Portsmouth 
plants.

Because DOE has not determined when final D&D will begin at the Paducah 
and Portsmouth plants, we also developed two alternative models--
Accelerated and Deferred--to assess whether the timing of the final D&D 
work at these plants would have a significant impact on the total 
costs. Total cleanup time was reduced by 20 years in the Accelerated 
model and increased by 8 years in the Deferred model. The timing of D&D 
can affect total cleanup costs because, among other things, each plant 
must pay significant annual security and maintenance costs that will be 
incurred as long as DOE maintains facilities on the sites. For example, 
at the Paducah plant, the safeguarding and security costs after the 
plant is shut down are projected to be more than $26 million annually 
(in 2004 dollars).

We found that irrespective of what model we used--Accelerated or 
Deferred--the Fund will be insufficient to cover the projected cleanup 
costs at the uranium enrichment plants. In present value, the Fund 
deficiency would range from a high of $3.8 billion in the Accelerated 
model to a low of $0.63 billion in the Deferred model.[Footnote 19] 
Thus, while accelerating or deferring the cleanup at the Paducah and 
Portsmouth plants could affect overall costs, the Fund would still be 
insufficient to cover the total cleanup costs irrespective of the time 
frames of final D&D at the Paducah and Portsmouth plants.

Because federal contributions to the Fund have been less than the 
authorized amount, we also developed two models to assess the affect of 
additional contributions from government appropriations.[Footnote 20] 
First, we developed a model--Revenue Added--that continued government 
contributions to the Fund until they equaled the total amount 
authorized under the Energy Policy Act. Building on this model, we 
developed an additional Revenue Added Plus Interest model that 
calculated and added to the Fund the interest that would have been 
earned if all authorized government contributions had been made. We 
found that under both models, despite additional revenues, the Fund 
would still be insufficient to cover all cleanup costs. In present 
value, the Fund deficiency would range from a high of $2.6 billion in 
the Revenue Added model to a low of $0.09 billion in the Revenue Added 
Plus Interest model. Even if the full amount of funds authorized by law 
were appropriated, and interest accrued on this additional amount, 
cleanup costs would still exceed revenues.

While our analysis was able to capture several uncertainties 
surrounding the Fund--including interest rates, inflation rates, cost 
and revenue variances, and the timing of final D&D--there are 
additional uncertainties we were unable to capture, including 
uncertainties due to possible changes in the scope of the cleanup; 
whether the Fund will be required to pay for additional activities, 
such as long-term groundwater monitoring once the plants are closed; as 
well as potential litigation costs the Fund would have to support. 
Significant changes in the scope of the cleanup work could impact the 
costs of cleanup activities at the plants. For example, a recent risk 
analysis exercise completed by DOE for the Paducah plant indicated that 
such changes could increase cleanup costs by more than $3 billion and 
extend the time frame for cleanup to more than 30 years past the 
original scheduled end date of 2019.[Footnote 21] Additionally, 
uncertainties surrounding waste disposal at the Paducah and Portsmouth 
plants could significantly impact cleanup costs. Current DOE cost 
estimates assume that on-site disposal facilities will be built, which 
would minimize waste transportation costs. These facilities have yet to 
be constructed at the plants or agreed upon by regulatory authorities. 
However, if DOE is not able to build these on-site facilities, waste 
disposal costs could increase substantially. For example, at the 
Portsmouth plant, contractor officials estimated that if they have to 
ship all of the waste off site, disposal would cost at least $515 
million (in 2002 dollars) more than the projected cost of disposing of 
the waste in an on-site facility.

Further, there may be additional activities the Fund is required to 
support that are not currently included in DOE's cost projections. For 
example, after each site has completed all of the necessary cleanup 
work, there will be long-term stewardship costs at the plants, such as 
continual groundwater monitoring. Currently, DOE officials assume these 
long-term stewardship costs will be covered by a separate funding 
source. Similarly, the costs to store and dispose of each plant's 
depleted uranium hexafluoride are currently covered by a separate 
appropriation. However, DOE officials acknowledge that if another 
funding source is not available for these costs, they may be required 
to use resources from the Fund.

Finally, litigation costs supported by the Fund are another source of 
uncertainty. Future litigation costs could vary depending on the extent 
to which lawsuits are pursued and whether the actions are decided in 
favor of the federal government. Various legal claims related to 
domestic utility company assessments have been made against the Fund. 
All of the actions decided to date have been in favor of the federal 
government. However, additional claims may be filed. Additionally, 
there have been litigation costs associated with lawsuits against DOE 
by workers and adjoining landowners at the Paducah and Portsmouth 
plants, often concerning allegations of property or human health 
damages.

Conclusions: 

Based on DOE's current estimates, and the most likely time frame for 
completing cleanup, costs will exceed revenues in the Fund by $3.5 
billion to $5.7 billion (in 2004 dollars). However, DOE has yet to make 
a number of decisions that will impact the costs of cleanup, including 
when decontamination and decommissioning at the Paducah and Portsmouth 
plants will occur. Until DOE resolves some of these uncertainties and 
has more specific information, it is impossible to more precisely 
determine the total funds necessary to cover the authorized cleanup 
activities. While the precise amount of additional revenue needed 
cannot be determined, our analysis shows that additional contributions 
to the Fund beyond its current 2007 expiration date will be necessary 
to cover the costs of authorized activities irrespective of when DOE 
decides to undertake D&D of the Paducah and Portsmouth plants. Because 
the Paducah and Portsmouth plants are now estimated to cease operations 
by 2010 and 2006, respectively, DOE should be able to develop plans, 
including more precise cost estimates, for D&D of these plants. 
Extending the Fund by an additional 3 years would give DOE an 
opportunity to develop these plans and a better estimate of the costs 
to clean up the plants. With this information, DOE could better 
determine if further extensions to the Fund will be necessary.

Matters for Congressional Consideration: 

In order to better ensure that the Fund will be sufficient to cover the 
projected costs for authorized activities, the Congress should 
consider: 

* reauthorizing the Fund for an additional three years to 2010, and: 

* requiring DOE to reassess the sufficiency of the Fund before the 
expiration date to determine if extensions beyond 2010 will be 
necessary.

Recommendations for Executive Action: 

To help reduce uncertainty regarding the sufficiency of the Fund, we 
are recommending that the Secretary of Energy take the following two 
actions: 

* develop a decontamination and decommissioning plan for the Paducah 
plant that would identify the most probable time frames and costs for 
completing final D&D, and: 

* develop a decontamination and decommissioning plan for the Portsmouth 
plant that would identify the most probable time frames and costs for 
completing final D&D.

