[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
SELLING THE DEPARTMENT OF ENERGY'S
DEPLETED URANIUM STOCKPILE: OPPORTUNITIES AND CHALLENGES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
APRIL 3, 2008
__________
Serial No. 110-103
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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SELLING THE DEPARTMENT OF ENERGY'S DEPLETED URANIUM STOCKPILE:
OPPORTUNITIES AND CHALLENGES
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
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SELLING THE DEPARTMENT OF ENERGY'S
DEPLETED URANIUM STOCKPILE: OPPORTUNITIES AND CHALLENGES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
APRIL 3, 2008
__________
Serial No. 110-103
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
?
COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan, JOE BARTON, Texas
Chairman Ranking Member
HENRY A. WAXMAN, California RALPH M. HALL, Texas
EDWARD J. MARKEY, Massachusetts FRED UPTON, Michigan
RICK BOUCHER, Virginia CLIFF STEARNS, Florida
EDOLPHUS TOWNS, New York NATHAN DEAL, Georgia
FRANK PALLONE, Jr., New Jersey ED WHITFIELD, Kentucky
BART GORDON, Tennessee BARBARA CUBIN, Wyoming
BOBBY L. RUSH, Illinois JOHN SHIMKUS, Illinois
ANNA G. ESHOO, California HEATHER WILSON, New Mexico
BART STUPAK, Michigan JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York CHARLES W. ``CHIP'' PICKERING,
ALBERT R. WYNN, Maryland Mississippi
GENE GREEN, Texas VITO FOSSELLA, New York
DIANA DeGETTE, Colorado STEVE BUYER, Indiana
Vice Chairman GEORGE RADANOVICH, California
LOIS CAPPS, California JOSEPH R. PITTS, Pennsylvania
MICHAEL F. DOYLE, Pennsylvania MARY BONO, California
JANE HARMAN, California GREG WALDEN, Oregon
TOM ALLEN, Maine LEE TERRY, Nebraska
JAN SCHAKOWSKY, Illinois MIKE FERGUSON, New Jersey
HILDA L. SOLIS, California MIKE ROGERS, Michigan
CHARLES A. GONZALEZ, Texas SUE WILKINS MYRICK, North Carolina
JAY INSLEE, Washington JOHN SULLIVAN, Oklahoma
TAMMY BALDWIN, Wisconsin TIM MURPHY, Pennsylvania
MIKE ROSS, Arkansas MICHAEL C. BURGESS, Texas
DARLENE HOOLEY, Oregon MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York
JIM MATHESON, Utah
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
_________________________________________________________________
Professional Staff
Dennis B. Fitzgibbons, Chief of
Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
David L. Cavicke, Minority Staff
Director
7________________________________________________________________
Subcommittee on Oversight and Investigations
BART STUPAK, Michigan, Chairman
DIANA DeGETTE, Colorado ED WHITFIELD, Kentucky
CHARLIE MELANCON, Louisiana Ranking Member
Vice Chairman GREG WALDEN, Oregon
HENRY A. WAXMAN, California MIKE FERGUSON, New Jersey
GENE GREEN, Texas TIM MURPHY, Pennsylvania
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois MARSHA BLACKBURN, Tennessee
JAY INSLEE, Washington JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex
officio)
(ii)
C O N T E N T S
----------
Page
Hon. Bart Stupak, a Representative in Congress from the State of
Michigan, opening statement.................................... 1
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 7
Hon. Gene Green, a Representative in Congress from the State of
Texas, prepared statement...................................... 8
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 9
Prepared statement........................................... 10
Hon. Mike Doyle, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 10
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, prepared statement................................ 68
Hon. Joe Barton, a Representative in Congress from the State of
Texas, prepared statement...................................... 101
Witnesses
Dennis Spurgeon, Assistant Secretary for Nuclear Energy, United
States Department of Energy.................................... 12
Prepared statement........................................... 15
Answers to submitted questions............................... 140
Robert A. Robinson, Managing Director for Natural Resources and
Environment, Government Accountability Office; Accompanied by
Ryan Coles, Assistant Director; and Susan Sawtelle, Associate
General Counsel, Natural Resources and Environment, GAO........ 25
Prepared statement........................................... 27
Answers to submitted questions............................... 124
Robert C. Ervin, Jr., President, United Steel Workers Local 550,
Paducah, Kentucky.............................................. 79
Prepared statement........................................... 82
Marvin S. Fertel, Executive Vice President, Nuclear Energy
Institute...................................................... 89
Prepared statement........................................... 90
Submitted Material
Graphs accompanying Mr. Stupak's opening statement............... 4
Hearing slides................................................... 103
E-mails submitted by Mr. Spurgeon for the record................. 111
Subcommittee exhibit binder...................................... 200
SELLING THE DEPARTMENT OF ENERGY'S DEPLETED URANIUM STOCKPILE:
OPPORTUNITIES AND CHALLENGES
----------
THURSDAY, APRIL 3, 2008
House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, D.C.
The subcommittee met, pursuant to call, at 10:08 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Bart
Stupak (chairman) presiding.
Members present: Representatives Stupak, Green, Doyle,
Dingell (ex officio), Shimkus, Whitfield, Blackburn, and Barton
(ex officio).
Staff present: Scott Schloegel, Richard Miller, John Sopko,
Kyle Chapman, Carly Hepola, Alan Slobodin, and Dwight Cates.
OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Stupak. This meeting will come to order. Today we have
a hearing entitled ``Selling the Department of Energy's
Depleted Uranium Stockpile: Opportunities and Challenges.''
Each member will be recognized for a 5-minute opening
statement. I will begin.
Today's hearing will focus on what options the Department
of Energy has to convert its depleted uranium into cash as a
result of a huge jump in uranium prices. Department of Energy
has two choices: to quickly seize the opportunity, or push the
decision to the next administration.
More than 700,000 tons of depleted uranium hexafluoride
tails are stored in 60,000 cylinders in Paducah, Kentucky and
Portsmouth, Ohio.
Eight years ago, this corrosive radioactive material was
considered worthless and represented an environmental
liability. Since 2000, however, uranium prices have jumped
tenfold from around $8 per pound to $95 per pound for long-term
contracts.
Chart number 1 shows how the spot prices spiked as high as
$140 per pound last summer. This sharp jump in prices is due to
tight uranium markets and has given American taxpayers a
potential financial windfall. Approximately 260,000 tons of so-
called ``high-assay tails'' are now worth an estimated $7.6
billion, according to the Government Accountability Office,
GAO. In order for the Department of Energy to capitalize on
this potential windfall, they must act now. This year only 55
percent of the reactor fuel used worldwide is met through mined
uranium, but new mine production will start to catch up with
demand over the next 3 to 6 years.
DOE has two primary ways to turn the excess depleted
uranium into cash.
Option number 1 is to auction the tails to utilities or
uranium enrichment companies. The Committee wrote Under
Secretary Albright on February 14 asking that DOE solicit
nuclear utilities to assess their interest in a depleted
uranium tails auction. Instead of a ``yes'' or ``no,'' DOE
responded that they will be doing a cost-benefit study. This is
puzzling and looks like a formula for paralysis-by-analysis.
At our request, GAO polled potential buyers and found
utility industry interest in high assay tails. Slide 3 shows
large amounts of uncovered utility demand for uranium over the
next 5 years. In order to auction the uranium tails, GAO
cautioned that the Department of Energy, DOE, may need
additional statutory authority. This hearing will seek DOE's
views on whether it agrees that added legal authority is
required.
Option 2 for the Department of Energy is to contract out
re-enrichment of the high-assay tails and then sell the
enriched uranium. DOE faces a challenge with this option
because there is very limited available capacity at the
Nation's only uranium enrichment plant, which is operated by
USEC. DOE could only re-enrich about 14 percent of the tails
over the next 4 to 5 years. Nevertheless, this could yield as
much as $1.4 billion after costs of re-enrichment.
To purchase enrichment services, DOE will have to negotiate
a sole source contract with USEC. This hearing will explore
whether DOE has enough bargaining leverage to negotiate a fee
in addition to USEC's cost that is fair to the taxpayers. If
USEC's monopoly position has the Federal Government over a
barrel, what is DOE's strategy?
I note with irony that the bottleneck in enrichment
capacity would not be confronting DOE today if even a handful
of the lavish promises made to the Committee by the advocates
of USEC's privatization had been kept.
My good friend and subcommittee member, Ed Whitfield, has
proposed legislation that directs DOE to enter into a sole
source contract with USEC and commence tails enrichment in 120
days. While I commend his desire to see DOE take action, this
proposal, I believe, would force DOE to bypass its procurement
rules. Secondly, it would not give DOE sufficient time to audit
the reasonableness of USEC's actual costs. Third, it fails to
cap the fees that could be paid to USEC, while DOE must
negotiate against the clock. And fourth, it would not allow DOE
to seek a better deal for taxpayers by auctioning the tails to
utilities and letting them use their bargaining power with
USEC.
The good news is that 5 to 10 years out, enrichment
companies will increase capacity to re-enrich tails, thus
helping to relieve the bottleneck. However, if DOE waits 5
years, there's a risk that prices could deflate and taxpayers
will receive a significantly smaller return.
It is important to note that Congress is well aware of the
negative impact on uranium sales and mining that occurred 8
years ago when massive government stockpiles were liquidated
through USEC's privatization. DOE must be careful not to flood
the market and negatively impact the industry again. This may
require establishing floor prices or quotas. This committee
held a hearing on April 13, 2000 to look at how the domestic
industry was damaged.
The uranium tails are currently a liability sitting in
63,000 metal containers that you can see on the slide at two
government facilities. It should be noted that we have been
down to Paducah, Kentucky, and in fact, I think the slide right
there, the picture right there, Ed, I think it's actually
Paducah, Kentucky.
[The accompanying slides follow:]
[GRAPHIC] [TIFF OMITTED] T1163.150
[GRAPHIC] [TIFF OMITTED] T1163.151
[GRAPHIC] [TIFF OMITTED] T1163.152
So we have the opportunity to convert this waste. And the
whole purpose of this hearing is we have an opportunity to
convert this waste into cash, and the American taxpayers expect
the Department of Energy to seize the opportunity.
That ends my opening statement. Next turn to the ranking
member, Mr. Shimkus, from Illinois.
Mr. Shimkus. Thank you, Mr. Chairman. I am going to yield
to Ed Whitfield, former ranking member of this subcommittee
and, of course, been involved with this to start our opening
statements.
Mr. Stupak. Very good. Ed, you want to start with the
opening? And I enjoyed the time in Paducah and learned a lot.
So this hearing is----
Mr. Whitfield. Thank you.
Mr. Stupak [continuing]. Very timely.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. Well, Chairman Stupak, thank you. And, Mr.
Shimkus, I genuinely appreciate your waiving your opportunity
for an opening statement to give me that chance to speak on
this important issue.
I think Chairman Stupak set out the parameters pretty well
in his opening statement, and we all know from the GAO study
that there are only three things that can be done with these
canisters of depleted tails. One, we can continue to store them
and leave them the way they are. Two, DOE can attempt to
reprocess them by entering into a contract with USEC. And
three, the possibility of selling them at an auction at what we
think would be discounted price. And then there also is the
question of whether or not DOE can legally sell this material
under existing federal law.
But there are about 40,000 of these canisters in Paducah,
Kentucky and around 20,000 up in Portsmouth, Ohio. And each
canister weighs in the neighborhood of about 14 tons is my
understanding.
But to give you a little bit of history on this, the
Paducah Gaseous Diffusion Plant opened in the early 1950s to
supply enriched uranium for national defense purposes. Later,
it transitioned to enriching uranium for fuel in nuclear power
plants. Now, the plant is scheduled tentatively to close in the
next few years. For more than 50 years, this plant has provided
good jobs to the community and has been a key element in the
local economy and has contributed in a significant way to the
energy needs of our country. But the plant has also left the
community with a legacy of environmental damage. And, of
course, prior to USEC operating, it was operated by the Federal
Government. And part of that environmental legacy are these
tens of thousands of cylinders containing waste tailings from
the uranium enrichment process.
The anticipated resurgence and growth in nuclear power in
the United States and worldwide has helped drive up the value
of uranium. In 2000, uranium was trading at $7 a pound. Last
August, the price had gone to around $138 a pound. So suddenly
this waste that nobody wanted has become very valuable, and we
will hear today from witnesses just how valuable it has become.
Now, I have proposed and introduced legislation H.R. 4189
that would allow the Department of Energy to enter into a
contract with USEC to reprocess this material and sell the
product. GAO has estimated that this could generate revenue
anywhere from $7.6 billion up to $20 billion, just depending
upon what the spot market price would be at that particular
time.
So it seems to me that the time to act is now. This can be
a win-win-win situation. Without this legislation, it is my
understanding that DOE would need almost up to a year just to
negotiate a contract with USEC to do this. But it can be a win-
win-win situation if we could pass this legislation because a
win for the environment at Paducah and at Portsmouth, a win for
the taxpayers because it would recoup a significant amount of
money, and a win importantly for the workers at the Paducah
plant because this would add to the life of the plant and would
allow us to continue to operate the plant for many years to
come.
So as we consider this opportunity, I want to raise a
concern that must be addressed. And as I said, throughout the
plant's history, no one has been knocking on the door offering
to relieve the communities of this waste. And so now this idea
of selling it at auction I do not think is the best way to
proceed. But the purpose of this hearing--and I want to thank
Chairman Stupak and Mr. Shimkus once again. The purpose of this
hearing is to get the issue out there. Let us talk about it.
Let us look at the positive aspects of it. Let us look at the
negative aspects of it and then move forward in what we hope
will be the best solution for our country, for the workers, and
certainly for the environment.
And so with that, I look forward to the testimony of the
witnesses today and thank you once again.
Mr. Stupak. Thank you, Mr. Whitfield. There is another
hearing going on in the larger hearing room downstairs. So
members will be coming back and forth. I appreciate members
being here. Mr. Green for an opening statement please.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman. I am glad you noted
that because the Health Subcommittee is meeting on the Medicaid
issue, and I will have to go there. But I want to thank you for
holding the hearing today on ``Selling the Department of
Energy's Depleted Uranium Stockpile: Opportunities and
Challenges.''
