Legal & Regulatory

GAO Has Legal Concerns With Uranium Transfers Between DOE and USEC

On June 9, the U.S. Government Accountability Office (GAO) announced six recommended actions designed to improve transparency of Department of Energy (DOE) uranium transactions.

The recommendations were developed following a review of four transactions that took place in 2012 and 2013 between the DOE and USEC Inc. USEC is a supplier of nuclear fuel to electric utilities worldwide, but has been steeped in financial trouble due to low prices and weak demand for low enriched uranium, as well as by difficulties with a long-delayed project to develop a new centrifuge enrichment technology. The company filed for Chapter 11 bankruptcy protection on March 5, 2014.

USEC is the only company that uses U.S.-developed technology to enrich uranium. According to the DOE, under international agreements the U.S. must use uranium enriched with domestic technology to meet national security needs. The uranium transfers that took place in 2012 and 2013 were intended to support the development of the next generation enrichment technology and for other national security purposes.

The GAO believes that, in three of the four transactions, the DOE likely did not have authority to transfer depleted uranium tails—a product of the enrichment process and generally considered to be an environmental liability—under restrictions imposed by the USEC Privatization Act. The DOE for its part disagrees, citing its authority to conduct the transactions under the Atomic Energy Act. To counter the argument, the GAO says that, even if the DOE had such authority, it did not meet the Act’s requirement to charge a price for the tails, because it transferred them without charging any price at all.

In the other transaction between the DOE and USEC, the GAO found that the DOE transferred ownership of uranium material that it previously obtained to meet national security needs, without obtaining a presidential determination that the uranium material was no longer necessary for national security needs, as is required by the USEC Privatization Act.

One of the GAO’s main contentions is that the DOE does not have adequate guidance for determining the value of tails when they are treated as an asset in a transaction. As a result, the estimated value of the tails ranged from $0 to $300 million. In the USEC transactions, the DOE considered the tails to have no value, but in other cases the DOE determined that the tails did have value and sought to sell its tails. The GAO concluded that without consistent guidance for how to value its uranium tails, the DOE couldn’t ensure that the government is reasonably compensated in transactions.

Ultimately, the GAO’s recommendations were:

  • The Secretary of Energy should continue to review the accuracy of its documentation associated with [a June 2012] transaction and seek an independent review of this documentation by a third party, such as the DOE Inspector General.
  • The Secretary of Energy should publicly identify the legal authority it relied on for each uranium transaction the department conducts and explain how the transaction meets the requirements of that authority.
  • The Secretary of Energy should develop guidance for setting an appropriate method for determining the value of depleted uranium tails when transferring them as an asset and apply the method consistently and transparently, prior to conducting such transfers, sales, or barters.
  • The Secretary of Energy should take steps to mitigate the risks for each uranium transaction, in accordance with federal internal control standards.
  • The Secretary of Energy should:
    • Conduct a rigorous and documented internal assessment consistent with contract provisions and the DOE’s Information Quality Guidelines of the quality of such studies and/or have an independent third party conduct a peer review.
    • To the extent that market impact studies are made publicly available, require that studies include information on the methods, data sources, and assumptions used in such a way that allows others to understand, interpret, and evaluate the studies consistent with [the] DOE’s Information Quality Guidelines.
  • The Secretary of Energy should seek and consider industry input both on the amount of DOE sales or transfers of uranium the market can absorb annually and on whether there is a need to reinstitute a guideline that limits annual uranium sales or transfers.

All recommendations are currently in an open status and the GAO concedes that the DOE generally disagrees with the GAO’s legal analysis and recommendations. GAO maintains that its recommendations are valid.

Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)

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