Agency Comments and Our Evaluation: 

We provided a draft of this report to DOE for review and comment. DOE 
generally agreed that our report accurately presents the current status 
of the Fund and concurred with the report's matters for congressional 
consideration. DOE also stated that it would develop decontamination 
and decommissioning plans for the remainder of the facilities at 
Paducah and Portsmouth "at the appropriate time," but did not indicate 
when would be an "appropriate time." We recognize that the 
decontamination and decommissioning of the Paducah and Portsmouth 
plants may not occur for years and that any plans developed by DOE 
would have to be periodically updated. However, many of the 
uncertainties that currently exist and could have significant impact on 
the costs of DOE efforts will not be resolved until DOE develops D&D 
plans for the Paducah and Portsmouth plants that identify the most 
probable time frames and costs for completing final D&D. We recommended 
that the Congress consider extending the Fund for 3 years, in part, to 
provide DOE with an opportunity to develop these plans. Until DOE does 
so, it will not be able to develop a more precise estimate of the total 
funds necessary to cover the authorized cleanup activities or to 
reassess the sufficiency of the Fund and determine if further 
extensions are necessary.

DOE also provided technical comments that we incorporated, as 
appropriate. DOE's written comments on our report are included in 
appendix III.

Scope and Methodology: 

To determine what actions DOE has taken to reduce the cleanup costs the 
Fund is authorized to support, we reviewed the National Academy of 
Sciences' 1996 report that identified 13 major cost reduction 
recommendations for the nation's three uranium enrichment 
plants.[Footnote 22] We met with Academy officials to gain further 
information about the study and with DOE and its contractor officials 
at each of the plants to determine the extent to which DOE has taken 
actions to address the recommendations. While we were able to obtain 
information on actions taken to date, DOE could not determine whether 
the actions were taken as a result of the Academy's recommendations. 
DOE was also generally unable to provide information regarding the cost 
savings, if any, achieved by implementing these actions. To determine 
other steps DOE has taken to reduce cleanup costs, we visited all three 
plants and interviewed DOE and contractor officials from DOE 
headquarters, the Oak Ridge Operations Office, the Lexington Office, 
and the site offices at each of the three plants. Additionally, we 
obtained and analyzed documentation regarding DOE's accelerated cleanup 
strategy at the Oak Ridge and Paducah plants, including the plants' 
planning documents and other DOE management reports. We also obtained 
and reviewed each of the three plants' draft risk-based end state 
vision documents, to understand DOE's proposed options for 
consideration. Additionally, we attended a public meeting in Paducah, 
where DOE presented a draft risk-based end state vision to the 
community, to better understand the proposal. We also interviewed 
regulatory authorities responsible for overseeing cleanup activities at 
the plants, including officials at the Environmental Protection 
Agency's Region IV and Region V, the Commonwealth of Kentucky's 
Department for Environmental Protection, the Tennessee Department of 
Environment and Conservation, and the Ohio Environmental Protection 
Agency.

To assess the sufficiency of the Fund to pay for the total projected 
costs of the Fund's authorized activities, we interviewed DOE and 
contractor officials responsible for the Fund's financial data and 
obtained DOE's current estimates for uranium and thorium reimbursement 
costs, the cleanup costs at the three plants, and the current and 
likely revenue projections. We used these data to develop a number of 
simulation models that factored in the cost and revenue projections on 
an annual basis and uncertainties surrounding inflation rates, interest 
rates, costs, revenues, and the timing of the final D&D work at the 
Paducah and Portsmouth plants. See appendix I for a detailed 
description of our modeling methodology, assumptions, and results. We 
interviewed DOE and contractor officials from DOE Headquarters, the Oak 
Ridge Operations Office, the Lexington Office, and the site offices at 
each of the three plants, as well as officials from the federal and 
state regulatory offices party to the plants' cleanup agreements. We 
also toured the Oak Ridge plant to identify the major uncertainties 
that could impact future cleanup costs at the plants.

In addition, we assessed the reliability of the data used to develop 
our simulation models. We obtained, from key DOE and contractor 
database officials, responses to a series of data reliability questions 
covering issues such as data entry access, quality control procedures, 
and the accuracy and completeness of the data. Follow-up questions were 
added whenever necessary. We also interviewed DOE and contractor 
officials and reviewed relevant documentation to determine how cost 
estimates for future cleanup, including the final D&D work, were 
developed at each of the plants. We obtained historical cost estimates 
for several D&D projects completed at the Oak Ridge plant and compared 
them with updated or actual costs. We also interviewed and obtained 
relevant work papers from KPMG, a private accounting firm hired by the 
DOE Inspector General's Office to conduct annual financial audits of 
the Fund, to understand and incorporate their audit findings. KPMG's 
annual financial audits have concluded that the cost and revenue data 
related to the Fund appear to be complete and accurate, that internal 
controls are operating effectively, and that Fund managers have 
complied with all significant provisions of laws, regulations, and 
compliance agreements. Based on our own work, in conjunction with that 
of KPMG, we determined that the financial data provided were 
sufficiently reliable for the purposes of our report.

We are sending copies of this report to the Secretary of Energy. We 
will also make copies available to others upon request. In addition, 
the report will be available at no charge on the GAO Web site at 
[Hyperlink, http://www.gao.gov].

If you or your staff have any questions on this report, please call me 
at (202) 512-3841. Other staff contributing to this report are listed 
in appendix IV.

Signed by: 

Robin M. Nazzaro: 
Director, Natural Resources and Environment: 

List of Congressional Committees: 

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

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

[End of section]

Appendixes: 

Appendix I: Fund Modeling Methodology, Assumptions, and Results: 

This appendix describes the methodology, assumptions, and results of 
the models we developed to evaluate the sufficiency of the Uranium 
Enrichment Decontamination and Decommissioning Fund (Fund). 
Specifically, this appendix contains information on the following: 

* the simulation technique and the Baseline model we developed to 
estimate the balance of the Fund by the time all cleanup activities are 
scheduled to be completed;

* the data sources, assumptions, and uncertainties we used for the 
Baseline model;

* the additional models--Accelerated, Deferred, Revenue Added, and 
Revenue Added Plus Interest--that we developed to analyze the effects 
of additional uncertainties associated with decontamination and 
decommissioning time frames and revenues to the Fund;

* our simulation results for individual models as well as a comparison 
of results from the alternative models.