The Department of Energy has been processing uranium for
commercial and national defense purposes since the 1940s. This
process creates both enriched uranium and leftover tails of
depleted uranium that are stored in giant metal cylinders at
the DOE uranium enrichment plants in Paducah, Kentucky and
Portsmouth, Ohio.
I was actually on this subcommittee in 2000 when we had our
last hearing, and our colleague, who is now governor of Ohio,
Ted Strickland, that was included in his district. So it brings
back some memories.
Once considered at that time only a waste product and a
liability, current market prices are rapidly changing this
dynamic. In only 8 years, uranium prices have skyrocketed to
$200 per kilogram from as low as $21 per kilogram. Over 700,000
metric tons of uranium are stored at the DOE sites, but some
officials estimate that only a third of this material contains
higher concentrations of uranium that can be profitably
enriched. With the potential for the substantial returns to the
Federal Government, we must ask if we are moving quickly enough
to protect the American taxpayer and our domestic industry.
On March 12, DOE issued ``The Secretary's Policy Statement
on the Management of the Department of Energy's Excess Uranium
Inventory.'' The statement outlined a general framework for
managing inventories, including the need to maintain sufficient
inventories for DOE missions and to maintain a strong domestic
nuclear industry. This is critical, considering that when this
subcommittee held a hearing on the privatization of the U.S.
Enrichment Corporation back in 2000, DOE had transferred
stockpiles of un-enriched uranium to the USEC, which sold these
stockpiles on the open market and threatened the viability of
the domestic uranium mining industry.
While the statement on the uranium management was
commendable, DOE has not yet completed a detailed assessment of
the options, nor determined how these options would be
implemented. I hope this hearing will help us evaluate the
policy options for us so we can quickly and safely manage our
excess uranium inventory in the best interest of both the
taxpayers and the nation. And again, Mr. Chairman, if there is
legislation needed and that turns out from our testimony, I
know our committee will be more than happy to consider and see
how we can pass it.
But it is interesting from the last--almost 8 years ago
when we had a hearing, when we were worried about the loss of
it now with the market, from the slides you showed, we need to
keep it because we do have an expanding nuclear capability in
our own country. But we also need to see if we can benefit the
taxpayers from it. And I yield back my time.
Mr. Stupak. I thank the gentleman. Mr. Shimkus, for opening
statement please.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. Yes, Mr. Chairman. I will be brief. It is
pretty clear in the understanding of this. One point is that
DOE spends about $200 million per year just to store these
inventories. So if we could eventually get those off the books,
there is a savings there. We must, although, balance the
opportunities to promote the nuclear industry but limit uranium
sales to prevent adverse effects on the uranium markets.
Both Ed and I come from mining regions, coal mining to be
exact. But it takes a long time to develop a mine. So there is
a window of opportunity, and we don't want to close mines
because of flooding the market. So we need to be concerned
about that.
I would also like to introduce into the record the 1-page
document, which is in the binder anyway, ``Industry Position on
Disposition of DOE's Nuclear Fuel Industry.'' This consolidated
industry position statement represents a significant amount of
work and should be used by DOE as a guideline for future sales.
Without objection?
Mr. Stupak. Without objection.
Mr. Shimkus. Thank you, Mr. Chairman. As you saw the
slides, we need to move pretty rapidly to take advantage of the
spike in sales and not wait like we do at the spur all the
time. We buy high, and then we sell when it is cheap. We are
not really good managers of what the private sector can do. And
with that, Mr. Chairman, I will yield back my time.
[The prepared statement of Hon. John Shimkus follows:]
Statement of Hon. John Shimkus
Mr. Chairman, thank you for this hearing.
On March 12th of this year, the Department of Energy issued
a policy statement that outlines a framework for managing its
extensive uranium inventories. This important policy statement
balances the need to maintain a strategic inventory of uranium;
support a growing domestic nuclear infrastructure; and generate
revenue from the sale and transfer of excess inventories.
The Department's uranium inventories are in many forms,
including depleted uranium--the subject of today's hearing--as
well as natural uranium, low enriched uranium, and highly
enriched uranium. DOE spends about $200 million per year just
to store and secure these inventories.
Sales of uranium could generate revenue to the government
to offset storage and security costs, pay for environmental
cleanup from uranium contamination, and reduce program
expenditures.
In developing its uranium sales strategy, DOE has solicited
the views of the nuclear industry. Clearly, the nuclear
utilities want DOE to sell as much of its uranium inventories
as possible, while uranium producers prefer DOE restrict
further uranium sales. DOE must balance opportunities to
promote the nuclear industry, but limit uranium sales to
prevent any adverse impact on the uranium markets.
If the Department is not careful, it could flood the
markets with its vast inventories, thus driving down the price
of uranium and discourage future investment in domestic uranium
mining and conversion services.
Mr. Chairman, I would like to introduce into the record the
1-page document titled, ``Industry position on disposition of
DOE's nuclear fuel inventory.'' [DOCUMENT] This consolidated
industry position statement represents a significant amount of
work and should be used by DOE as a guideline for future sales.
Today's hearing will focus on the depleted uranium
inventories at Portsmouth, Ohio and Paducah, Kentucky. The sale
of depleted uranium represents a great opportunity to score a
win for the American taxpayer. What was once considered a
costly liability could be worth as much as $7.6 billion. These
sales projections, however, change every day with the volatile
price of uranium.
I wish DOE could convert these wastes to riches right away
while the price of uranium is elevated--but it does not seem to
be that simple. DOE must first complete cost-benefit studies on
different options, complete environmental assessments, and
clarify the legal authorities for each option. There are many
challenges; however, DOE must not interpret these challenges as
an opportunity for inaction.
My colleague Ed Whitfield represents the Paducah site, and
he has thought more about these issues than any of us. Ed was
interested in depleted uranium back when it was just a waste--
long before it became a valuable commodity. I look forward to
hearing his ideas, as well as the testimony of the witnesses
today.
I thank the Chairman and I yield back.
----------
Mr. Stupak. I thank the ranking member. Mr. Doyle for an
opening statement please.
OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Doyle. Thank you, Mr. Chairman. I want to start my
remarks by thanking you for holding this hearing so that
Congress can look into this important matter. I don't believe
there are many here on The Hill who are looking at this issue,
so I applaud you for bringing the subject into the limelight.
Every one of us, those who support nuclear power and those
who are opposed to nuclear power, can agree that one of the
concerns with nuclear power is the disposal of the waste that
results from the power it produces. Clearly this same waste is
produced with the manufacture of nuclear weapons also. The cost
of storing and treating this waste is a major burden on the
Department of Energy.
However, as the price of uranium has increased, I believe
the department is facing a golden opportunity. We have the
chance to turn a major liability into a valuable commodity,
through which the department can generate new revenue to help
expand their mission as we move towards energy independence and
combating global warming. And in the long run, we would be
taking the first step towards eliminating one of the biggest
concerns regarding nuclear power.
I applaud the secretary for his statements of March 12,
where he said the department was going to begin to look at
setting up a process through which they would sell off up to
one-third of their depleted uranium tails over the next 13
years. My concern is that the studies and the bureaucracy of
the department may lead to a long process that will not
conclude until a point when the price for uranium has dropped
to a level where the enrichment and sale of the department's
nuclear waste is no longer economically viable.
Let us be real here. The only reason we are looking at this
matter is because the price for uranium is at near record
levels. Like any other commodity, its price will fluctuate, and
it is critical that the department acts quickly so they can
maximize the value of this depleted uranium. Time is not on our
side, and we do not have time for countless studies or years of
rulemaking before the next administration puts a policy in
place.
It is rare that government has a chance to turn a liability
into an asset, and we need to move forward aggressively so that
we don't miss the opportunity. As we will see here in this
hearing, there are many questions out there regarding issues
ranging from the authority for the sales through where the
money generated from the sales go. I for one believe that this
committee is ready to work on a bipartisan basis to do our part
to ensure that the department has the legislative authority it
needs to move forward expeditiously.
I look forward to hearing from our witnesses, what specific
actions they believe we should take. However, one concern I do
have in particular is where the money from the sale goes. As I
understand it, the money generated from these sales will go to
general treasury. Considering that the department is already
paying for the storage of these materials out of their woefully
inadequate $25 billion annual budget, it seems to me that the
department should receive all of the funds that are generated
from the sale of its waste.
This walled-off approach will give the department more of
the tools they will need if we are ever going to be able to
adequately address the dual challenges of energy independence
and global warming.
In conclusion, Mr. Chairman, we are looking at a golden
opportunity to turn a liability into an asset. Our biggest
challenge isn't partisanship, mass opposition to a sale, or
administration pushback. Our challenge is time and the prospect
that prices will fall over time. We must act quickly, we must
act intelligently, and we must act with focus. Let us not let
this opportunity go to waste. With that, Mr. Chairman, I yield
back my time.
Mr. Stupak. Thank the gentleman. Ms. Blackburn, opening
statement.
Ms. Blackburn. Thank you, Mr. Chairman. I am going to waive
my opening statement. Want to welcome those that are here.
Those of us in Tennessee are very concerned about this issue,
anxious to hear what you have to say, and look forward to
reserving my time for questions.
Mr. Stupak. All right, I think Oakridge, Tennessee is
Congressman Wamp's area. Thanks for being here. That concludes
the opening statement by members of the subcommittee. I now
call our first panel. They are already up there. So we have the
Honorable Dennis Spurgeon, Assistant Secretary for Nuclear
Energy at the U.S. Department of Energy; Mr. Robert A.
Robinson, Managing Director for Natural Resources and
Environment at the Government Accountability Office. Mr.
Robinson is accompanied by Mr. Ryan Coles, the Assistant
Director, and Ms. Susan Sawtelle. Did I say it right, Sawtelle?
The Associate General Counsel of Natural Resources and
Environment at GAO.
It is the policy of this subcommittee to take all testimony
under oath. Please be advised that you have the right under the
rules of the House to be advised by counsel during your
testimony. Do any of you wish to be represented by counsel?
Seeing nod of heads that would indicate no.
[Witnesses sworn.]
Mr. Stupak. We will start with the opening statements.
Five-minute opening statement. You may submit a longer
statement for the record. Mr. Spurgeon, you want to start with
you please, sir.
Mr. Spurgeon. Thank you, sir.
STATEMENT OF DENNIS SPURGEON, ASSISTANT SECRETARY FOR NUCLEAR
ENERGY, U.S. DEPARTMENT OF ENERGY
Mr. Spurgeon. Chairman Stupak, Congressman Shimkus, and
members of the subcommittee, thank you for the opportunity to
discuss the Department of Energy's inventory of depleted
uranium and its potential sale.
DOE is custodian of the Federal Government's inventory of
uranium considered excess to national security needs, which is
equivalent to about 59,000 metric tons of natural uranium
contained in a variety of forms, most of which are not readily
usable. This inventory is expensive to manage and to secure. In
light of the significant increases in market prices for uranium
in recent years, the uranium in this inventory is a valuable
commodity, both in terms of monetary value and the role it
could play in achieving vital department missions and
maintaining a healthy domestic infrastructure.
I would like to devote my time today to discussing the
origin of this resource and outlining the precepts that the
department uses to determine how best to manage our excess
inventory.
Large-scale uranium enrichment in the United States began
as part of the atomic weapons development during World War II.
Depleted uranium hexafluoride, or DUF6, results
from the process of making uranium suitable for use as fuel for
nuclear power plants or for defense applications. The use of
uranium in these applications requires increasing the
proportion of the fissionable 235U isotope found in
natural uranium through an isotopic separation process called
uranium enrichment.
The byproduct of enrichment is DUF6, sometimes
referred to as tails. DOE maintains approximately 700,000
metric tons of DUF6 in approximately 59,000
cylinders stored at the Paducah and Portsmouth sites. Until
recently, the entire inventory of DUF6 was
considered a financial liability to the department because it
required safe storage and security until converted to uranium
oxide and dispositioned.
On March 12, 2008, Secretary Bodman issued a policy
statement on management of the Department of Energy's excess
uranium inventory. This document establishes a framework by
which the Department of Energy will prudently manage and
disposition its excess uranium inventory. Mr. Chairman, I would
like to request that this policy statement that the secretary
issued be entered into the record.
Mr. Stupak. Without objection.
Mr. Spurgeon. Thank you, sir. The department has broad
authority under the Atomic Energy Act of 1954 to loan, sell,
transfer, and otherwise utilize its inventories of depleted
natural and enriched uranium. In exercising this authority, the
department must act consistent with the other relevant
statutory provisions such as the USEC Privatization Act, which
imposes limitations on certain specified actions.
DOE will maintain sufficient uranium inventories at all
times to meet the current and reasonably foreseeable needs of
its missions. The department is working to ensure that these
needs are identified, the needed amounts and forms of uranium
are quantified, and the uranium inventory is appropriately
maintained. DOE will only sell or transfer uranium that is in
excess of those needs.
Implementation of our uranium inventory management policy
must ensure transparent and competitive procedures.
Transactions involving non-governmental entities will be
undertaken in a transparent manner and in a competitive manner,
unless the Secretary of Energy determines, in writing, that
overriding departmental missions needs dictate otherwise.
All transactions involving excess uranium transfers or
sales to non-U.S. government entities must result in the
department's receipt of reasonable value for any uranium sold
or transferred to such entities. The department will seek to
manage its uranium inventories in a manner that is consistent
with and supportive of the maintenance of a strong domestic
nuclear industry.
As a general matter, the introduction into the domestic
market of uranium from DOE inventories in amounts that do not
exceed 10 percent of the total annual domestic fuel
requirements should not have an adverse material impact on the
domestic uranium industry.
The department anticipates that it may introduce into the
domestic market in any given year less than that amount or, in
some years, for certain specific purposes, such as the
provision of initial cores for new reactors, more than that
amount.
DOE will conduct analyses of the impacts of particular
sales or transfers on the market and the domestic uranium
industry prior to entering into any sales or transfers. DOE has
also determined that it may be feasible to manage its uranium
inventories by entering into arrangements with existing and
potential operators of nuclear fuel cycle facilities in a
manner that supports the maintenance and expansion of the
domestic nuclear fuel infrastructure. Any such arrangement,
however, must contain reasonable terms and conditions and be
competitive to the extent practical.
