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Energy > 40. Excess Uranium Inventories

Marketing the Department of Energy’s excess uranium could provide billions in revenue for the government.

Why This Area Is Important

Uranium—a naturally occurring radioactive element—is used in nuclear weapons, as well as in fuel for nuclear power plants. In the United States, 20 percent of the nation’s electricity comes from nuclear power, and growing anxiety over climate change generated by ever-growing demand for fossil fuels has sparked interest in increasing the use of nuclear power, despite ongoing concerns about safety in light of the March 2011 nuclear accident in Japan. A healthy domestic uranium industry is considered essential to ensuring that commercial nuclear power remains a reliable option for supporting the nation’s energy needs.

The Department of Energy (Energy) maintains large inventories of uranium that it no longer requires for nuclear weapons or fuel for naval nuclear propulsion reactors. A large portion of Energy’s inventories consists of depleted uranium hexafluoride, otherwise known as “tails”— a byproduct of the uranium enrichment process. Although once considered an environmental liability, recent increases in uranium prices could transform these tails into a lucrative source of revenue for the government. Hundreds of thousands of metric tons of tails are stored at Energy’s uranium enrichment plants in Portsmouth, Ohio, and Paducah, Kentucky.

In addition to tails, Energy maintains thousands of tons of natural uranium, which likewise could be sold to utilities or others for additional revenue. For example, since December 2009, Energy has used some of this uranium to pay for environmental cleanup work at its Portsmouth uranium enrichment plant.

What GAO Found

The Energy uranium inventories are worth potentially billions of dollars to commercial nuclear power plants that can use the material as fuel in their reactors.

With regard to the Energy depleted uranium tails, as GAO reported in March and April 2008 and again in June 2011, under certain conditions, pursuing the following options could generate significant revenue:

  • Energy could contract to re-enrich the tails. Uranium tails lack sufficient quantities of the fissile uranium-235 isotope necessary for nuclear fuel. Considerable enrichment is required to further increase the concentration of uranium-235. In the past, low uranium prices meant that the cost of enrichment would have been greater than the proceeds the government would receive for the relatively small amount of uranium-235 extracted. But increases in uranium prices—from a nominal price of approximately $21 per kilogram of uranium in the form of uranium hexafluoride in November 2000 to about $160 per kilogram in May 2011—could make tails re-enrichment profitable. Although Energy would have to pay for processing, the resulting re-enriched uranium could be profitably sold if the sales price of the uranium exceeded processing costs.
  • Provided appropriate statutory authority, Energy could sell the tails “as is.” Although GAO found that Energy generally has the legal authority to process the tails and sell the resulting re-enriched uranium, GAO found that the department lacks authority to sell depleted uranium tails in their current form. While Energy disagrees and believes it currently has the necessary legal authority, it is nonetheless planning no sale of depleted uranium tails in the near term. Instead, Energy is committed to converting the tails to a more stable chemical form for safe long-term storage, which involves additional processing and stockpiling thousands of protective cylinders to contain the material indefinitely. If Congress were to provide the department with the needed legal authority to sell the tails, however, firms such as nuclear power utilities and enrichment companies might find it cost-effective to purchase these tails and re-enrich them as a source of nuclear fuel.

With regard to Energy’s inventories of natural uranium, as GAO reported in March and April 2008 and again in June 2011, the department has the general legal authority to sell this material; and in September 2011, GAO reported that in seven transactions executed since 2009, Energy has, in effect, “sold” nearly 1,900 metric tons of natural uranium into the market, using its contractor as a sales agent, receiving from $109 to $183 per kilogram. The total proceeds from these transactions funded over $250 million in environmental cleanup services by that contractor at the Portsmouth uranium enrichment plant. Although Energy characterized these sales as barter transactions— exchanges of services (environmental cleanup work) for materials (uranium)—GAO’s review showed that they were sales of natural uranium through a sales agent. While Energy received no cash from the transactions, it allowed USEC, Inc. to keep cash from the sales. Energy thus violated the miscellaneous receipts statute, which requires an official or agent of the government receiving money for the government from any source to deposit the money in the U.S. Treasury. Executed in accordance with federal law, however, future sales of natural uranium by Energy could generate additional revenue for the government.

Ultimately, the extent to which sales of Energy’s uranium inventories would generate financial benefits for the government depends on several factors:

  • The market price of uranium. The price for uranium is historically volatile, affected greatly by speculation regarding supply and demand, the price of competing energy resources, and domestic and international political and economic events or natural disasters, such as the March 2011 nuclear accident in Japan.
  • The price and availability of re-enrichment services. Only two companies currently provide enrichment services domestically. Energy would have to find a company with excess enrichment capacity beyond its current commitments, which may be difficult if large amounts of enrichment processing were required.
  • An existing commitment to domestic uranium producers to limit Energy inventory sold. Under its December 2008 Excess Uranium Inventory Management Plan, Energy committed to limit the amount of uranium sold in a given year to no more than 10 percent of the domestic requirements for nuclear fuel. The sudden introduction of hundreds of tons of uranium into the market could topple prices and not only reduce the government’s revenue from such sales, but could also undermine profitability of the domestic uranium industry.