Modeling Methodology: 

To conduct our analysis, we first developed an Excel spreadsheet 
simulation model that annually tracked all estimated contributions to 
and payments from the Fund starting in fiscal year 2004 and extending 
out until all cleanup activities are scheduled to be completed. We also 
estimated the interest that could be earned by unused balances of the 
Fund each year, and included these earnings in the annual Fund 
balance.[Footnote 23] Our analysis began with the Fund balance at the 
end of fiscal year 2003 and continued until all cleanup work at the 
three uranium enrichment plants was projected to be completed. The 
completion date for the Baseline model and Revenue models was set at 
fiscal year 2044--the most likely date for the completion of all 
cleanup activities at the three plants. However, for the Accelerated 
and Deferred models, the completion dates were set at fiscal year 2024 
and fiscal year 2052, respectively.

Building on the Excel spreadsheet model, we used a commercially 
available forecasting and risk analysis software program called Crystal 
Ball to model the uncertainties associated with cost and economic 
assumptions used in the model. Using the Crystal Ball program in 
concert with the Excel model, we were able to expand our capability to 
explore a wide range of possible values, instead of one single value, 
for such variables as interest rates, inflation rates, and cleanup 
costs. The Crystal Ball program uses a process called Monte Carlo 
simulation. That is, it repeatedly and randomly selects values for 
interest rates, inflation rates, and costs from distribution ranges 
that we prespecified for these variables. Using these values for the 
appropriate cells in the spreadsheet model, Crystal Ball then makes the 
calculations and forecasts the results. Repeating the same process, 
Crystal Ball can calculate the results based on hundreds or thousands 
of such trials. Our simulation results were based on 1,500 different 
trials. The Crystal Ball program produces the entire range of forecasts 
for the given model and shows the confidence level for, or the 
likelihood associated with, any specific forecast.

Baseline Model Data, Assumptions, and Uncertainties: 

The Department of Energy (DOE) and its contractor was our primary 
source for all the cost data used to develop our Baseline model. For 
Fund revenues, we generally assumed the Fund would receive 
contributions as authorized by current legislation. DOE also provided 
us with the time frames for completing the cleanup work at each of the 
plants and, when possible, contingency estimates for the costs. Since 
DOE's cost data were provided in different dollar values, we converted 
all cost data to 2004 dollars using either the inflation rates used by 
DOE or the Consumer Price Index. More specific sources of data and 
assumptions to the modeling work were as follows: 

Revenues to the Fund. To construct the Baseline model, we assumed 
contributions to the Fund would come from three sources: federal 
government appropriations, payments from domestic utility companies, 
and interest earned on investments of Fund balances. We assumed that 
government contributions would continue from fiscal years 2004 through 
2007, as authorized by the Energy Policy Act. However, for the federal 
government contributions in fiscal years 2004 and 2005, we used actual 
appropriations and the President's budget request, respectively; for 
the remaining years, we assumed contributions would be at the level 
authorized in the current legislation. For payments from domestic 
utility companies, we assumed the assessment would remain unchanged at 
the fiscal year 2004 level, and assumed payments would continue through 
fiscal year 2007, as authorized by the Energy Policy Act. Additionally, 
as required by law, the Fund can accrue interest income from investing 
the unused balance of the fund in government securities. Therefore, we 
estimated the investment earnings of the Fund annually and included it 
in the available Fund balances. To calculate investment earnings, we 
used a range of different interest rates based on the Fund's previous 
earnings. We assumed that the real interest rate earned on the Fund 
investment has a triangular distribution, with minimum and maximum 
values based on historical performance of the Fund's investments since 
1994. Similarly, we used the performance of the Consumer Price Index 
since 1994 to develop a triangular distribution for price indices to 
adjust the data where necessary.

Costs of the Fund. DOE, in conjunction with its contractor officials 
responsible for conducting the cleanup work at the three uranium 
enrichment plants, provided cost estimates for all anticipated 
activities that will be paid for from the Fund starting in fiscal year 
2004, and that will carry forward until all cleanup activities have 
been completed at each of the three plants. Cost estimates included (1) 
reimbursements to uranium and thorium licensees and (2) costs to 
complete the cleanup at the three uranium enrichment plants.

1. Reimbursements to uranium and thorium licensees. The Energy Policy 
Act authorized reimbursements to uranium licensees not to exceed $350 
million and reimbursements to the thorium licensee not to exceed $365 
million for the portion of their cleanup costs associated with the sale 
of these materials to the federal government. The remaining unused 
authorized amounts are adjusted annually based upon the Consumer Price 
Index. We assumed that the annual reimbursement amount will be fixed at 
the fiscal year 2004 level and will carry forward until the total 
amount authorized by law has been allocated. Based on the current 
balance of the Fund, anticipated revenues, and the total available 
reimbursement amount remaining, we determined that the Fund would be 
sufficient to cover the reimbursements to the uranium and thorium 
licensees.[Footnote 24]

2. Cleanup costs at the three uranium enrichment plants. Cleanup costs 
for decontamination and decommissioning (D&D) work were kept separate 
from all other cleanup cost activities, which include remedial actions, 
waste management, surveillance and maintenance, and other (including 
all other activities the Fund supports such as litigation fees and 
funds to support site-specific advisory boards). Cleanup costs were 
broken out annually and by each plant. Due to the different 
uncertainties surrounding these costs, D&D costs were then further 
segregated for process buildings (the large buildings where uranium is 
enriched) and all other remaining D&D costs. The Baseline model costs 
for the cleanup activities at the three plants were developed under the 
assumption that the final D&D (all D&D and other required cleanup 
actions at the plants once the facilities cease operations) would occur 
between 2004 and 2008 at the Oak Ridge plant; between 2018 and 2032 at 
the Paducah plant; and between 2010 and 2044 at the Portsmouth plant. 
These are the most likely time frames for completing the final D&D 
work, based on discussions with DOE and contractor officials.