Additionally, DOE will consider using its uranium inventory
to address prolonged severe disruptions in the supply of
uranium that cannot be addressed practically through the
marketplace or that threaten to cause shutdown of commercial
nuclear reactors in the United States.
DOE is considering converting a portion of its uranium
inventory into low-enriched uranium, or LEU. Conversion to LEU
would, in many cases, reduce inventory levels, minimize
inventory management, surveillance, and maintenance cost, and
provide DOE with increased flexibility for meeting potential
future programmatic needs, and enhance the value of converted
uranium.
As of March 31, 2008, the spot price for natural uranium
was $71 per pound. Five years ago, natural uranium was quoted
at $10.10 per pound. As the uranium spot market price increased
to above about $24 per pound, more of the high assay
DUF6 become economically attractive to the
commercial nuclear industry for purchase or enrichment.
The department has initiated the process of identifying
categories of depleted uranium that have the greatest potential
for market value and/or use by the department and then
conducting an appropriate cost-benefit analysis to determine
what circumstances would justify enriching and/or selling
depleted uranium rather than pursuing current plans to convert
it and ultimately dispose of it.
The department will seek to obtain the best economic value
for the department in light of our identified objectives and
needs. Actions consistent with the policy statement have been
and are currently underway. The National Security
Administration is continuing its efforts to blend down HEU
surplus to national security needs to meet its nonproliferation
objectives.
Additionally, DOE is conducting the necessary national
environmental policy act analysis on the re-enriching of
DUF6 in the department's inventory. As DOE completes
requisite analysis with respect to specific types of
DUF6, natural uranium and LEU, we expect to
undertake specific transactions in the near future based on
these determinations. This concludes my prepared statement, Mr.
Chairman. I would be pleased to answer any questions the
Committee may have.
[The prepared statement of Mr. Spurgeon follows:]
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Mr. Stupak. Thank you. It is my understanding, Mr.
Robinson, you will be giving an opening statement. If you would
start please.
STATEMENT OF ROBERT A. ROBINSON, MANAGING DIRECTOR FOR NATURAL
RESOURCES AND ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE;
ACCOMPANIED BY RYAN COLES, ASSISTANT DIRECTOR; AND SUSAN
SAWTELLE, ASSOCIATE GENERAL COUNSEL, NATURAL RESOURCES AND
ENVIRONMENT, GAO
Mr. Robinson. Thank you, Mr. Chairman. Usually when we are
here to testify, we are talking about some serious management
problem of some program, but today, as members have all
mentioned, we are here to talk about opportunities and taking
advantage of opportunities.
A couple weeks ago we were here talking about the IPP
program as kind of an example of the former. And this is,
dramatically different situation than that. Here we are talking
about an opportunity to generate billions of dollars in return
to taxpayers over time. Alternatively, the material that we are
talking about could serve as a kind of strategic uranium
reserve, providing an alternative to and protection against
disruptions in the worldwide supply of uranium, on which the
U.S. is heavily dependent.
In the year 2000, when uranium prices were about $21 a
kilogram, the depleted uranium in DOE's inventory had
essentially no commercial value and in fact cost the taxpayers
about $4 million a year just to store and maintain safely.
These annual costs are still being incurred. Now, however, we
estimate that the tenfold increase in uranium prices gives the
portion of this depleted uranium with the highest
235U content a net value of about $7.6 billion at
today's prices.
While it is hard to keep the eye from lighting up at such a
figure, it is important to note that this value is quite
sensitive to uranium prices and is subject to change. As we
said in 2000, it was worthless. About nine months ago, it would
have been worth about $20 billion according to this estimate.
So that's a fairly significant variation.
If it is decided that the best course of action is to sell
the material, we found that there are potential buyers. As
always, however, there are complications. Potentially, the
material could be sold as is or re-enriched and then sold.
However, with respect to the first option, we have concluded
that under terms of the USEC Privatization Act, DOE does not
have the authority to sell the tails as is.
Accordingly, to make this option possible and provide legal
clarity for all stakeholders involved, we recommend that the
Congress amend the USEC Privatization Act or other legislation
to provide explicit direction about the conditions DOE must
follow to sell or transfer the tails in their current form.
On the other hand, DOE does have current authority to
enrich the tails and then sell the re-enriched product.
However, here too there is an important complication, namely
the limited spare enrichment capacity in the U.S. As we sit
here today, USEC is the only enrichment operation in the U.S.,
and it appears USEC has the capacity to only enrich perhaps 14
percent of the most valuable tails before its planned closure
in 2012.
While USEC and at least two other companies are planning to
build new enrichment capacity using much more efficient
enrichment technology, it would be years before this capacity
is online. Navigating the complexities and complications
associated with obtaining value from the tails in DOE's
stockpile and taking advantage of the opportunities of today's
high uranium prices will require a well thought-out strategy
and a detailed plan. However, while DOE has been working on
such a uranium disposition plan since 2005, it has not advanced
past a statement of general principles enunciated in the
Secretary's March 2008 policy statement.
As we recommended in our report issued Monday, DOE should
put together a comprehensive uranium assessment and disposition
plan that, at a minimum, lays out the policy priorities for the
uranium in its inventory, preferred sales, re-enrichment and
storage options for each type of uranium in the inventory, the
department's legal authority to implement the options, and
analysis of the impact of the options on the domestic uranium
industry and details on how implementation of these options
should change in the event uranium market conditions change.
Such a detailed plan is needed to maximize the chances that
taxpayer and national interests in the suddenly valuable
depleted uranium stockpile are maximized.
Because uranium prices are volatile, this plan should be
prepared as soon as possible. Based on our most recent
conversations with DOE staff, DOE may have a slightly different
take on both its authority and the need for the specific
strategy we are calling for. So we look forward to discussing
these issues further today. Thank you very much.
[The prepared statement of Mr. Robinson follows:]
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Mr. Stupak. Thank you. That concludes all the opening
statements. Without objection, we will go to 10-minute round
questions to move this along a little quicker. I will begin.
Mr. Spurgeon, if you will. Do you agree that in the short
term, DOE has two main choices to derive the value from DOE's
high assay tails: contract USEC to re-enrich the tails and
reselling the uranium, or auctioning the tails outright? Would
you agree with that?
Mr. Spurgeon. I would agree that contracting to enrich and/
or selling the tails for the purchaser to then subsequently
enrich them and use them are the two major options.
Mr. Stupak. OK, in your statement, you say that DOE
initiated a process to do cost-benefit analysis on whether to
re-enrich or sell tails rather than store or dispose of the
tails. But DOE's current plan still calls for processing and
disposal. Given that uranium prices have been high for over 2
years, can you tell us today whether DOE intends to convert
some of the DOE high-assay tails into cash during this
administration, or will it wait until the next administration
to deal with it?
Mr. Spurgeon. We are proceeding forward with the actions
that would be needed in order to be able to implement
enrichment. For example, our general counsel had told us that
we do need to do environmental assessment of our enriching
tails prior to our being----
Mr. Stupak. So----
Mr. Spurgeon [continuing]. To actually do it. So we are
starting the process.
Mr. Stupak. So it sounds like it will be the next
administration before you can----
Mr. Spurgeon. I hope not, sir. Not if I can be able to----
Mr. Stupak. Well, won't it take about 9 months to do an
environmental assessment?
Mr. Spurgeon. We have it underway already, sir.
Mr. Stupak. OK. So how far into it are you?
Mr. Spurgeon. I signed the authorization to start it, I
think, in February. We have a contractor as of March, and we
are trying to get a----
Mr. Stupak. When is the anticipated end date?
Mr. Spurgeon. It is between 6 and 8 months so it is tight.
Mr. Stupak. That is about the end of this administration.
Mr. Spurgeon. It is tight.
Mr. Stupak. OK, and Mr. Whitfield raised it, these
timeframes. So let me ask you a little bit more. How many
months do you need to do the National Environmental Policy Act
analysis?
Mr. Spurgeon. Well, that is what I indicated.
Mr. Stupak. So that is about the 8 months?
Mr. Spurgeon. Yes, sir.
Mr. Stupak. And then you have to finalize the sole source
contract with USEC to re-enrich DOE's tails consistent with
federal procurement policy, do you not?
Mr. Spurgeon. I am sorry. I----
Mr. Stupak. OK, you also have to then finalize a sole
source contract with USEC to re-enrich DOE's tails consistent
with the federal procurement requirements, right?
Mr. Spurgeon. If one were to do a sole source contract,
yes, sir.
Mr. Stupak. Well, it is the only one who can do it in this
country. If you go overseas, Russia or France, it is going to
be even longer, right?
Mr. Spurgeon. Without getting into the specifics, we do
have the potential of other U.S. enrichers or U.S.-based
enrichers that would be interested in that because you are
talking about something----
Mr. Stupak. But that is the next 4 to 5 years, aren't you?
Mr. Spurgeon. You are talking about the amount of tails
that we have is going to have to----
Mr. Stupak. OK, but let us back up. There is only one place
that can----
Mr. Spurgeon. Yes, sir.
Mr. Stupak [continuing]. Re-enrich right now, right? That
is USEC? So any other one in the United States it is going to
be 4 or 5 years before it comes online.
Mr. Spurgeon. It is going to be some time before it comes
online. Yes, sir.
Mr. Stupak. Yeah, so now we are talking two administrations
maybe.
Mr. Spurgeon. But you are not talking two administrations
to be able to go and get the process and the contracting
operation underway, sir.
Mr. Stupak. Sure, being a Democrat, I hope the next
administration is in there for 8 years. But realistically, we
only have one processor right now?
Mr. Spurgeon. Yes, sir, and they have a limited amount
today of excess----
Mr. Stupak. Fourteen percent is what they could do.
Mr. Spurgeon. But we are looking at a timeframe when
perhaps they could have much more capacity available.
Mr. Stupak. Well, let me ask you this then about an
auction. How many months would it take to set up and complete
an auction of an initial--for DOE's depleted uranium, assuming
DOE has the legal authority, and I know there is some question
there. So how long would it take you to just set up an auction?
Mr. Spurgeon. The competitive process--one way for me to
lose credibility with anyone is to tell you how long it takes
for us to complete a procurement process. But it is in the
order of six months when we talk about going out to do a
competitive procurement.
Mr. Stupak. Six months to set up the auction, and then you
will give them at least 30 days, 60 days to submit their bid?
Mr. Spurgeon. Pardon? No, I am talking----
Mr. Stupak. Complete it in 60 days--or 6 months you said?
Mr. Spurgeon. I thought you meant how long it takes to do a
competitive procurement, and my response was that it takes at
least 6 months to do a total competitive procurement.
Mr. Stupak. OK, the reason I am asking these questions, I
think you heard from all the members, but, and as you
indicated, the secretary--and I find it curious just before
this hearing, March 12, puts out a policy. But as I reviewed
that policy, which is part of the record, first of all, I am
glad he did it. That means when we hold these hearings, the
agency is acting a little bit.
But when I looked at the policy, I don't see a schedule in
the policy. I don't see a timetable in the policy, and I don't
see any milestones to be reached, which would give that policy
some weight. So that is the reason why we are asking some of
these questions. So does DOE have specific milestones for
securing value from its depleted uranium tails? If so, what are
these?
Mr. Spurgeon. I have nothing that has gone through any kind
of internal review for specific milestones. We have just issued
the policy statement. And as I mentioned, we are proceeding
today. The policy statement, by the way, applies to all of our
uranium inventory and----
Mr. Stupak. Sure.
Mr. Spurgeon [continuing]. Should be viewed as an
integrated effort because, and it is stated in there, we are
proceeding forward with some pieces of that today. Such as the
blend down of high enriched uranium and moving forward with the
environmental assessment needed to do the enrichment of natural
and depleted.
Mr. Stupak. OK, so the answer is there are no specific
schedules, and there are no specific time milestones?
Mr. Spurgeon. Not at this time, sir.
Mr. Stupak. OK, on February 4, Chairman Dingell and I urged
DOE to issue a request for information to test utilities'
interests in bidding on depleted uranium tails. Your March 12
reply did not respond to this suggestion. So therefore I have
to ask you, is DOE going to issue a request for information to
gauge market interest regarding the depleted uranium tails?
Mr. Spurgeon. The staff is working on that and----
Mr. Stupak. So that is a yes?
Mr. Spurgeon [continuing]. That is something that will be
decided. I can't tell you. That is a department decision, but I
can tell you there is staff work directed toward that
objective.
Mr. Stupak. So that is a maybe?
Mr. Spurgeon. I can only tell you what I have authority to
say is happening.
Mr. Stupak. Well, as GAO, it sounds like you have no
specific policy to deal with this issue.
Mr. Spurgeon. I am sorry.
Mr. Stupak. As GOA--GAO--I am having a rough time today. It
sounds like you don't have a specific policy on how to handle
this.
Mr. Spurgeon. We issue a request for expressions of
interest when we need that to be able to inform a particular
procurement action. The one that probably is, I would say, in
the lead right now is some of our off-spec material because of
the urgency associated with the containers that that off-spec
material happens to be held in. So we are proceeding forward on
dual tracks here, not just a single track relative to----
Mr. Stupak. All right. Well, let me help you out a little
bit here. Nuclear Energy Institute, which is going to testify
later, in their testimony indicates that the utilities which
own 53 reactors, or more than half of the 103 reactors in the
U.S., have indicated an interest----
Mr. Spurgeon. Yes, sir.
Mr. Stupak [continuing]. In your high-assay tails. Isn't
this sufficient information for DOE to make a decision to
direct test market interest?
Mr. Spurgeon. We are aware of that interest. We are aware
of the interest in a number of people. So we are very confident
that we will have sufficient interest in the tails in order to
have a process that will allow us to get fair value to the
government.
Mr. Stupak. All right. Well, the GAO says that the DOE's
legal interest or legal--let me quote now--``authority to sell
or transfer tails in their current form is doubtful'' because
no part of USEC Privatization Act ``specifies conditions under
which depleted uranium may be sold.'' Do you agree with GAO's
legal opinion?
Mr. Spurgeon. Sir, as the secretary's statement said, the
department does have broad authority under the Atomic Energy
Act to sell, transfer, and otherwise utilize its inventories of
depleted natural and enriched uranium.
Mr. Stupak. OK, but GAO says they doubt you have the
authority. So do you believe they do? Other than this broad
discretion?