As GAO reported in June 2011, the potential value of Energy’s tails is currently substantial, but changing market conditions could greatly affect the tails’ value over time. GAO estimated the value of the tails at $4.2 billion based on May 2011 uranium prices and enrichment costs and assuming sufficient re-enrichment capacity was available.

Actions Needed

In Energy’s 2008 uranium management plan, the department summarized its intent to sell or transfer uranium to the commercial market through 2017, including plans to re-enrich and sell depleted uranium tails. But because DOE has decided to use uranium to fund environmental cleanup at the Portsmouth site, more uranium has been released into the market than articulated in the 2008 plan. As a result, Energy tabled plans to also sell uranium tails, because doing so would violate the commitment the department made to domestic uranium producers to limit the amount of uranium Energy sells in a given year.

Even in the absence of such a commitment, however, legal obstacles to the pursuit of certain options for its uranium tails and natural uranium exist. GAO previously found that Energy lacked the necessary legal authority to pursue potential options for its tails and natural uranium and that the following congressional action may be needed. Specifically

GAO recommended in March 2008 that Congress may wish to

  • clarify Energy’s statutory authority regarding depleted uranium, explicitly providing direction about whether and how Energy may sell or transfer the tails in their current form. Depending on the terms of the legislation, and given the significant amount of tails in inventory, the government could garner substantial revenue as a result.

GAO recommended in September 2011 that if Congress sees merit in using the proceeds from the barter, transfer, or sale of federal uranium assets to pay for environmental cleanup of uranium enrichment plants, it could consider

  • providing Energy with explicit authority to barter excess uranium and to retain the proceeds from all three types of uranium transactions (barter, transfer, and sale). Likewise, Congress could direct Energy to sell uranium for cash and make those proceeds available by appropriation for decontamination and decommissioning expenses at Energy’s uranium enrichment plants.

Congress has taken some actions in response to GAO’s work. For example, the Consolidated Appropriations Act, 2012, among other things, requires the Secretary of Energy to report to the House and Senate Appropriations Committees not less than 30 days prior to the transfer, sale, barter, distribution, or other provision of uranium in any form specific details on the transactions, including the amounts of uranium to be provided and an estimate of the uranium value along with the expected recipient of the material. The act also requires the Secretary to submit a report evaluating the economic feasibility of re-enriching depleted uranium.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the products listed the related GAO products section. These reports reviewed Energy’s management of its uranium inventories and the department’s transactions using its uranium to pay for environmental cleanup and other services. GAO reviewed Energy documents detailing the transactions the department has engaged in involving its uranium, assessments of the value of uranium in each transaction, and analyses of the impact of DOE’s activities on the uranium market.

Agency Comments & GAO Contact

GAO provided a draft of its September 2011 report to Energy. Energy provided written comments that stated that because it did not receive money for the uranium it used to pay for environmental cleanup work, it did not violate the miscellaneous receipts statute. However, GAO and the courts have found in a number of instances that an entity does not have to receive actual cash to trigger a responsibility to deposit money into the U.S. Treasury. Energy also disagreed with GAO’s estimate of the value of Energy’s depleted uranium tails, stating that it did not include additional costs that may be incurred processing tails including, among other things, the costs of re-enriching the tails and packaging and transporting the material. The estimate does include the costs of re-enriching the tails, but it does not include some other costs, including packaging and transportation, because those costs are unknown. Furthermore, as GAO’s March and April 2008, June 2011, and September 2011 reports noted, GAO’s estimate is very sensitive to changing uranium prices, as well as to the availability of sufficient enrichment capacity. Uranium prices are volatile, and a sharp rise or fall can greatly affect the value of the tails. Any estimates of the value of the Energy tails are therefore subject to great uncertainty. As part of its routine audit work, GAO will track agency actions to address its recommendations and report to Congress.

For additional information about this area, contact David Trimble at (202) 512-3841 or trimbled@gao.gov.

Related Products

Excess Uranium Inventories:

Clarifying DOE's Disposition Options Could Help Avoid Further Legal Violations
GAO-11-846:
Published: Sep 26, 2011. Publicly Released: Sep 26, 2011.

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DOE's Depleted Uranium Tails Could Be a Source of Revenue for the Government
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Several Potential Options for Dealing with DOE's Depleted Uranium Tails Could Benefit the Government
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