Cost Uncertainties. To capture uncertainties inherent in the data, we 
used the Crystal Ball program in concert with the Baseline model we 
developed. With the Crystal Ball program, we could assign a range of 
values, rather than a single value, to each cell of the spreadsheet 
model. We developed the range of values for each cost category based on 
extensive discussions with DOE and its contractor staff who provided 
the cost estimates. After considering their recommendations and input, 
we assumed that all cleanup costs at the three uranium enrichment 
plants, with the exception of D&D of the process buildings at the 
Paducah and Portsmouth plants, could increase by a uniform probability 
of up to 20 percent.[Footnote 25] Given the considerable uncertainty 
associated with costs for D&D of the process buildings and the 
experience to date at the Oak Ridge plant, we assumed, based on the 
values provided by DOE, the costs for this work at Paducah and 
Portsmouth could increase by a uniform probability of up to 85 
percent.[Footnote 26]

Alternative Models: 

Because not all uncertainties could be incorporated into one model, we 
developed several alternative models to our Baseline model. 
Specifically, since DOE has not determined when final decontamination 
and decommissioning of the Paducah and Portsmouth plants will begin, we 
developed two alternative models--Accelerated and Deferred--to show the 
effects of different timing assumptions on the sufficiency of the Fund. 
Further, because federal contributions to the Fund have been less than 
the authorized amount, we developed two additional models--Revenue 
Added and Revenue Added Plus Interest--to include additional 
contributions to the Fund based on revenues from federal government 
appropriations. These alternative models were built using the same 
data, assumptions, and uncertainties that were used for the Baseline 
model, except for specific changes discussed below.

Accelerated and Deferred Models: 

Because DOE has not determined when the final decommissioning and 
decontamination work for the Paducah and Portsmouth uranium plants will 
begin and when it will be completed, DOE, in conjunction with its 
contractor officials, developed two additional cost series for the 
Paducah and Portsmouth plants that varied in the start and completion 
dates for the final D&D work, which we then incorporated into our 
Accelerated and Deferred models. The completion of all D&D activities 
in the Accelerated model was reduced by 20 years from 2044 to 2024, and 
increased by 8 years in the Deferred model to 2052.

The Accelerated cost series was developed under the assumption that 
final D&D could be completed faster than under the Baseline model, 
given unconstrained funding. For the Accelerated approach, Paducah's 
final D&D work would begin in 2010 and end by 2024; Portsmouth's final 
D&D work would begin in 2007 and be completed by 2024. These time 
frames were determined in consultation with DOE and contractor 
officials. They represent the soonest the D&D work would most likely 
start, according to DOE and its contractor officials, and represent the 
earliest likely time frame that the total D&D and other associated 
cleanup work could be completed.

The Deferred cost series was developed under the assumption that given 
current funding constraints, it may not be realistic for two major D&D 
projects to be carried out concurrently. Thus, Deferred time frames 
were determined by DOE, assuming that all work would be completed at 
the Portsmouth plant first and then initiated at the Paducah plant. For 
the Deferred model, Portsmouth's final D&D work was estimated to be 
completed from 2010 to 2037 and Paducah's from 2038 to 2052.

Revenue Added Models: 

According to DOE's records, by the start of fiscal year 2004, when our 
analysis begins, the government's actual contributions to the Fund were 
$707 million less than authorized under the Energy Policy Act. To 
capture the effect of the government meeting its total authorized 
annual contributions on the balance of the Fund, we developed two 
additional models--a Revenue Added and a Revenue Added Plus Interest 
model. For the Revenue Added model, we assumed that government 
contributions to the Fund would continue annually at the authorized 
level until the total government contributions as authorized by law had 
been met, which would occur in fiscal year 2009. For the Revenue Added 
Plus Interest model, we built on the Revenue Added model to include the 
effect of forgone interest that the Fund could have earned if the 
government had contributed the full authorized amount. In other words, 
we continued government payments into the Fund until the total amount 
authorized (regardless of amounts actually appropriated), as well as 
interest on the unpaid portion of the authorized amount, is paid to the 
Fund. We assumed these additional payments would be made to the Fund in 
the same amounts as the 2004 annual authorized amount, which extended 
payments through fiscal year 2010.

Results: 

The balance of the Fund at the projected completion of all cleanup work 
indicated whether the Fund will be sufficient to cover all costs 
identified by DOE. We estimated the Fund balance in current (year of 
completion) dollars and constant 2004 dollars. However, to compare the 
results of various models with different completion dates, we also 
estimated the present value of the Fund's balance in 2004. For each 
model, the Crystal Ball program produced not only a range of possible 
values, but also the probability associated with that value, as well as 
the expected mean for the range. Figures 4 through 8 provide an overall 
illustration of the results produced by the models in constant 2004 
dollars. In the figures, each bar shows the value by which costs could 
exceed revenues in billions of 2004 dollars. The height of each bar is 
the probability that the costs would exceed the revenues by that exact 
amount. Even though the probability of one specific amount is low, 
there is a 100 percent probability that the actual amount will fall 
somewhere within the range (e.g. for the Baseline model, minus $3.5 
billion to minus $5.7 billion). As shown in figures 4 through 8, 
regardless of the model we used, the revenue going into the Fund will 
not be sufficient to cover all of the projected cleanup costs at the 
uranium enrichment plants.

Figure 4: Baseline Model Results: 

[See PDF for image]

Note: The values on the horizontal axis of the figure are to provide a 
scale and do not correspond exactly to the ranges of the Fund balance, 
which are provided in table 2.

[End of figure]

Figure 5: Accelerated Model Results: 

[See PDF for image]

Note: The values on the horizontal axis of the figure are to provide a 
scale and do not correspond exactly to the ranges of the Fund balance, 
which are provided in table 2.

[End of figure]

Figure 6: Deferred Model Results: 

[See PDF for image]

Note: The values on the horizontal axis of the figure are to provide a 
scale and do not correspond exactly to the ranges of the Fund balance, 
which are provided in table 2.

[End of figure]

Figure 7: Revenue Added Model Results: 

[See PDF for image]

Note: The values on the horizontal axis of the figure are to provide a 
scale and do not correspond exactly to the ranges of the Fund balance, 
which are provided in table 2.

[End of figure]

Figure 8: Revenue Added Plus Interest Model Results: 

[See PDF for image]

Note: The values on the horizontal axis of the figure are to provide a 
scale and do not correspond exactly to the ranges of the Fund balance, 
which are provided in table 2.

[End of figure]

The figures show the results for the individual models in constant 2004 
dollars in the year DOE projected that all cleanup work will be 
completed. Because of the difference in the completion dates, the 
comparison of the Fund balances across the different models will not be 
meaningful. To make the comparison of the balances possible, we also 
estimated the present value of the Fund in 2004 dollars. Figure 9 shows 
in present value how the Fund balance of the Baseline model compares 
with the Accelerated and Deferred models; Figure 10 shows in present 
value how the Fund balance of the Baseline model compares with the two 
Revenue Added models.