Mr. Spurgeon. Sir, we are not aware of anything that has
happened that would repeal that broad authority that we have.
However, the department has not yet received and we do not yet
have an analysis of the GAO's opinion. That is something--I
would be glad to take that issue for the record and have our--
--
Mr. Stupak. Well, when would you be in a position to tell
us and be able to advise the committee whether or not you would
need the legal authority or have the legal authority?
Mr. Spurgeon. I will be glad to take that back and provide
you a response for----
Mr. Stupak. Can you give me some time which that will
happen?
Mr. Spurgeon. Anything that I would tell you would be a
guess, sir, and I would rather give you that----
Mr. Stupak. All right, well you announced in a conference
call with congressional staff that DOE issued a contract for
the environmental assessment, as you indicated here this
morning. Does the DOE need an environmental assessment before
it can auction the tails?
Mr. Spurgeon. That also is under review by our general
counsel's office, sir.
Mr. Stupak. Do you have any specific information you can
share with the committee today?
Mr. Spurgeon. On the legal authority?
Mr. Stupak. Or environmental assessment or requests for
information?
Mr. Spurgeon. Well, the environmental assessment, we are
moving forward with that. So that is happening.
Mr. Stupak. Let me hold there. Let me go to GAO if I can.
Let me ask Ms. Sawtelle if I may. I want to ask you a little
bit on the legal issues here. DOE's policy statement says DOE
has broad authority or broad discretion, as you heard Mr.
Spurgeon say, to sell, transfer, or barter uranium under the
Atomic Energy Act. Please explain why DOE lacks the authority
to auction depleted uranium tails but has the authority to sell
natural uranium. So what is wrong with DOE's view on this?
Ms. Sawtelle. Sure. Thank you, Mr. Chairman. And we are at
a little bit of a disadvantage in the sense that we don't have
DOE's legal views. But in essence, we agree that DOE does have
general authority under the Atomic Energy Act to sell uranium.
That would include depleted uranium. However, in 1996, Congress
enacted the USEC Privatization Act. That was the more specific
and more recent legislation where Congress focused on how the
department should be authorized to sell or transfer valuable
uranium assets. There is a provision, Section 3112 of that
statute, which specifically says that the secretary may not,
shall not, sell or transfer any uranium. It is a very
comprehensive term, and it gives some examples. But they are
not exclusive examples. Any uranium except as consistent with
the section, Section 3112.
So depleted uranium, we believe, would qualify as uranium.
I don't think that the department disagrees with that. The
question is then what does consistent with this section mean?
In our view and under rules of statutory construction, what
that means is there has to be essentially another section in
3112 that spells out the conditions. There isn't such a
provision. There are provisions spelling out the conditions for
natural uranium, low enriched uranium, Russian-origin uranium,
other categories of uranium. Congress did not include--and we
think there is not a very surprising reason because in 1996,
depleted uranium, as we are saying, wasn't valuable.
So Congress didn't explicitly consider that, but
nevertheless this prohibition applies. It says you can't sell
any uranium except as provided here. There is no provision for
that. So while that is something that we would recommend
Congress take another look at, it has this opportunity now. As
the statute is currently written, we think that the prohibition
applies and the department does not have authority to sell the
tails at this time.
Mr. Stupak. Just one more note, and we will go to Mr.
Shimkus. If we looked at the '96 law, if we added three words,
depleted, uranium, and tails, that would probably resolve this
issue if we just amended it. Would it not?
Ms. Sawtelle. It depends, of course, on what the Congress's
policy objectives are, but if Congress wanted to authorize DOE
to be able to sell the tails, yes, that would be in the nature
of that simple amendment.
Mr. Stupak. So we need three words?
Ms. Sawtelle. Yes, sir.
Mr. Stupak. Thanks. Mr. Shimkus for questions, or Mr.
Whitfield, whoever is going.
Mr. Shimkus. I told him I would--my graciousness only goes
so far. The--but I want to follow up on this timeline, and
bureaucratic timelines are very frustrating. So I really agree
with the Chairman's kind of analysis, and I just want to go
into it a little bit further because there may be a very short
window of opportunity to take advantage of current high prices
for uranium by re-enriching some of the depleted tails at the
Paducah site.
However, as you stated, there is a lot of work that must be
completed before this is possible. And the department must
identify the categories of depleted uranium that have the
highest market value, conduct a cost-benefit analysis on
whether enrichment is a viable option, complete any
environmental assessments, and we talked a little bit about
that, and conduct contract negotiations with USEC.
Based on my staff's discussions, especially with the
department, we have been told by senior procurement staff that
DOE needs at least 270 days just to negotiate a contract with
USEC--and when they mentioned this to me yesterday, I said that
is a whole year in essence--to enrich the depleted uranium.
However, DOE can't begin this contracting process until it
completes the cost-benefit analyses and the environmental
assessments. So we estimate that DOE will at least need 2 years
to complete all this work. Thus, it would not be able to begin
enrichment until the summer 2010, just 2 years before the
Paducah plant is scheduled to close.
And here are the questions. Is it possible that during the
2 years it may take for DOE to begin enrichment, the price of
uranium may come down in price to the point there is no longer
any benefit to re-enriching the depleted tails?
Mr. Spurgeon. Sir, anything can happen, but I think you
have to, and I believe the GAO in their report alluded to that,
that anyone that is going to be buying the tails is going to be
looking at the futures market for uranium because that uranium
would not be usable as product for use in a reactor until some
future date after it has been enriched.
Consequently, when you talk about even selling today,
people are going to be looking at what they believe is a fair
value for that product based on their perception of the market
at the time that product would actually be able to be used. And
if we are talking about selling substantial quantities, in
order for us not to perturb the uranium mining industry, you
are looking at perhaps limiting that to being used for new
cores. And those new cores would then be needed in the 2013,
2014 timeframe.
And so my answer to you is, I can't predict the future
market for uranium, but I believe that the issue of selling it
now or selling it at nearer the time when the material would
actually be used in a reactor is not going to make a giant
difference in the value received by the government.
Mr. Shimkus. I follow commodities, not at the point of
risking my own personal money in doing commodities markets.
Yeah, what little I have. But I would say anyone who follows
commodity knows that there is a possibility of any commodity.
Whether it is beans or corn, which I am more familiar with, if
there is a worldwide recession, you are going to see the price
of a barrel or crude oil drop to where it was just 8 years ago,
which a lot of people would be surprised was about $10 a
barrel.
So that is why we are focused on the next question. Can we
expedite the cost-benefit analysis and environmental
assessment? When can you have these completed? Is there an
expedited process to move things faster?
Mr. Spurgeon. The process that we are following today, I am
never going to say that something can't be done better, because
it always can be. But I would tell you that we do have--I know
that my office and I know the environmental management----
Mr. Shimkus. Well, why are we just--it is yes or no. Can we
go faster?
Mr. Spurgeon. We will try, sir.
Mr. Shimkus. How about the contracting process? Can it go
faster? We are asking. I mean if you can't, tell us no.
Mr. Spurgeon. I spent my career in industry. I can't
understand how come it takes so long, myself. So it--we are
going to push things as fast as we possibly can, but there are
a lot of steps in the way. And those steps have been put there
for good reason to protect the integrity of contracting
process, so----
Mr. Shimkus. Yeah, I fear that we lose a window. I fear
that we continue to have not only the loss of this possible
revenue and whatever--however, then the Federal Government
decides to use that revenue. Plus the continued burden of
having something on the books that is going to be worth little
to nothing. And that is a huge concern.
The nuclear industry recently developed a consensus
position, that is tab 23 in the book, which is what I submitted
for the record, on how DOE could sell uranium without
disrupting uranium markets. Have you seen this consolidated
industry position?
Mr. Spurgeon. Yes, sir.
Mr. Shimkus. And do you agree with their targeted deliver
quantities for DOE uranium sold over the next 7 years?
Mr. Spurgeon. We have met with them. I very much appreciate
the work that NEI did to try and bring together what is in the
nuclear industry a plural word, industries, in order to come to
a consensus of how we can approach this matter that achieves
the objective without--achieves everyone's objective in a way
that can be supported broadly across the industry. And, yes, we
have worked with them in order to try and get to that point.
Mr. Shimkus. You also mentioned the comment about the
initial cores of new reactors----
Mr. Spurgeon. Yes.
Mr. Shimkus [continuing]. In the previous question. If DOE
made its uranium available for new reactor cores, how many
utilities would purchase new cores in the near term?
Mr. Spurgeon. Well, all I can tell you is that there are
currently nine combined operating license applications that
have been filed with the Nuclear Regulatory Commission. And so
that forms today, and there is an expectation of five more
being filed some time this year. So that gives you a universe
of perhaps 14 which would amount to 14 plus, I believe, I think
some of them for dual plants. So that is at least 16 reactors
that might be in the universe known today, and perhaps more in
the future.
Mr. Shimkus. Can you explain to us how the core issue helps
these new nuclear reactors? And we are basically laymen, so----
Mr. Spurgeon. It helps it by two reasons. It helps the
power plant purchasers know that there would potentially be an
additional source of uranium such that when they go out for the
large purchases of uranium that would be needed to fuel these
initial cores, that would not cause an undue spike upward in
the price of uranium. But in addition, it does not hurt the
uranium suppliers because the uranium supplier, even though
they would be perhaps foregoing that initial coreload of
business by it being supplied by DOE, they are getting a new
plant online. And they then have a 60-year potential supply of
uranium for that new plant. So everybody benefits when we get
new nuclear reactors online.
Mr. Shimkus. And, Mr. Chairman, this is my last question.
Based on uranium sales in 2006, DOE could sell 6.7 million
pounds of uranium annually with no impact on the uranium
industry. That is your analysis. Are you certain that these
levels would not harm the domestic uranium mining industry?
Mr. Spurgeon. We say up to that amount, and we also would
do a specific analysis prior to that sale. Our anticipation is,
sir, that in these early years, it would be less than that
number until such time as we would be selling it for new cores.
Mr. Shimkus. Thank you, Mr. Chairman. I yield back.
Mr. Stupak. Thank you, Mr. Shimkus. Mr. Whitfield for
questions please.
Mr. Whitfield. Thank you, Mr. Chairman.
Mr. Stupak. Ten minutes.
Mr. Whitfield. The reason that I had introduced this
legislation in the first place was obviously there is an equity
issue here, and that is that since the late '40s, there has
been a government-operated plant there in Paducah and also at
Portsmouth. And during that time, there has been a legacy of
environmental problems. And even today, the federal government
is spending at Paducah alone in the neighborhood of $100
million a year on cleanup.
In addition to that, both communities have had a
significantly large number of health problems for people that
had worked at these plants. Certainly before the USEC plant,
but when it was a munitions plant. Many people were exposed to
chemicals and so forth without their knowledge, and there have
been significant health problems which lead us to introduce and
pass legislation that established a compensation program at
those two plants as well as other plants around the country.
And I might add that in Paducah alone, that health compensation
plan has been in the neighborhood of $220 million on health
issues if someone had 1 of the 12 cancers contracted as a
result of working there.
So one of the arguments that we are making in this
legislation is that because of just the equity issue, the fact
that these communities have suffered as a result. They
benefited through jobs and good-paying jobs. They have also
suffered because of environmental and health issues.
And so now that the uranium is at a price where there is
some benefit, we feel like that, and this legislation would
direct, that any profits go into the D&D fund to help continue
to clean up those communities.
And there are people--obviously with an issue this complex,
people have different views. And there are many people who say
well, we want to auction it off. We want to let the highest
bidder, wherever that entity may be, buy this stuff and get it
reprocessed wherever they want to get it reprocessed. But I was
noting in the GAO report, Mr. Robinson, that you indicated that
more than likely if it went to auction, it would have to be
sold at a deeply discounted price. Is that correct? Is that
your view or your analysis?
Mr. Robinson. Based on our discussions with industry and
others, there is a certain amount of risk that would be assumed
by the buyers, and they would factor that risk that they would
be assuming into their price without a reasonable doubt. The
question is how steep would that discount be, and would it be
greater than the cost that the government would incur by re-
enriching the product itself? And that is what we do not know.
Mr. Whitfield. And I suppose that the risk would be one,
the actual transportation of these canisters--some may or may
not be suitable for transportation. Two, can you find someone
to reprocess it? And what would be some other factors that they
would be concerned about?
Mr. Robinson. I am quite certain they would be concerned
about what is happening to the price of the alternative
supplies that they----
Mr. Whitfield. Right.
Mr. Robinson [continuing]. Could otherwise acquire, and so
they would be assuming some sort of price risk.
Mr. Whitfield. Right.
Mr. Robinson. And that they would be factored into the--I
mean as a basic business decision. Obviously I am not a
businessman, but these seem to be fairly obvious components
into a decision.
Mr. Whitfield. Well, would I be accurate to say--I mean
would I be stretching it to say that probably the best economic
benefit for the government would come from the option of simply
contracting the government to contract, reprocess, and sell
that material?
Mr. Robinson. Our position is until the government decides
what its policy objectives are--if you are attempting to
achieve a most immediate return to the Treasury--obviously
either selling them outright, depending on what the discounting
would be, and if acquiring the legal authority to do so, or to
go through USEC as the only source of re-enrichment right now.
Longer term, it is hard to know whether that is the best
because, as we all know, the current USEC processing costs are
much higher than others would be. That is why they are pursuing
a different, more efficient technology.
Mr. Whitfield. But right now, the only option is to just
leave it stored where it is or enrich it because legally right
now it cannot be auctioned according to your view.
Mr. Robinson. That is correct; although, I mean a three-
word technical amendment doesn't seem like a huge hurdle, but I
guess it could be.
Mr. Whitfield. Right, but you would not be prepared to say
which one of the two options would be most likely to bring the
biggest dollar value to the government?
Mr. Robinson. No, sir, I can't because I don't know what
the discounting factor would be built into the auction process
for selling the tails as is, and also assuming that the
government acquired that authority. Without some basic facts,
it is hard to be able to compare the two alternatives.
Also, there is a third alternative which obviously is to
wait, assume that the prices are going to stay what they are,
and wait for new technology alternatives, enrichment
alternatives to appear, which is 5 years plus away.
And these are all options. What I don't have is all the
facts to be able to compare the--to pencil all the dollars and
cents out and make a conclusive determination. And frankly that
is at the root of our call for DOE to do just that.
