Uraniuma naturally occurring radioactive elementis used in nuclear weapons, as well as in fuel for nuclear power plants. In the United States, 20 percent of the nations 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 nations 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 Energys 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 Energys 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.
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:
With regard to Energys 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)GAOs 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 Energys uranium inventories would generate financial benefits for the government depends on several factors:
As GAO reported in June 2011, the potential value of Energys 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.
In Energys 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
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
Congress has taken some actions in response to GAOs 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.
The information contained in this analysis is based on findings from the products listed the related GAO products section. These reports reviewed Energys management of its uranium inventories and the departments 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 DOEs activities on the uranium market.
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 GAOs estimate of the value of Energys 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 GAOs March and April 2008, June 2011, and September 2011 reports noted, GAOs 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 email@example.com.