Figure 9: Present Value of Fund Balance for Baseline, Accelerated, and 
Deferred Models: 

[See PDF for image]

Notes: In order to compare the results of various models with different 
completion dates, we estimated the present value of the Fund's balance 
in 2004 dollars, as represented here.

[End of figure]

The values on the horizontal axis of the figure are to provide a scale 
and do not correspond exactly to the ranges of the Fund balance, which 
are provided in table 2.

Figure 10: Present Value of Fund Balance for Baseline, Revenue Added, 
and Revenue Added Plus Interest Models: 

[See PDF for image]

Notes: In order to compare the results of various models with different 
completion dates, we estimated the present value of the Fund's balance 
in 2004 dollars, as represented here.

The values on the horizontal axis of the figure are to provide a scale 
and do not correspond exactly to the ranges of the Fund balance, which 
are provided in table 2.

[End of figure]

The specific values for which the Fund could be insufficient under the 
various models are shown in table 2. Though the Deferred model showed 
the greatest insufficiency in the year the cleanup work is projected to 
be completed, once the timing of expenditures is considered as in the 
present value analysis, the deficiency of the Deferred alternative was 
not significantly different from other models. On the other hand, the 
deficiency of the Fund, as measured in present value mean, was the 
lowest in the Revenue Added Plus Interest model. In this model, cleanup 
costs would exceed revenues by $0.09 billion to $2.3 billion.

Table 2: Comparison of Models: 

Dollars in billions.

Completion date (fiscal year); 
Baseline model (range): 2044; 
Accelerated model (range): 2024; 
Deferred model (range): 2052; 
Revenue Added model (range): 2044; 
Revenue Added Plus Interest model (range): 2044.

Fund balance at completion of all cleanup: Constant: 2004 dollars; 
Baseline model (range): -$5.7 to -$3.5; (mean): (-$4.8); 
Accelerated model (range): -$5.2 to -$4.0; (mean): (-$4.6); 
Deferred model (range): -$6.2 to -$4.0; (mean): (-$5.2); 
Revenue Added model (range): -$4.7 to -$1.8; (mean): (-$3.6); 
Revenue Added Plus Interest model (range): -$4.2 to -$.43; (mean): 
(-$2.7).

Fund balance at completion of all cleanup: Current; 
dollars; 
Baseline model (range): -$18.5 to -7.6; (mean): (-$12.5); 
Accelerated model (range): -$9.8 to -5.7; (mean): (-$7.6); 
Deferred model (range): -$26.4 to -8.8; (mean): (-$16.7); 
Revenue Added model (range): -$15.1 to -4.3; (mean): (-$9.3); 
Revenue Added Plus Interest model (range): -$13.3 to -1.0; (mean): 
(-$7.1).

Fund balance at completion of all cleanup: Present value; 
2004 dollars[A]; 
Baseline model (range): -$3.1 to -.77; (mean): (-$1.7); 
Accelerated model (range): -$3.8 to -1.8; (mean): (-$2.7); 
Deferred model (range): -$3.1 to -.63; (mean): (-$1.5); 
Revenue Added model (range): -$2.6 to -.39; (mean): (-$1.3); 
Revenue Added Plus Interest model (range): -$2.3 to -.09; (mean): 
(-$1.0). 

Source: GAO analysis of DOE data.

[A] Because of the difference in completion dates, the comparison of 
the Fund balance in constant 2004 dollars would not be meaningful. To 
make the comparison of the various models possible, we estimated the 
present value of the Fund's balance in 2004 dollars. Because present 
value analysis reflects time value of money--that costs are worth more 
if they are incurred sooner and worth less if they occur in the future, 
the present value under the deferral model declines more than the other 
options. However, in reality the net effect would depend on many other 
factors. If, for example, deferral would add substantially to such 
costs as safeguarding and security or costs associated with increased 
health risks then the reduction due to adjusting for time value of 
money could be more than offset by increases in other costs.

[End of table]

[End of section]

Appendix II: DOE Actions Taken That Addressed the National Academy of 
Sciences' Cost Reduction Recommendations: 

This appendix describes the actions taken by DOE that address the 
National Academy of Sciences' (Academy) cost reduction recommendations. 
The Energy Policy Act directed the Academy to conduct a study and to 
provide recommendations for reducing the decontamination and 
decommissioning costs at the three uranium enrichment plants. In 1996, 
after convening a committee of academic and technical experts to carry 
out the study, the Academy released a report highlighting 13 major 
recommendations entitled Affordable Cleanup? Opportunities for Cost 
Reduction in the Decontamination and Decommissioning of the Nation's 
Uranium Enrichment Facilities. The recommendations address a variety of 
cost reduction approaches, including developing specific technologies 
and suggestions for planning, management, and regulatory coordination. 
While we were able to obtain information on actions DOE has taken that 
are consistent with the recommendations, DOE could not determine 
whether any actions to date were taken directly in response to the 
Academy's recommendations. Table 3 shows each of the Academy's major 
recommendations, the status of the recommendation, and an explanation 
of the actions taken by DOE that addressed the recommendation.

Table 3: Recommendations, Status, and Explanation of the Actions Taken 
by DOE: 

Focus of recommendation: management; 
Recommendation: Rather than constructing a new administration building, 
existing facilities should be used to house the management and 
professional D&D staff; 
Status: Addressed; 
Action taken: At the Oak Ridge plant, all DOE and contractor staff are 
housed in existing facilities. At the Paducah and Portsmouth plants, 
DOE plans to use existing structures to house staff when D&D efforts 
begin.

Focus of recommendation: management; 
Recommendation: DOE should develop three plans--namely, headquarters 
level, plant-complex level, and site level--that address and integrate 
D&D of the facilities, environmental remediation activities, and the 
management of the depleted uranium hexafluoride; 
Status: Partially addressed; 
Action taken: DOE has not developed a headquarters-level D&D plan that 
addresses and integrates D&D of all three plants with other DOE 
activities. While DOE's strategic plan discusses overall environmental 
management strategies and objectives, the plan does not specifically 
address D&D of the three plants as described by the Academy's 
recommendation. DOE also has not developed a complex-level D&D plan for 
the three plants. Oak Ridge is the only plant with an agreed-upon D&D 
plan that incorporates D&D, other cleanup activities, and the 
management of depleted uranium hexafluoride (a byproduct of the 
uranium enrichment process). The Paducah plant currently has a plan 
that lays out DOE's approach for a portion of its cleanup, but the plan 
does not include details for final D&D. DOE does not have a D&D plan 
for the Portsmouth plant. However, the DOE site manager said the agency 
is currently working to develop a Portsmouth strategic plan that will 
address final D&D, other cleanup activities, and management of depleted 
uranium hexafluoride.