Mr. Whitfield. Right, and Chairman Stupak and Mr. Shimkus
both touched on this, and that is a concern that we all have is
the length of time, Mr. Spurgeon, it would take to do this. And
everyone is talking about 270 days at a minimum. Now, if our
legislation passed directly the Department of Energy to enter
into a contract with USEC to start reprocessing and do so
within X number of days, how would you react to that? I know we
passed legislation up here directing things be done in 90 days
and 100 days, and they are not done. But would we expect that
this legislation would, if it passed, would substantially
shorten the time necessary for contract?
Mr. Spurgeon. Well, sir, I am quite familiar with
contracting from a private sector standpoint. I am not such an
expert in contracting within the government environment,
however. Obviously the department would make every attempt to
follow the law as passed. But unless the law were to somehow
change the procedures by which we have to go through a
contracting process, it would be subject to that process.
Mr. Whitfield. Now, some people seem to be expressing some
concerns that, because USEC is the only company that is
currently reprocessing or enriching uranium, that that is a
problem, that there is something inherently wrong about that
that only one company is the only entity that the government
can go to.
From your analysis of this problem, does that concern you
that there happens to be only one company that is doing that in
the U.S. today? Do you have enough concern that that would
preclude you from recommending that you enter into a contract
with that entity to do it without auctioning it off?
Mr. Robinson. Obviously, from a GAO perspective,
competition is best as a general rule, given the circumstances.
But that is not the circumstance we find ourselves in here
today.
Mr. Whitfield. Right.
Mr. Robinson. If the objective is to get a fairly immediate
return and protect ourselves against downside price risk----
Mr. Whitfield. Right.
Mr. Robinson [continuing]. Then moving with the quicker
option is probably best. However, let us all be informed that
that quick option is perhaps the most costly re-enrichment
option that is likely to be available--much, much more costly
than to be likely to be available down the road. So essentially
we are locking ourselves into a fairly high-priced enrichment
option. But again, that may be more than offset by the price
risk of uranium prices dropping. And again, without some hard
and fact facts, it is hard to make a conclusive judgment.
Mr. Whitfield. Right.
Mr. Robinson. At the end of the day, it might make sense to
do some sort of a balanced approach where you hedge your bets.
You do some of this. You do some of the sales. You hold some in
reserve. A balanced approach might end up being the best
alternative.
Mr. Whitfield. Right, one other point I just wanted to
touch on briefly. In GAO's testimony--well, first of all, Mr.
Spurgeon, the Department of Energy believes that at today's
market prices for uranium, the depleted uranium with assays
greater than .35 percent is attractive for re-enrichment. GAO
says that assays as low as .30 percent would be attractive for
re-enrichment. And it is my understanding between .30 and .35,
there is something like 220,000 tons. And so I was curious why
is there this difference in your view of .35 and above and
GAO's .30 and above?
Mr. Spurgeon. I would doubt that is really a difference us.
.35 and above is something that I think you can say with a very
high probability, based on today's economics, is going to be
attractive. .30 and above could very well be but----
Mr. Whitfield. OK.
Mr. Spurgeon [continuing]. It is just a matter of where one
puts the probability curve.
Mr. Whitfield. So it is not a significant issue or
difference? OK. Thank you.
Mr. Stupak. Thank the gentleman. Mr. Dingell, your option.
You would like to give an opening statement, or do you want to
go to questions? If you want to do an opening statement then
questions, we are more than happy to hear from the full
chairman.
Mr. Dingell. Well, first, thank you for your courtesy.
Second of all, I would ask unanimous consent to put my
statement into the record.
Mr. Stupak. Without objection.
[The prepared statement of Mr. Dingell follows:]
Statement of Hon. John D. Dingell
Mr. Chairman, thank you for holding today's hearing. It is
not every day that we have the opportunity to save the taxpayer
money. This Subcommittee has identified the opportunity to
return $7.6 billion to the American taxpayer. Today, we will
explore why the Department of Energy (DOE) has failed to take
advantage of this opportunity.
Specifically, we will examine whether the Department of
Energy has developed a concrete plan to recoup for the taxpayer
the unexpected windfall caused by a tenfold increase in the
price of uranium. That jump in uranium prices has transformed a
large part of DOE's depleted uranium tails from an
environmental liability to a potential $7.6 billion asset,
according to estimates by the Government Accountability Office
(GAO).
This price jump is not brand new. Almost 3 years ago, the
uranium prices increased to the point where re-enrichment of
tails became economically attractive. Despite extended internal
deliberations, the only tangible evidence of DOE action is a
Secretarial Policy statement issued several weeks ago, after
they learned of our hearing and the critical GAO report. We
need more than policy statements and a department that simply
reacts after they get caught by Congress.
Eight years ago, the depleted uranium had zero value, and
my concern is that it could become worthless again while DOE
dithers. DOE needs to show some urgency, and not simply punt
this to the next Administration.
We need to assess whether Congress needs to legislate, as
GAO suggests, and whether we need to set timetables, since DOE
appears unwilling or incapable of assuming leadership.
Should DOE contract to re-enrich these tails at Paducah?
Can a deal be struck that is fair to American taxpayers? Should
we auction these valuable uranium tailings to utilities? Many
in the power industry agree with this approach. We sent the DOE
Under Secretary a letter on February 14, 2008, asking that he
solicit the nuclear utilities for their interest in buying
tails at auction. This was not done. We need to learn why.
While we understand it will take a decade to fully capture
such benefits due to the limited capacity of uranium enrichment
in the United States, DOE needs to move on this so the process
can begin this year.
We must keep in mind that today's hearing is not just about
depleted uranium. It is about the opportunity to return
billions of dollars to the Treasury that could fund other
needed programs. Using GAO's estimate, DOE could potentially
convert its depleted uranium waste into a $1.4 billion return
to the Treasury over the next 4 years. How could such revenue
be used? Here are some examples:
It could help finance $210 million for the Food
and Drug Administration to modernize safety standards for fresh
produce and other raw foods and implement inspection programs.
It could provide 4 years of health insurance
coverage for half a million children under SCHIP.
It could close $21 million in budget gaps to
Indian Health Services program.
Mr. Chairman, I congratulate you for holding this hearing
so we may assess DOE's stewardship of this resource, and learn
from our witnesses how best to maximize returns to the American
taxpayer.
----------
Mr. Dingell. Third of all, when it suits the chair, I would
be grateful for a chance to ask a few little questions.
Mr. Stupak. Questions? Now would be the time, sir.
Mr. Dingell. To Mr. Robinson. Didn't the GAO find that DOE
is sitting on an enormous windfall in the form of depleted
uranium that as recently as a few years ago was deemed to be
waste but today is worth $7.6 billion? Is that right?
Mr. Robinson. That is our analysis. Yes, sir.
Mr. Dingell. Now, and if we were to reprocess that uranium,
we would be addressing both a moneymaking opportunity but also
a chance to clean up what is potentially a significant
environmental problem. Is that not so?
Mr. Robinson. The disposition options that we laid out to
include re-enriching would accomplish those objectives. Yes,
sir.
Mr. Dingell. Now, I believe the GAO has found DOE has been
working on a uranium sales strategy for nearly 3 years?
Mr. Robinson. Yes, sir.
Mr. Dingell. And isn't it also true that GAO found that DOE
has not completed its plans with sufficient speed to take
advantage of current market conditions?
Mr. Robinson. Our judgment is is that a more detailed,
comprehensive plan and strategy is in order, and that would
facilitate the sales and return maximum value to taxpayers.
Mr. Dingell. Now, I believe that GAO also found that 8 out
of 10 utilities interviewed by the GAO had interest in bidding
on this excess uranium. Is that right?
Mr. Robinson. Yes, they expressed general interest. Yes,
sir.
Mr. Dingell. Now, Mr. Robinson, in your opinion, would it
be a prudent first step for DOE to issue a request for
information to identify the legal and market-related issues so
that DOE could commence a successful auction?
Mr. Robinson. Yes, sir. The most information possible on
what the interest is out there to purchase these tails, if that
is the option that is a, decided to be the best one, and b,
legal, that would be a good step. Yes, sir.
Mr. Dingell. Now, is there any reason in your mind why DOE
should not move promptly to realize as much of the $7.6 billion
in value as soon as possible, recognizing that there are short-
term constraints on re-enriching tails and constraints on how
much the market could absorb?
Mr. Robinson. Speedy action to take advantage of the
current high price of uranium is in order, keeping in mind that
a few years ago it was essentially worthless. A few months ago,
it was essentially worth three times what we think it is worth
now. So prices are fairly volatile, yes.
Mr. Dingell. Now, these questions to Mr. Spurgeon. Mr.
Spurgeon, what percentage of your time has been spent advancing
the global nuclear energy partnership over the past year?
Mr. Spurgeon. I would totally guess, sir, because I don't
keep a clock, but something like maybe 20 percent.
Mr. Dingell. OK, now what percentage of your time has been
spent the last 2 years developing a strategy to derive value
from DOE's excess depleted uranium stockpiles?
Mr. Spurgeon. I have spent--I am going to again guess--
maybe half of that, 10 percent. Again I don't keep a clock on
myself.
Mr. Dingell. Has anybody else spent any time on this
question?
Mr. Spurgeon. There are a number of people that have spent
time on this----
Mr. Dingell. I would like you to give us, submit for the
record please, who has done what with regard to these matters
at DOE. Now, Mr. Spurgeon, given GAO's findings, what are your
immediate plans to take advantage of current market conditions
and convert this depleted uranium into cash for the American
people?
Mr. Spurgeon. Step 1 is the Secretary initiated and
released a policy statement on how we were going to proceed
forward. Step 2 is that we have underway an environmental
assessment which is required by the National Environmental
Policy Act prior to us enriching uranium for ultimate sale as
part of this. Step 3 is we are doing, as the GAO has
recommended, the cost-benefit analysis of the best value and
way in which to dispose of the current inventory of not only
our depleted uranium but our natural uranium and our high
enriched uranium.
Mr. Dingell. Now, what is the date by which you and DOE are
going to be able to sell off or auction off these tailings?
What time? This month, this year, this decade? When?
Mr. Spurgeon. For going forward with enrichment, we would
require a suitable finding, a record of decision by the
secretary following preparation of the necessary environmental
analysis. That, while it is underway, would some time this fall
is my estimate.
Mr. Dingell. This fall?
Mr. Spurgeon. Late summer, this fall. Yes, sir. I don't
control the schedule, but that is a guess.
Mr. Dingell. I am going to ask you to procure for the
Committee a statement signed by the Secretary indicating the
date on which that will be completed. And I will ask that the
record be held open so that we may receive that. You understand
what you have been requested to do, sir?
Mr. Spurgeon. A schedule for completion of the
environmental assessment, Environmental Policy Act
requirements. Yes, sir.
Mr. Dingell. Now, who controls the schedule down there? You
or the Secretary or who?
Mr. Spurgeon. There are a number of people involved. The
program office principally responsible for this is our
environmental management organization, when we get down to
actually dispositioning this material.
Mr. Dingell. So----
Mr. Spurgeon. But the general counsel's office is very much
involved in----
Mr. Dingell. So who is your responsible decision maker? It
is always nice to know who has the responsibility for making
the decision, and if DOE doesn't know who that is, we have a
bit of a problem, don't we?
Mr. Spurgeon. I am responsible for nuclear policy, sir, as
the Assistant Secretary for Nuclear Energy.
Mr. Dingell. So it is your responsibility?
Mr. Spurgeon. I have the overall responsibility in my
court.
Mr. Dingell. All right, now you worked for the USEC. Is
that right? The United States Enrichment Corporation?
Mr. Spurgeon. Yes, until December of----
Mr. Dingell. How long?
Mr. Spurgeon. I worked for them for 2-and-a-half years.
Mr. Dingell. What was your position when you left?
Mr. Spurgeon. I was the chief operating officer.
Mr. Dingell. OK, and you received a cash payout, I believe,
of about $5.9 million when you left?
Mr. Spurgeon. My compensation is a matter of public record.
Yes, sir.
Mr. Dingell. Now, isn't it a fact that you have former
colleagues at USEC who would be negotiating a sole source
contract with DOE to re-enrich the depleted uranium and who
would personally benefit from the deal with the Department of
Energy?
Mr. Spurgeon. I am sorry. Did you say that I would
personally benefit?
Mr. Dingell. Well, no, your former associates at USEC.
Mr. Spurgeon. If there was something that happened positive
to USEC, obviously it would be a benefit to the employees of
the company.
Mr. Dingell. Now, have you ever recused yourself from
dealing with your former company and friends and colleagues at
USEC?
Mr. Spurgeon. No, sir.
Mr. Dingell. Have you got authorization or an opinion from
the ethics officers at the Department of Energy which says that
you should or should not recuse yourself?
Mr. Spurgeon. Yes, sir. My former employment was--and any
restrictions on what I could do--was thoroughly vetted at the
time prior to my nomination for the current position.
Mr. Dingell. Will you submit that to the Committee please?
Mr. Spurgeon. I think we did.
Mr. Dingell. I am assuming this is in writing. So I am
assuming that you can submit this to the Committee.
Mr. Spurgeon. I believe we did already, because I think it
was asked for.
Mr. Dingell. Well, appreciate if you did so. Does the
Secretary of Energy know you have not recused yourself?
Mr. Spurgeon. Yes, sir. The Secretary of Energy knows I
have no recusals whatsoever.
Mr. Dingell. I think my time is about expired, Mr.
Chairman. I will wait for a second time.
Mr. Stupak. You still have 2 minutes, Mr. Dingell. We went
10 minutes on this, and the recusal statement would be Exhibit
Number 12 in our book.
Mr. Dingell. Well, I will proceed at the pleasure of the
chair.
Mr. Stupak. Please continue.
Mr. Dingell. Has your--I will repeat this question. Have
you got a legal opinion from the legal counsel at DOE on your
recusal and whether you should be recused or not?
Mr. Spurgeon. I don't happen to be a lawyer, but I do know
that it was determined prior to my being nominated that I was
not required to recuse myself from any activities with any
company upon my confirmation as assistant secretary.
Mr. Dingell. Would you please submit that to the Committee
if you could?