Focus of recommendation: management; 
Recommendation: An independent contractor should be selected through 
open competition and should be assigned total responsibility and 
accountability for all aspects of the assigned D&D work; 
Status: Partially addressed; 
Action taken: In 1997, DOE awarded a contract to Bechtel Jacobs for 
cleanup work at the Oak Ridge, Paducah, and Portsmouth plants. Bechtel 
Jacobs was responsible for the planning and execution of remedial 
action, D&D, and waste management at the three plants (with the 
exception of three of the Oak Ridge plant's process buildings). In 
September 2003, DOE awarded a new contract to Bechtel Jacobs for 
completing the cleanup work at the Oak Ridge plant. Although the 
contract awarded in 1997 included all aspects of the cleanup at the 
Paducah and Portsmouth plants, DOE is currently in the process of 
bidding for two separate contracts at each plant--one for remedial 
actions and one for infrastructure and site maintenance--because of new 
federal contract initiatives.

Focus of recommendation: management; 
Recommendation: A prioritized cost-and risk-reduction approach should 
be used as the basis for developing the D&D plan. This approach should 
be used to accomplish D&D activities prior to the completion of the 
entire plan; 
Status: Partially addressed; 
Action taken: In the 1990s, DOE developed a risk-based prioritization 
system to rank projects on the basis of overall risk reduction. DOE has 
now transitioned to a prioritization approach that maximizes the use of 
available resources while addressing near-term concerns first. The 
current prioritization criteria used by DOE, in order of importance, 
consist of the following: (1) imminent human health or safety risks, 
(2) compliance with existing enforceable regulatory agreements, (3) 
actions required to mitigate risks under current land use, and (4) 
activities that are on the critical path for efficient completion of 
the Environmental Management Program. While DOE has used this approach 
in developing the Oak Ridge plant's D&D plan, D&D plans, including the 
approach DOE will take, have not yet been developed for the Paducah and 
Portsmouth plants.

Focus of recommendation: management; 
Recommendation: To reduce costs without compromising information 
security for the gaseous diffusion technology, DOE should try to define 
physical security requirements that allow uncleared workers under 
adequate supervision to conduct D&D operations. In addition, DOE should 
conduct an in-depth evaluation of the safeguards and security 
requirements during D&D to determine how their impact on D&D costs 
could be reduced; 
Status: Partially addressed; 
Action taken: DOE is evaluating steps to allow access, under adequate 
supervision, to workers conducting D&D at the Oak Ridge plant who do 
not have clearances. For example, DOE recently approved a new security 
plan for the large process buildings at Oak Ridge. According to DOE 
officials, by taking actions such as reducing the number of times 
security forces search employees and constructing a perimeter fence 
around the outskirts of buildings to eliminate the need for searches 
each time employees enter or exit a building, they will not need to 
increase the security staff. Without these changes, DOE would have had 
to significantly increase the security staff on-site to handle the 
increased D&D activity. Additionally, the Oak Ridge plant has a 
sitewide safeguards and security plan that outlines security 
requirements across the site during D&D. According to DOE, this plan is 
continually updated to reduce security requirements as projects are 
completed, in order to reduce costs. The Paducah and Portsmouth plants 
do not have D&D plans that specify the security requirements that will 
be necessary during D&D operations. However, the DOE site manager said 
that at the Portsmouth plant, officials are actively looking at ways to 
reduce their security requirements as a part of an effort to develop a 
strategic plan for D&D of the site.

Focus of recommendation: development of D&D technologies; 
Recommendation: The high-assay decontamination facility should be 
eliminated; 
the low-assay decontamination facility should be simplified to focus 
primarily on aqueous decontamination and should be housed in existing 
buildings; 
Status: Addressed; 
Action taken: Development of high-assay and low- assay decontamination 
facilities (facilities to disassemble and decontaminate equipment 
contaminated with enriched uranium) is no longer part of DOE's plans 
for D&D. DOE abandoned the construction of these facilities after an 
evaluation revealed how costly the process would be and instead has 
opted to dispose of the material into on-site landfills, which do not 
require aqueous decontamination. At Oak Ridge, this process is already 
under way. DOE officials assume a similar approach will be taken at 
the Paducah and Portsmouth plants when D&D is initiated at these 
plants. If DOE plans change or it is unable to obtain approval for on-
site disposal cells at these sites, DOE may need to re-evaluate its 
approach.

Focus of recommendation: development of D&D technologies; 
Recommendation: A few highly focused D&D demonstrations should be 
undertaken to verify the cost and effectiveness of specific 
technologies, including the following two: 
1. Optimization of aqueous decontamination to remove radioactive 
surface contamination from materials and process equipment, with 
special attention to Tc-99; and; 
2. Support of current DOE robotics programs, with highly focused 
demonstrations to verify potential cost savings and safety benefits; 
Status: Addressed; 
Action taken: DOE has hosted several demonstrations and workshops to 
assess the effectiveness of specific D&D technologies. For example, 
DOE's contractor recently held a workshop to evaluate dismantlement 
technologies for removing specific buildings at the Oak Ridge plant; 
1. According to DOE officials, there is no longer a need to utilize 
aqueous decontamination technology. The current waste acceptance 
criteria allow DOE to dispose of the materials into an on- site 
disposal facility whole, without first decontaminating the material; 
2. DOE has evaluated different types of robotics for use at the Oak 
Ridge plant and the agency is currently using a quasi-robotics 
program. For example, a worker can sit in the cab of a robotic device 
and extend a mechanical arm to cut or sheer piping, cables, or wire, 
precluding the need to manually cut the materials.

Focus of recommendation: development of D&D technologies; 
Recommendation: The technical and management approaches used 
successfully for D&D of the United Kingdom's Capenhurst gaseous 
diffusion plant and for recently completed D&D projects with U.S. power 
reactors should be carefully considered by DOE to reduce costs for D&D 
of the U.S. plants; 
Status: Partially addressed; 
Action taken: According to DOE officials, DOE has considered the 
technical and management approaches used at both the Capenhurst plant 
and other U.S. D&D projects, such as at the Hanford, Washington, site, 
to learn from their experiences and reduce costs. Specifically, at the 
Oak Ridge plant, DOE selected contractors who participated in D&D 
activities at other sites. For example, DOE awarded a contract to D&D 
several large process buildings at the Oak Ridge plant to British 
Nuclear Fuels Limited, based, in part, on its experience at the 
Capenhurst plant. DOE has not yet initiated final D&D at the Paducah 
and Portsmouth plants. However, the site manager for both of these 
plants acknowledged that it will be important to identify lessons 
learned from DOE's experiences at Oak Ridge and adopt best practices 
once D&D begins at the plants.