Mr. Spurgeon. Yes, sir, if it----
Mr. Dingell. All right.
Mr. Spurgeon [continuing]. Whatever exists.
Mr. Dingell. Now, this question for Mr. Fertel. Isn't it
the case, Mr. Fertel, that there are utility companies where
members of the Nuclear Energy Institute that would bend on
DOE's high-assay depleted uranium tails if the DOE put these
out to auction? Where is Mr. Fertel? Come on up here. I am
sorry. Never mind. We will get you----
Mr. Fertel. I will stand.
Mr. Dingell. No, Mr. Fertel, we will get you on the next
panel.
Mr. Stupak. No, we will get you on the next panel.
Mr. Dingell. Sorry. I guess that completes my questions.
Mr. Stupak. Thank you, Mr. Chairman. One of the problems we
have in this matter is it appears, Mr. Spurgeon, you are the
person who will make the recommendations on whether we do
auction or whether we do a sole source contract with USEC, and
your prior employment with USEC, and it almost appears like a
conflict of interest. If you look at Exhibit Number 12, it is
in the exhibit book. Should be right there in front of you. In
there, the recusal form is really limited to dealing only with
your family members, and that is a concern with the generous
payout you received when you left there, and then now if you
are the person who is going to make the decision and
recommendation to the secretary to make a sole source contract
to the company you used to work for, it raises a lot of red
flags.
So if you do have an opinion, a written legal opinion on
your recusal or an opinion saying you can, in your role as
Under Secretary, deal with USEC even though you are their
former employee, I think it would be very helpful for the
Committee because when you were asked earlier for your RFI on
this matter, we never received one. When we look at your
policy, we asked--Mr. Dingell and I wrote February 14, received
no answer.
When you talk about the risk in questions from Mr.
Whitfield, when you talked about those risks, that would be in
an RFI, but you failed to produce one.
When you talk about the policy, as I indicated in my
earlier statements, there are no schedules. There are no time
limits. There are no mile posts. It seems like this whole thing
is being dragged out way too long, and if so, it is probably to
the benefit of USEC, which raises again the issue of maybe a
conflict.
So if you have a legal opinion in writing from your
counsel, please put that forth. In fact, because this issue may
have come up, we even sent your office an e-mail asking that
you have legal counsel here so we could get to the bottom of
these questions. So I am sure that the full committee chairman,
that was some of his questions. That was some of the questions
where I was going to move on also.
So let me ask you this. Would DOE then, because we have
this sole source or this one company here in the U.S. can
reprocess, USEC, would DOE consider contracting--and I sort of
alluded to this question earlier--either companies in France or
Russia for re-enrichment as a way to spur the competition that
Mr. Robinson spoke to? Would you consider doing that?
Mr. Spurgeon. I think anything would be and could be
considered by the Department of Energy. I think as the policy
did lay out, we are focused on supporting the growth of the
U.S. industry, both from a reactor standpoint and from a viable
fuel cycle standpoint. That includes all of the front end from
uranium mining through conversion through enrichment to
actually the construction of the reactors themselves.
Mr. Stupak. Well, let me ask you this then. Go to tab 8 in
the binder. Because this is an e-mail. You are going to spur
competition. I am a little concerned about this because it
says--this is a September 16, 2006, e-mail from you to your
general counsel, David Hill, which discusses whether DOE should
take on a major review of a $9.5 billion sole source
decommissioning proposal by Energy Solutions and USEC. The deal
would lead to USEC's takeover by Energy Solutions, and that is
slide number six.
You wrote, ``we are about to have a USEC train wreck that
could have serious effect for nuclear energy in the U.S. Like
it or not, DOE is involved. Whether or not we can prevent the
train wreck is questionable, but I believe we must try our
best.'' So what do you mean by a ``USEC train wreck'' and ``I
believe we must try our best''?
Does your e-mail push DOE issues or DOE officials to try to
address legal obstacles related to the sole source proposal in
order to craft the deal? Wouldn't this deal ultimately benefit
your former colleagues at USEC? So I see just the opposite from
this e-mail on what you just said about trying to spur
competition if you want to prevent the USEC train wreck. And it
looks like you are trying to craft the deal to help our USEC,
based on this e-mail.
Mr. Spurgeon. Sir, my objectives in coming to this job were
to do whatever I could to support the resurgence of nuclear
energy in this country. A piece of that is the front end of the
fuel cycle. I was asked a schedule or percentage of my time a
little bit ago. I probably overestimated some of the, you know,
some of the time that I might spend on this particular aspect
of it.
But I would say that anytime that we look, and if you look
at the timeframe involved there, November 16, 2006, there was
some real concern. And it was made known to Members on The Hill
and also made known to the Department of what would happen to
our domestic enrichment capability over the next several
months.
We had something that was presented to the Department that
deserved a look, as I believe it is our job to look at any
potential alternative that might be a benefit to the U.S.
taxpayer. The end result of that look, which the general
counsel did do--together with our environmental management
organization, they really had the lead in this--was to
determine that it was not something that we felt we could
pursue.
But I believe that we have an obligation to look at those
things, and that is really what the intent of that e-mail,
although albeit perhaps I wrote it in a little more dramatic
fashion than I might have if I thought about it a little
longer. But I wanted the general counsel's office to give some
priority to the issue of looking at the ramifications of this
sort of a contractual vehicle.
Mr. Stupak. Well, but did your views about preventing a
USEC train wreck also have bearing on the overall amount USEC
receives from DOE for processing depleted uranium?
Mr. Spurgeon. No, this wasn't really in that context at
all.
Mr. Stupak. Let us go back to Mr. Secretary's policy.
Implicitly allows DOE to use a contract for re-enriching DOE
tails as a vehicle to subsidize USEC if USEC's success was
deemed a departmental objective, right?
Mr. Spurgeon. I believe that the policy statement says is
that, in any event, the Department would receive fair value for
any materials that it does contract for. That is certainly the
objective. I----
Mr. Stupak. Well, then let me ask you this.
Mr. Spurgeon. Sure.
Mr. Stupak. Is there a way to make this contracting process
that you are about to go through transparent to Congress? For
example, would DOE be willing to share a draft of the sole
source contract with GAO in this committee before it is
finalized?
Mr. Spurgeon. The Department of Energy has made no decision
to go down any sole source contracting route whatsoever.
Obviously----
Mr. Stupak. OK, but whenever you make that decision.
Mr. Spurgeon. Pardon?
Mr. Stupak. Whenever you make that decision, if there is a
contract, will you provide it to GAO and to this committee so
we can make sure there is transparency to make sure things are
above board and we are not looking to prevent a train wreck or
to cause a train wreck?
Mr. Spurgeon. Sir, I will do whatever--I am not going to
make a commitment that I can't follow.
Mr. Stupak. Then how can we ensure transparency then? So
the questions that I am sure are a little uncomfortable for you
and a little uncomfortable for us to ask you, that we have that
transparency so those questions are cleared up and there is no
question about what is going on. Because if you look at tab 12,
again the one in front of you, your recusal, it only says you
are to recuse yourself from family interests. You are not
recused from any other matter including your former employer.
So I would think that boy, that is almost a conflict when you
go from the CEO of USEC right into the decisionmaking process
on how, whether we auction or do a sole source contract to
USEC. You will make the decision, right, to make the
recommendation to the secretary on which way we go? You will
make that decision to make the recommendation after you gather
all the information.
Mr. Spurgeon. Well, I want to make clear the prime
contracting responsibility for disposition of our tails is our
environmental management organization.
Mr. Stupak. Who is going to make the recommendation to you.
They are under----
Mr. Spurgeon. Well no, he is going to make the
recommendation to the secretary as well. He does not report to
me in any sense of the word.
Mr. Stupak. Well, I thought you were head of all nuclear
policies.
Mr. Spurgeon. From a policy standpoint. To integrate our
department-wide policy on disposition of all of our----
Mr. Stupak. Sure.
Mr. Spurgeon [continuing]. Assets so that we are
coordinated.
Mr. Stupak. So you would be involved----
Mr. Spurgeon. It is a coordinating function.
Mr. Stupak. And you would be involved in that
decisionmaking? You would coordinate with this management
group.
Mr. Spurgeon. We try to coordinate our actions within the
department. Yes, sir. But I do not control the contracts from
the Environmental Management Organization in any way, shape, or
form.
Mr. Stupak. So then there shouldn't be an objection then,
if there is a contract, to share it with GAO to make sure that
we are getting the best bid for the taxpayer and that we are
doing it in everyone's best interest, to share it with GAO and
this committee then? There shouldn't be an objection then.
Mr. Spurgeon. That is one that I will take back. I don't
want to make a commitment relative to what is shared prior to a
contract being issued that might conflict with departmental
policy.
Mr. Stupak. We are not asking prior to. When you get it
done, drafted, please share it with GAO and share it with us.
That is what I am asking for. I am not asking for prior
information.
Mr. Spurgeon. I will take that back and provide you an
answer to that question for the record, sir.
Mr. Stupak. Mr. Shimkus for questions.
Mr. Shimkus. Thank you, Mr. Chairman. I am actually kind of
disappointed in how this hearing has turned. Here are my
concerns. Addressing Mr. Spurgeon, how former colleagues are
going to benefit. I am not happy with this. There doesn't
always have to be a crook or a bad guy under every rock in
every place in the world, and I was just looking at these e-
mails today. There is one, August 6, 2007, from Mr. Spurgeon
saying ``I'm traveling Monday and Tuesday from what I can on
my, I guess, Blackberry. This issue may just be too hard to
tackle in the remaining 17 months. Let's talk on Wednesday.''
In other words, can't do it.
I don't understand what is the big deal. Sole source. There
is one--we are lucky we have got one reprocessor left in this
country after what happened in the industry with the nuclear
stuff with the weapons. And we are glad that it is in Paducah,
and I am glad it is across the river from my district in
southern Illinois. We are going to push this stuff to France or
Russia after the Boeing debate and Airbus? I don't think so.
So my concerns are we got a commodity product on the ground
that we have to manage, and it is costing the Federal
Government money. It is at record prices. We ought to get rid
of it, and we ought to do it in a way that saves uranium
miners. And the concern that I have, Mr. Spurgeon, and we have
met numerous times, is that we need to do all we can to move up
and expedite this as fast as possible. Otherwise again
following commodity prices, we lose a window, and then it sits
there again. And then we have the cost, and then we can't use
that money to do other things that we might be able to do if we
have leveraged real dollars.
We have been talking in between this, and I think there is
an opportunity to suggest legislation that will do that. And I
look forward to working with my colleague. I just put it on the
record. I am disappointed that it has turned into a hunt, and I
don't think it should have. And I yield back my time.
Mr. Stupak. Well, since it was raised by Chairman Dingell
and myself, let me just clarify a few things here. February 14,
2007, we asked for a request for information to test utility
interest in bidding for depleted uranium tails. We get that we
are looking into it, and we basically get no answer. We go to
NEI. They can tell us 53 of 103 are interested in doing
something. We have asked for other information as far back as
2006. Received no answer. The longer this drags out, once again
we could find ourselves, as you indicated earlier, in a
worldwide recession in which it is worth nothing.
So the quickest way, if we are really interested in
benefiting the American taxpayer, is to go to the auction. And
even in my opening, I said there is a hybrid way to do this.
Auction part of it. USEC can only do 14 percent a year, so why
not auction part of it while we have got a high price for
uranium? We have been after DOE and apparently Mr. Spurgeon's
office to tell us what authority do they need. They can't tell
us. GAO can tell us. Has there been an inquest to do it? No.
It seems like the more this has dragged out, the
uncertainty for 3 years in which it has taken to get us even to
this point that we continue to lose money. And we are looking
at the taxpayers' interests here. And it certainty looks like
the more you drag this out, it looks like the contract, the
sole source contract, goes to USEC, which benefits USEC, which
is a former employer with a very generous golden parachute
payout, $5.9 million--$5.4 I think it was, whatever it was.
That is something.
So that is the reason for the questions. We ask for
transparency. We can't get commitments on transparency. No, we
are staying on this, and we want to do what is in the best
interest of the taxpayer.
And, you know, it is like when DOE sold the stuff to
Bonneville way back for the treasury, $7 million is worth $220
million. That is another form of questions I could go into. So
what happened there? Was that an indirect appropriation to the
Bonneville folks? There are a lot of questions on the way this
has been handled in the last few years that I would be more
than happy to go into if you would like to.
But I just thought I better respond to your comments. So
yes, it has been a tough hearing. It is uncomfortable for all
of us, but I think we need to answer these questions. Mr.
Whitfield, for questions or comments.
Mr. Whitfield. Yeah, I do have a comment also. In the next
panel, we have Rob Ervin with us, who is the president of the
United Steel Workers Union, who is going to be advocating that
USEC be given the sole source contract to reprocess these
tails.
Now, I am not here to defend Mr. Spurgeon, and I had no
idea of what his severance package was at USEC. But USEC is the
only uranium enrichment company still operating in the U.S. And
if we want to go to a speedy resolution of this, I have no
objection to auctioning off some of this.
But if we could pass my legislation, H.R. 4189 directing
the Department of Energy, there would not be any question that
there is a quid pro quo here in allowing this contract to go
forth because it would be fully vetted by the Congress. And
what we would be doing is one, we would be helping these
communities clean up this waste. Two, we would be protecting
jobs. And three, we would be delivering a significant amount of
money to the Federal Government.
And the fact that Mr. Spurgeon is a former employee of
USEC, I am not concerned about that because we have a bill here
that, if we could get through Congress, vet the issues, and
maybe we could do a combination. Maybe there could be a public
auction, and maybe we could do reprocessing because we need
reprocessing to keep these jobs in Paducah.
And so that is my interest in this. That is my only
interest in it, and I do think that we have an opportunity here
to go to a combination or some method so that the country can
benefit, the communities can benefit, and the employees can
benefit. Thank you.
Mr. Stupak. Very good. Since I brought it up, let me ask
you this then, Mr. Spurgeon, since it is part of our concerns
up here. 2005, DOE transferred about 18,500 metric tons of high
assay tails to the Bonneville Power Administration, which had
to be re-enriched by USEC. This uranium will be used to make
fuel for the Columbia generating stations run by Energy
Northwest. The U.S. Treasury received only $7 million for the
high assay tails, where Bonneville Power Administration
estimates that it saved $220 million on fuel costs under the
deal. What would be the basis for only receiving $7 million
back when the benefit is $220 million?