Focus of recommendation: development of D&D technologies; 
Recommendation: A modest research program should be established to 
develop methods to decontaminate diffusion barrier material 
effectively; 
Status: Not applicable; 
Action taken: DOE is currently not pursuing methods to decontaminate 
diffusion barrier material (the material used to separate and enrich 
uranium during the enrichment process). According to DOE officials, it 
is not necessary to decontaminate this material at the Oak Ridge plant 
because the material is placed directly into an on-site disposal cell, 
eliminating the need for decontamination. DOE assumes a similar 
approach will be taken at the Paducah and Portsmouth plants.

Focus of recommendation: regulatory and stakeholder involvement; 
Recommendation: A stakeholder involvement program should be pursued to 
obtain timely and substantive public participation and input to ensure 
that social values are reflected in policy decisions; 
Status: Addressed; 
Action taken: DOE has generally sought stakeholder involvement at each 
of the plants. DOE established Site Specific Advisory Boards at the Oak 
Ridge and Paducah plants that are staffed by local stakeholders. The 
boards' charters include providing input on cleanup policies and 
strategies and reviewing work plans and activities. While the 
Portsmouth plant does not have a Site Specific Advisory Board, DOE is 
currently working with the community to establish a stakeholder group 
to address DOE's new risk-based end state policy. DOE officials told us 
that they also regularly hold public meetings to present cleanup 
project plans and progress reports to Oak Ridge, Paducah, and 
Portsmouth city government organizations. Additionally, DOE has 
established information centers open to the public in or near all 
three communities. The centers provide information on each of the 
plant's respective cleanup activities, in addition to general 
information about its activities at other sites. The Portsmouth 
information center is located within the secure perimeter of the site, 
however, making public access somewhat less convenient than at the 
other two centers.

Focus of recommendation: regulatory and stakeholder involvement; 
Recommendation: DOE should seek coordination of all regulatory aspects 
of D&D with the appropriate state and federal agencies early in 
planning to provide consistency during D&D planning and execution; 
Status: Partially addressed; 
Action taken: DOE coordinates all of its cleanup planning activities 
through specific agreements with relevant state and federal regulatory 
officials. While mechanisms are in place to coordinate the regulatory 
aspects of its work, early coordination and planning between DOE and 
its regulatory entities have not always taken place. For example, at 
the Paducah plant, regulators have recently expressed concern that DOE 
has excluded them from the planning process for both the overall 
cleanup approach and specific projects.

Focus of recommendation: recycling/waste disposal; 
Recommendation: DOE should develop an integrated, optimized waste 
management plan that encompasses material reuse, recycling, packaging, 
transport, and waste disposal. Consistent with cost reduction and 
public health and environmental protection, materials should be cleaned 
to free-release standards and released to the commercial sector for 
recycling. Material that cannot be cleaned to free-release standards 
should be considered for recycling within DOE or Department of Defense 
complexes in applications where slightly contaminated materials are 
acceptable, such as for shield blocks or waste containers; 
Status: Addressed; 
Action taken: In 1997, DOE established the National Center of 
Excellence for Metals Recycle as a DOE complexwide resource for 
pursuing recycling and reuse alternatives for scrap equipment and 
surplus materials. The center has reported a reuse savings for the 
three plant sites of approximately $28 million since its establishment. 
However, in 2000, DOE suspended the release of scrap metals, such as 
nickel, copper, and aluminum, for recycling because of public concern 
that radioactive contamination might remain on or in the scrap metal. 
As a result, the plants are currently stockpiling or disposing of 
potentially valuable metals. For example, about 15,500 tons of scrap 
nickel--a valuable industrial commodity--salvaged from the Oak Ridge 
and Paducah plants have been stockpiled and are awaiting disposition. 
If recycled, DOE could earn between $42 million to $108 million, while 
disposal of the Oak Ridge plant's nickel stocks alone are estimated to 
cost DOE about $10 million in transportation and disposal costs. DOE is 
currently reassessing its recycling policies to determine if scrap 
metals can be safely recycled.

Focus of recommendation: recycling/waste disposal; 
Recommendation: The committee recommends that, if consistent with the 
prioritized cost-and risk-reduction process, the depleted uranium 
hexafluoride should be converted to the more stable chemical form, 
uranium oxide, for storage or disposal; 
Status: Addressed; 
Action taken: DOE recently awarded a contract to construct and operate 
depleted uranium hexafluoride conversion facilities at the Paducah and 
Portsmouth plants. DOE has begun shipping the depleted uranium 
hexafluoride cylinders currently stored at the Oak Ridge plant to 
Portsmouth for conversion. 

Source: GAO analysis of DOE information.

[End of table]

[End of section]

Appendix III: Comments from the Department of Energy: 

The Under Secretary of Energy 
Washington, DC 20585:

June 15, 2004:

Ms. Robin M. Nazzaro: 
Director, Natural Resources and Environment:
United States General Accounting Office: 
Washington, DC 20548:

Dear Ms. Nazzaro:

We have reviewed your draft report entitled URANIUM ENRICHMENT - 
Decontamination and Decommissioning Fund is Insufficient to Cover 
Cleanup Costs. The report, with some corrections, accurately presents 
the current status of the Fund. Due to the complexity of the Government 
Accounting Office (GAO) financial models, the Department of Energy 
(DOE) was unable to independently validate the results. The DOE's 
agreement, therefore, with the recommendations contained in this report 
is based upon the assumption that the financial analysis is accurate.

The Department concurs with the GAO's recommendation that Congress 
consider the reauthorization of the Fund for an additional three years 
and requires DOE to reassess the Fund's sufficiency before it expires 
to determine if further extensions will be necessary.

DOE does have in place appropriate cleanup plans for the current 
requirements. DOE will at the appropriate time, develop plans for the 
Decontamination and Decommissioning of the remainder of the facilities 
at Paducah and Portsmouth. Enclosed are our specific comments to 
clarify statements within the report.

If you have any further questions, please call me at (202) 586-7709 or 
Ms. Barbara Heffernan, Acting Deputy Assistant Secretary for Business 
Operations, (202) 586-5314.