Mr. Spurgeon. I will have to take that question for the
record, sir. That happened to be during a period in time when I
was not at USEC and I was not in the Department of Energy. I
was happily playing golf in Florida.
Mr. Stupak. OK, well we appreciate the fact that the rate
payers up in the Northwest may receive a break and a benefit,
but would you consider $7 million equitable compensation to
U.S. Treasury for the value of this uranium when BPA got about
$220 million?
Mr. Spurgeon. Sir, you have to look at the circumstances at
the time, and I can't comment on that just sitting here today.
Mr. Stupak. Well, do you think it is fair, $220 million----
Mr. Spurgeon. It depends on the circumstances at the time,
sir. You know obviously over these past couple of years, since
2005, the price of uranium has gone up. I can't speak to what
the projections were at that particular point in time.
Mr. Stupak. Well, do you agree with the GAO recommendation
that the Secretary of Energy should complete a comprehensive
uranium management assessment as soon as possible to take
advantage of the recent increases in uranium prices?
Mr. Spurgeon. Yes, sir, but I would also say that that is
not the completion of that entire assessment, which brings
together all of our uranium assets is not a prerequisite for us
being able to move forward. This isn't something that----
Mr. Stupak. Would you recommend to the Congress that we
change the '96 law and put the three words in, ``tails'' and
``depleted uranium'' so you could auction part of it off so we
could immediately take advantage of the high price for uranium?
Would you recommend that to the Congress?
Mr. Spurgeon. Sir, I will not speak to what our official
legal recommendation will be. I would tell you, as a program
manager, I would like to have unambiguous authority to have
that flexibility available to me.
Mr. Stupak. OK, let me ask Ms. Sawtelle this question. The
GAO legal memorandum indicates that the government must receive
``reasonable compensation from depleted uranium sales if DOE
relies on its authority under the Atomic Energy Act.'' That is
the one of 1996 we were speaking of.
Ms. Sawtelle. Yes, sir.
Mr. Stupak. However, if DOE sold this material under
authority of the USEC Privatization Act, sales must ``not be
less than fair market value.'' So one says reasonable
compensation. The other one says not less than fair market
value. Are these two terms interchangeable, or does the term
``reasonable compensation'' allow DOE to accept less than fair
market value?
Ms. Sawtelle. Mr. Chairman, we haven't looked specifically
at that. I do know that the statute, the Atomic Energy Act, and
the USEC Act, neither of them defines those terms. And we
haven't again looked at it. I would make the observation, and
looking at the department's policy statement as well, as you
pointed out, the requirement under the Atomic Energy Act is for
reasonable compensation.
The term that the Department uses in the policy statement
is reasonable value. I am not sure if they intend a difference
there, but their description of that in their policy statement
says ``reasonable value takes into account market value as well
as other factors, such as the relationship of a particular
transaction to overall departmental objectives and the extent
to which cost of the department have been or will be incurred
or avoided.''
So again this isn't something we have looked at legally,
but that on its face sounds like it is essentially market value
minus, perhaps, if you will. That is, they will consider market
value, but given other factors, perhaps market value would not
be required.
And again, we would be happy to look at the legal issues
here and the legal interpretations. I would point you to also
page 4 of the same document, the policy statement, which uses
another term, ``best economic value.'' There is not too much
description of that. Best economic value for the department
``in light of the department's identified objectives and
needs.'' Again, not clear what that means.
What is clear, I think, is if the Congress were to make
that technical amendment and for example, put depleted uranium
sales authority under 3112(d), which covers the Department's
other inventories. That statute requires a couple of things.
First, as you say, not less than fair market value, which is a
relatively objective term without these qualifiers.
And then, of course, the other factors that the Department
has to balance in terms of no adverse material impact and no
endangering of the national security. So there are different
regulatory schemes, and, as we said earlier, Congress gave more
specific scrutiny in the '96 act.
Mr. Stupak. So Congress should clarify which one we are
looking at when we are talking about the depleted uranium?
Ms. Sawtelle. We would certainly recommend that you
consider that, yes.
Mr. Stupak. I have no further questions for this panel.
Anyone else? I will dismiss this panel. Thank you very much.
Now I would like to call up our second panel of witnesses to
come forward. On our second panel we have Mr. Rob Ervin,
President, United Steel Workers Local 550 in Paducah, Kentucky,
and Mr. Marvin Fertel, Executive Vice President at the Nuclear
Energy Institute.
It is the policy of this subcommittee to take all testimony
under oath. Please be advised that witnesses have the right,
under the Rules of the House, to be advised by counsel during
your testimony. Do either of you wish to be represented by
counsel? Both have indicated not. We will begin with an opening
statement from you. You may submit a longer statement for
inclusion. Mr. Ervin, we will have you go first please, and
then we will go to Mr. Fertel after you. You might want to pull
that mike a little closer. I am having a little trouble hearing
you. Is it on, the green light on there? OK.
[Witnesses sworn.]
STATEMENT OF ROBERT C. ERVIN, JR., PRESIDENT, UNITED STEEL
WORKERS LOCAL 550, PADUCAH, KENTUCKY
Mr. Ervin. Good morning. At the onset, I would like to take
this opportunity to thank the chairman and the ranking member
for conducting this hearing and for inviting me to testify.
Mr. Chairman, distinguished committee members, my name is
Rob Ervin, and I am president of the United Steel Workers, USW,
Local 550 at the Paducah Gaseous Diffusion Plant in Paducah,
Kentucky. There are nearly 900,000 active members in the USW
International Union, and I represent almost 800 of these
members at the site of our Nation's last operating uranium
enrichment facility.
Briefly stated, there are approximately 40,000 depleted
uranium or tail cylinders stored at the Paducah plant and over
20,000 at the closed facility in Portsmouth, Ohio. Until
recently, these tails were considered to be a waste product and
an environmental liability.
However, due to historic increases in the price of uranium,
the circumstances have now changed. For well over a year now, I
have been working with plant management, community leaders, and
our congressional delegation to develop a responsible strategy
for re-enrichment of tails at the Paducah plant. My efforts are
not exclusive to my responsibilities as a union official. They
occur in a broader context as a member of the plant workforce
and of the local community. Whatever happens to the Paducah
plant affects both hourly and salaried employees alike and thus
affects the community as a whole.
When we examine the tails issue in its simplest terms,
there are certain elements that are undeniable. First, there
are tails inventories at Paducah and Portsmouth that now have
considerable worth. Their total value is dependent on market
conditions and other variables, but they do have significant
value at today's market prices.
Secondly, re-enrichment of tails requires an enrichment
plant. Until such time as another facility becomes operational,
the Paducah plant is the only domestic facility where this re-
enrichment activity can occur.
Last but not least, failure to extract the value from these
tails because of indecisiveness within DOE or concerns over
past issues related to the United States Enrichment
Corporation, USEC, defies all logic and reason.
Simply put, we now have a unique opportunity at our
disposal, one that we need to take advantage of. I firmly
believe that a contract can be devised that meets DOE policy
goals, that is fair to USEC, and serves the best interest of
the taxpayer.
The Department of Energy, DOE, recently released their
much-anticipated policy statement on management of their excess
uranium inventory. This statement acknowledges what we have
known for quite some time, and that is, in light of the
significant increases in uranium prices, tails have now become
a valuable commodity.
However, the policy statement is written in generalities
and provides no clear determination as to how or if DOE plans
to proceed with tails re-enrichment or any timeframe in which
this action would begin.
Absent DOE direction, this much is known: Paducah has the
only near-term domestic capability for re-enrichment of tails.
Waiting for another domestic facility to come into existence
incorporates an unnecessary risk of value reduction and loss of
potential revenue.
As the only remaining domestic enrichment facility, Paducah
plays a key role in maintaining critical, national and energy
security objectives. Continued operation of the Paducah plant
is essential to an orderly transition to a more competitive and
viable enrichment industry in the United States. And the re-
enrichment of tails could help secure that future.
While the final determination of the policy direction
resides with the DOE and Congress, the two most logical options
are two that Paducah can perform without question. Tails can be
re-enriched back to the level of natural uranium and introduced
into the market at a rate that does not adversely impact the
domestic uranium industry.
Tails can also be re-enriched to low-enriched uranium, LEU.
This LEU could then be used to meet various DOE programmatic
needs and could also be used to create a strategic uranium
reserve. Considering our current levels of dependence on the
Russians and other foreign suppliers, creating a strategic
uranium reserve does make sense from an energy and national
security standpoint.
The Paducah plant has the excess capacity to re-enrich
tails at a controlled rate and the workforce necessary to
perform this work safely and efficiently. The only thing
missing is a clear path forward. House Resolution 4189,
introduced by Representatives Whitfield and Smitt, represents
what I believe to be a sound strategy for a responsible and
timely re-enrichment program.
The USW strongly supports this legislation and is
appreciative of their leadership efforts. The USW strongly
opposes an auction system that results in the work being
performed by foreign enrichers. Not only would this undermine
the aforementioned policy objectives, it would also result in
the outsourcing of highly skilled, good-paying U.S. jobs.
Mr. Chairman, this concludes my testimony, and I am happy
to answer any questions that you may have.
[The prepared statement of Mr. Ervin follows:]
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Mr. Stupak. Thanks Mr. Ervin. Mr. Fertel, your opening
statement please, sir.
STATEMENT OF MARVIN S. FERTEL, EXECUTIVE VICE PRESIDENT,
NUCLEAR ENERGY INSTITUTE
Mr. Fertel. Thank you, Mr. Chairman, Ranking Member
Shimkus, Mr. Whitfield, Mr. Barton. I appreciate the
opportunity to appear today and to provide this testimony
regarding selling the Department of Energy's depleted uranium
stockpiles.
As you have already heard, the increased focus on nuclear
plant deployment in the U.S. and worldwide has also resulted in
a significant increase in the price of uranium. In just the
last 2 years, since March 2006, the long-term price of uranium
has gone from $41 to $95 a pound. The increase in uranium
prices has stimulated planning for expansion of existing mines
and major planning for and development of new uranium mines
worldwide, including in the U.S.
It also provides a meaningful opportunity for the sale of
depleted uranium tails from the DOE enrichment program. In this
regard, we understand that the current DOE stockpile of
depleted tails is about 40 million pounds of G2308U equivalent
at greater than .3 percent G2235U. At projected long-term
uranium prices at between 70 and 90 pounds, these tails have a
potential value of $2.8 to $3.6 billion in the commercial
market.
Still more lower assay material may prove economical for
re-enriching as well, increasing the potential return to the
government. While recognizing that not all of the tails may be
readily re-enriched for sale in the commercial market, it seems
clear that the market could use additional supply and that the
government could gain significant value by the sale of tails
for re-enrichment, a situation that was not commercially viable
as recently as three years ago.
NEI surveyed its utility members regarding potential
interest in purchasing tails for re-enrichment, and this is a
little update on the numbers that we submitted in my testimony
because we got one more in. Of the 15 companies that responded,
7 companies representing 61 generating units indicated they
would or could be possibly interested in such purchases. Eight
companies were not.
With regard to the definition of a program for re-
enrichment of DOE tails and their sale into the commercial
marketplace, we suggest the following characteristics. While it
is likely market conditions will support the re-enrichment of
tails and the sale of uranium into the market over a long
period of time, the program should begin as soon as practicable
to provide experience with and greater certainty for the
commercial market as well as revenue to the government.
The sale for re-enrichment by a buyer desiring a uranium
supply or the sale by DOE of uranium resulting from contracting
for re-enrichment services should be done in a way that does
not undermine the deployment of new uranium mines and
conversion facilities in the U.S. In this regard, the aggregate
disposition of U.S. surplus nuclear fuel should not exceed
about 10 percent of the annual demand in the U.S.
Given the limited domestic enrichment capacity between now
and the post-2013 time period, government contracting for re-
enrichment of tails should avoid adversely affecting re-
enrichment supply to the commercial market.
Four, the government should consider auctions for a portion
of the tails being re-enriched until approximately 2020 should
also contract for enrichment services from USEC for the re-
enrichment of tails that will ultimately be sold into the
market by DOE.
Five, if the U.S. government determines that a domestic
enrichment facility is necessary for national defense purposes
and that the existing Paducah facility is required for those
purposes, the exclusive use of the facility over the longer
term for the re-enrichment of tails would likely entail a
national security premium that should not be allowed to
artificially impact prices in the commercial market.
And six, the revenue received by the government associated
with the sale of tails for re-enrichment or uranium derived
from re-enriched tails sold by DOE should be dedicated to the
GDP D&D fund if required to make up the deficits in the fund.
I thank you for the opportunity to participate in the
hearing and look forward to your questions.
[The prepared statement of Mr. Fertel follows:]
Statement of Marvin S. Fertel
The Nuclear Energy Institute (NEI), on behalf of the
nuclear energy industry, appreciates the opportunity to provide
this testimony regarding ``Selling the Department of Energy's
Depleted Uranium Stockpile: Opportunities and Challenges.''
NEI is the organization responsible for establishing
unified nuclear industry policy on matters affecting the
nuclear energy industry, including the regulatory aspects of
generic operational and technical issues. NEI's members include
all utilities licensed to operate commercial nuclear power
plants in the United States, nuclear plants designers, major
architect/engineering firms, fuel fabrication facilities,
materials licensees, and other organizations and individuals
involved in the nuclear energy industry. NEI's members are the
commercial entities that have purchased enriched uranium
services from the Atomic Energy Commission, the Department of
Energy, and from USEC since its inception.
Nuclear energy currently supplies 20 percent of our
Nation's electricity supply, and is America's largest source of
clean-air, carbon-free electricity, producing no greenhouse
gases or other air pollutants. Nuclear energy accounts for 71
percent of the Nation's clean-air electricity generation. In
2006, U.S. nuclear plants prevented the discharge of 681
million metric tons of carbon dioxide into the atmosphere. This
is nearly as much carbon dioxide as is released from all U.S.
passenger cars. The industry is committed to maintaining the
benefits of nuclear energy to benefit the United States and the
world.
Because of the growing need for additional baseload
electricity in the United States, nuclear generating companies
have already submitted nine license applications. We estimate
that at least another five applications will be made this year.