Sincerely,

Signed by: 

David K. Garman:

Acting Under Secretary for Energy, Science and Environment:

Enclosure:

cc: S. McDonald, GAO:

[End of section]

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Robin M. Nazzaro, (202) 512-3841 Sherry L. McDonald, (202) 512-8302: 

Staff Acknowledgments: 

In addition to the individuals named above, John W. Delicath, Jason 
Holsclaw, Alyssa M. Hundrup, Mehrzad Nadji, Judy Pagano, Michael 
Sagalow, and Barbara Timmerman also made key contributions to this 
report.

(360381): 

FOOTNOTES

[1] In 2001, enrichment operations were ceased at the Portsmouth plant, 
but the plant was placed on cold standby--a status that maintains the 
plant in a usable condition.

[2] All further references to the Energy Policy Act refer to the Energy 
Policy Act, as amended.

[3] Thorium is a naturally occurring, slightly radioactive metal that 
can be used as a nuclear fuel.

[4] National Academy of Sciences, Affordable Cleanup? Opportunities for 
Cost Reduction in the Decontamination and Decommissioning of the 
Nation's Uranium Enrichment Facilities (Washington, D.C., 1996).

[5] Remedial actions refer to environmental cleanup activities directed 
at eliminating or reducing contaminate sources and contaminated soil 
and groundwater. 

[6] U.S. General Accounting Office, Uranium Enrichment: Analysis of 
Decontamination and Decommissioning Scenarios, GAO/RCED-92-77BR 
(Washington, D.C.: Nov. 15, 1991). 

[7] U.S. General Accounting Office, Comments on Proposed Legislation to 
Restructure DOE's Uranium Enrichment Program, GAO/T-RCED-92-14 
(Washington, D.C.: Oct. 29, 1991).

[8] The following revenue amounts are authorized: $480 million for 
fiscal years 1992-1998; $488.3 million for fiscal years 1999-2001; and 
$518.2 million for fiscal years 2002-2007. Both domestic utility 
assessments and government appropriations are to be adjusted annually 
for increases in the Consumer Price Index.

[9] The Energy Policy Act authorizes reimbursements to uranium 
licensees not to exceed $350 million and reimbursements to the thorium 
licensee not to exceed $365 million for the portion of their cleanup 
costs associated with the sale of these materials to the federal 
government. The remaining unused authorized amounts are adjusted 
annually based upon the Consumer Price Index. 

[10] Cleanup activities are conducted under the requirements of the 
Resource Conservation and Recovery Act of 1976, as amended (RCRA); the 
Comprehensive Environmental Response, Compensation, and Liability Act 
of 1980, as amended (CERCLA); and compliance agreements with regulatory 
authorities, which include the Environmental Protection Agency and 
state regulatory agencies in Kentucky, Ohio, and Tennessee. 

[11] There are additional activities being carried out at the uranium 
enrichment plants that are not currently paid for by the Fund. For 
example, the costs to dispose of each plant's depleted uranium 
hexafluoride (a byproduct of the uranium enrichment process) are 
currently paid for by a separate appropriation within DOE's budget. 
Some of these activities could be paid for by Fund resources in the 
future.

[12] USEC was responsible for uranium enrichment before operations 
ceased and was awarded the contract to maintain the plant in cold 
standby condition.

[13] U.S. Department of Energy, Office of Inspector General, Cold 
Standby Program at the Portsmouth Gaseous Diffusion Plant (Washington, 
D.C., December 2003).

[14] National Academy of Sciences, Affordable Cleanup? Opportunities 
for Cost Reduction in the Decontamination and Decommissioning of the 
Nation's Uranium Enrichment Facilities (Washington, D.C., 1996).

[15] Diffusion barrier material is the material used to separate and 
enrich uranium during the enrichment process.

[16] Department of Energy, A Review of the Environmental Management 
Program (Washington, D.C., Feb. 4, 2002).

[17] DOE estimates that accelerating the cleanup at the Oak Ridge plant 
will reduce the overall cleanup cost by $866,176,000. However, this 
amount includes other activities not covered by the Fund. The savings 
to the Fund is an estimated $465,072,000. 

[18] As we reported in our April 2004 report, DOE has had and continues 
to have difficulty in reaching stakeholder agreement on its cleanup 
plans. U.S. General Accounting Office, Nuclear Waste Cleanup: DOE Has 
Made Some Progress in Cleaning Up the Paducah Site, but Challenges 
Remain, GAO-04-457 (Washington, D.C.: April 2004).

[19] Because of the difference in completion dates, the comparison of 
the Fund balance in constant 2004 dollars would not be meaningful. To 
make the comparison of the various models possible, we estimated the 
present value of the Fund's balance in 2004 dollars. Because present 
value analysis reflects time value of money--that costs are worth more 
if they are incurred sooner and worth less if they occur in the future, 
the present value under the deferral model declines more than the other 
options. However, in reality the net effect would depend on many other 
factors. If, for example, deferral of D&D would add substantially to 
such costs as safeguarding and security or costs associated with 
increased health risks then the reduction due to adjusting for time 
value of money could be more than offset by increases in other costs. 

[20] According to DOE's records, at the start of fiscal year 2004, the 
government's actual contributions to the Fund were $707 million less 
than the amount authorized under the Energy Policy Act.

[21] This end date does not include final D&D of the plant, but only 
includes the major remedial actions currently planned at the site.

[22] National Academy of Sciences, Affordable Cleanup? Opportunities 
for Cost Reduction in the Decontamination and Decommissioning of the 
Nation's Uranium Enrichment Facilities (Washington, D.C., 1996).

[23] The Energy Policy Act provided that balances in the Fund be 
invested in Treasury securities and any interest earned be made 
available to pay for activities covered under the Fund.

[24] At the end of fiscal year 2003, the Fund balance was $3.4 billion, 
whereas the total remaining balance for reimbursements was about $400 
million--a total of $214 million had been paid to uranium licensees and 
$171 million had been paid to the thorium licensee.

[25] Uniform probability of up to 20 percent indicates costs could 
increase by any factor between 0 and 20 percent, with all values having 
equal likelihood of occurring.

[26] We found that the cost to D&D the major process buildings at the 
Oak Ridge plant is now estimated to be about 85 percent higher than the 
cost estimate that was developed in 2000. The Paducah and Portsmouth 
plants' process buildings cost estimates were also developed in 2000, 
and were largely based on the same assumptions used to develop the Oak 
Ridge cost estimate. In general, officials with whom we spoke agreed 
that based on the experience at Oak Ridge, costs could increase in a 
similar fashion at Paducah and Portsmouth. 

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