This could result in 15-20 new operating nuclear plants in
2020, an additional 20GW-25GW of generating capacity.
In addition to the deployment of new enrichment facilities,
the increased focus on new nuclear plant deployment in the U.S.
and worldwide has also resulted in a significant increase in
the price of uranium. Since March 2006, the spot and long-term
price for uranium has risen from $41.00/lb and $41.00/lb
respectively, to $71.00/lb and $95.00/lb, respectively, in
March 2008. The increase in uranium prices has stimulated
planning for expansion of existing mines and major planning for
and development of new uranium mines worldwide, including in
the U.S. It also provides a meaningful opportunity for the sale
of depleted uranium tails from the DOE enrichment program to
entities that see the value of re-enriching them for sale in
the uranium market. In this regard, we understand that the
current DOE stockpile of depleted tails is about 40 million
pounds of G2308U equivalent at greater than 0.3% G2235U. At
projected long-term uranium prices of between $70/lb and $90/
lb, these tails have a potential value of between $2.8B and
$3.6B in the commercial market.
Still more lower-assay material may prove economical for
re-enriching as well, increasing the potential return to the
government. While recognizing that not all of the tails may be
readily re-enriched for sale in the commercial market, it seems
clear that the market could use some additional supply and that
the government could gain significant value by the sale of the
tails for re-enrichment, a situation that was not commercially
viable as recently as 3 years ago. NEI surveyed its utility
members regarding potential interest in purchasing tails for
re-enrichment. Of the 14 companies that responded, six
companies representing 53 generating units indicated that they
would or possibly would be interested in such purchases. Eight
companies representing 25 units said they would not be
interested.
With regard to the definition of a program for the re-
enrichment of DOE tails and their sale into the commercial
marketplace, we suggest the following characteristics:
(1) It is likely market conditions will support the re-
enrichment of tails and the sale of uranium into the market
over a long period of time. However, the program should begin
as soon as practicable to provide experience with and greater
certainty for the commercial market as well as revenue to the
government;
(2) The sale of tails for re-enrichment by a buyer desiring
uranium supply, or the sale by DOE of uranium resulting from
contracting for re-enrichment services, should be done in a way
that does not undermine the deployment of new uranium mines and
conversion facilities in the U.S. In this regard, the aggregate
disposition of U.S. government surplus nuclear fuel should not
exceed 10 percent of the annual demand in the U.S.;
(3) Given the limited domestic enrichment capacity between
now and the post- 2013 time period, government contracting for
re-enrichment of tails should avoid adversely affecting
enrichment supply to the commercial market;
(4) The government should consider auctions for a portion
of the tails being re-enriched, but until approximately 2020,
should also contract for enrichment services from USEC, for the
re-enrichment of tails that will ultimately be sold into the
market by DOE;
(5) If the U.S. government determines that a domestic
enrichment facility is necessary for national defense purposes,
and that the existing Paducah facility is required for those
purposes, the exclusive use of the facility over the longer-
term for the re-enrichment of tails would likely entail a
national security premium that should not be allowed to
artificially impact prices in the commercial market; and
(6) The revenue received by the government associated with
the sale of tails for re-enrichment, or uranium derived from
re-enriched tails sold by DOE should be dedicated to the GDP--
D&D fund, if required to make up the deficits in the fund.
NEI appreciates the opportunity to provide this perspective
to the subcommittee and would be happy to answer any questions
you may have.
----------
Mr. Stupak. Thank you, Mr. Fertel. We will begin questions.
Mr. Ervin, let me ask you. Your testimony endorsed H.R. 4189,
Mr. Whitfield's bill, which would direct DOE to contract with
USEC as a sole source basis to re-enrich tails and to conclude
the deal within 120 days. Given that there is no ceiling on the
fees that USEC could demand from DOE and DOE has given no
alternative but to conclude a deal with USEC, do you believe
the taxpayers would be able to derive full and fair value from
the tails under this agreement?
Mr. Ervin. Yes, I do. The legislation represents what we
thought was a sound strategy at the time that the legislation
was crafted. Now, that doesn't mean to say that the legislation
could not be tweaked, that we could not modify those time
parameters, but----
Mr. Stupak. So you just like the idea that we are going to
be moving this and doing something quickly?
Mr. Ervin. If we do not put some type of time limitation on
this matter, we will be having this same discussion next year.
Mr. Stupak. And I know that you have sat through the first
part of this hearing too. What about the idea of auctioning
some, at the same time, taking a little closer look at USEC
doing it, doing part of it because 14 percent a year is the
most you can do at Paducah, right?
Mr. Ervin. Those numbers, I believe, would be subject to
interpretation and debate. Without knowing the particulars of
an auction-type contract, I would not want to basically
comment. I will say that the Russians--I believe we do not have
a 123 agreement that is required by the Atomic Energy Act of
1954.
Mr. Stupak. That is true, but there would be nothing that
would prevent DOE in asking about taking bids to see if Russia
or France was interested, as long as the uranium was enriched
here in the United States. They could still be a bidder. There
would be another opportunity to get competition in to get the
fair market value for the taxpayer, right?
Mr. Ervin. That is correct, but if in an auction scenario
that we enrich the tails at Paducah, then utilities would
essentially become a middleman. And that obviously would
eradicate some of the benefit to the government.
Mr. Stupak. OK, H.R. 4189 also calls for depositing the
proceeds of the tails enrichment into your D&D fund. That is
for decontainment and decommission, right?
Mr. Ervin. Decontamination and decommissioning.
Mr. Stupak. So why wouldn't this money then just be
available to go back to the Treasury and other important
government functions?
Mr. Ervin. We have to have source of revenue for
decontamination and decommissioning, D&D, at both the uranium
enrichment facilities. The money has to come from somewhere.
This looks like a good opportunity to provide that source of
revenue.
Mr. Stupak. Sure, but your D&D fund, the authorization for
it ran out in October of last year, right?
Mr. Ervin. That is correct.
Mr. Stupak. So technically the government couldn't transfer
money into it if it is not authorized to do so.
Mr. Ervin. I believe it could be reinstated and----
Mr. Stupak. Sure.
Mr. Ervin [continuing]. The money therefore transferred
into it.
Mr. Stupak. OK, as part of reauthorization, should the tax
on utilities, which covers about one-third of the annual
contributions, also be extended?
Mr. Ervin. I do not have the necessary background and am
not----
Mr. Stupak. OK.
Mr. Ervin. I am not privy to that type of information where
I could answer that type of question.
Mr. Stupak. OK, Paducah plant is 50 years old, thereabouts,
and it is currently in good operating order. I know when I was
down there, it looked like it was doing well. Is it able to
continue operations though past 2012, or is the plant
maintenance such that reliable operations past 2012 would be
questionable, as USEC runs its plant to its expected end of its
economic life?
Mr. Ervin. Yes, what we would have to do is request that
USEC take a look at their projected operating lifespan on the
plant and start initiating programs and infrastructure repairs
that will allow the facility to continue operation past 2012.
Mr. Stupak. Well, let me ask you this. USEC's future is
pegged to the commercial successes of its advanced centrifuge
technology, which is planned for the Portsmouth, Ohio facility.
What actions do you believe the government should take in the
event USEC is unable to commercialize its advanced centrifuge
technology?
Mr. Ervin. My primary responsibility is to the membership
of the USW at the Paducah Gaseous Diffusion plant. What happens
with respect to USEC's ability to deploy their ACP project is
out of my ability to influence and really out of my area of
concern. If it happens, it happens. If it doesn't, it doesn't.
My primary objective is to continue to look at ways to keep the
gaseous diffusion plant that we currently have in operation
without being overly preoccupied about what if we are going to
do with one that might be built at some point later.
Mr. Stupak. OK. Mr. Fertel, does NEI support H.R. 4189?
Mr. Fertel. We do not at this time.
Mr. Stupak. OK, do you believe DOE should offer some of its
tails for auction in the near term?
Mr. Fertel. Actually, in my testimony, Mr. Chairman, I
offered that I thought we needed to deal with Paducah as a
primary source and also go up for auction. Most of the auction
discussion that you just had talked about foreign auctions. We
are deploying new enrichment facilities in this country.
Mr. Stupak. Sure.
Mr. Fertel. And at least my understanding is all three of
the companies that are looking to deploy them, one that is
already under construction, would be interested in hearing
about auctions, which would be in out years.
Mr. Stupak. Right.
Mr. Fertel. And as I already found out, utilities are
interested, and I appreciate Rob's comment on being a
middleman. But they may also have a lot more leverage in
dealing with actually the only enricher in town for doing a
deal because they continue to do business with them.
Mr. Stupak. So utilities would really have more leverage
than maybe DOE then, right?
Mr. Fertel. They might.
Mr. Stupak. OK, and then I believe I alluded to some
testimony earlier. You have 53 of your 103 members who
indicated an interest.
Mr. Fertel. I updated it. Sixty-one plants right now would
either say yes or they would like to at least be considered for
it.
Mr. Stupak. OK, so about 60 percent, then. What was the
response from your members? Were they interested in this? I
mean if you have 103 members, did they all respond? I know you
got 63 affirmative in some. Did the others respond?
Mr. Fertel. Yeah, we got about 70 percent of the industry
to respond. It was a pretty quick turnaround.
Mr. Stupak. How much time did you have?
Mr. Fertel. I think it was about 48 hours.
Mr. Stupak. OK, and you got 70 percent response in 48
hours. We wrote a letter on February 14, 2007. We are still
waiting for even a request for information from DOE. That is
amazing. OK, if DOE were to auction tails, would the industry
support a DOE restriction on exporting these tails overseas for
re-enrichment, or do you want that as a competitive option or--
--
Mr. Fertel. I think our members would want it as a
competitive option is what I would think. But to the question
on Paducah, we need Paducah to keep operating.
Mr. Stupak. Sure.
Mr. Fertel. Let us be very clear about that, and I don't
understand even a 2012 date because even if the American
Centrifuge is deployed, I expect whatever utilities sign
contracts for it will want to be certain that there is a backup
source until it operates commercially for a while. And Paducah
is the most obvious backup source for a USEC deployment of even
a new technology.
Mr. Stupak. Sure, and, as Mr. Ervin pointed out, even if we
did allow Russia or France to compete, we would still want
those things reprocessed here in the United States also from a
security point of view. But if they competed for price, they
could also help leverage, could they not, a higher price?
Mr. Fertel. Potentially. It would give DOE information. It
would at least help you get some better information.
Mr. Stupak. As to a base for----
Mr. Fertel. Yes, sir.
Mr. Stupak. OK, what is the basis for the joint industry
position that sales of DOE excess uranium inventories not
exceed--and you mentioned this in your opening--10 percent of
the U.S. market? Wouldn't a floor price be a more economically
rational way to ensure that DOE does not flood the market and
destroy business investment in mining or conversion?
Mr. Fertel. Yeah, it is very hard at NEI to deal with fuels
issues with our membership because, as you can imagine, we have
both the sellers and the buyers. And putting aside, making sure
we don't get into any sort of antitrust or anti-
competitiveness----
Mr. Stupak. Right.
Mr. Fertel [continuing]. Issues, we never talk price. So we
always talk in terms of policies that the government could be
looking at. And the compromise that we ended up with--in every
discussion, Mr. Chairman, you hear the same thing. The
utilities would say the numbers should be much bigger, and the
suppliers, wherever they are in the supply chain, will always
say the numbers should be much smaller.
Mr. Stupak. Right.
Mr. Fertel. And after a lot of good discussion, we end up
with something that everybody could compromise. So it is not
analytical.
Mr. Stupak. Well, let me ask this, and then my time is up.
I want to ask one more question if I may. Turn to tab 4. It
should be right there in your exhibit--I am sorry, tab 1, slide
4, which shows the domestic mining production is about 10
percent of the total amount of uranium consumed by U.S.
utilities. And there it is right there. Given the large amount
of imports and a weak dollar that we see right now, isn't it
likely that DOE sales of depleted uranium would tend to
displace imports rather than displace domestic mining
operations?
Mr. Fertel. The thing from my experience, Mr. Chairman, is
that what the market needs is certainty. And if they get
certainty, they can plan their projects. I am going to our fuel
conference next week, and I will hear what people are
projecting.
Last October when I went, uranium mines were talking about
growing to about 10 million pounds in this country. And what
they need to be able to do that and make the investments in the
business decisions is know what is happening, not only in the
other competitive markets, but what the government might do.
So I think if you do what you do with certainty, they may
not like the number, but they can plan around it and make good
decisions. So I am not answering your question directly because
I am not sure I know what it would displace, but I can tell you
the behavior you would see on the commercial side is that the
more certain the DOE could make what they are doing, the better
off everybody is for knowing how they can make their decisions.
Mr. Stupak. OK, I have no further questions of this
witness. Mr. Shimkus, please.
Mr. Shimkus. Thank you, Mr. Chairman. I don't want to get
back into our previous debate, but I do like the e-mail that I
read, if we----
Mr. Stupak. Sure, in the--sure.
Mr. Shimkus [continuing]. File it in the record. Yeah, I
appreciate it.
Mr. Stupak. The e-mail of August 6, 2007 will be made part
of the record.
Mr. Shimkus. Thank you.
Mr. Stupak. You had referenced it earlier for the record.
Mr. Shimkus. Thank you. I am a supply guy so I understand
your debate. What I would say for the consumer at the end, we
want more supply of everything so that we have lower cost. Mr.
Ervin, how would your local--and I need to come to your
facility, and you know I am right across the river. I have been
to Metropolis a couple times, so you probably have some members
who live in my district I would imagine.
Mr. Ervin. I do represent quite a few of your constituents.
Mr. Shimkus. How would your local view a proposal, either
by legislation or by the DOE, to send tails to Russia or France
to reprocess?
Mr. Ervin. We would be diametrically opposed to such an
action. Those are our direct competitors, and I might add that
those competitors are either government owned or government
subsidized. And we are forced to compete with them as a private
entity.
Mr. Shimkus. Wouldn't you agree that also for issues of
national security, the growth of nuclear power in this country
again, the growth of new high-paying jobs, encouraging new
processing facilities--I know you would like to be the sole
one--but for the country, the encouraging of reprocessing in
this country is the way we should go?
Mr. Ervin. Absolutely. We need to be promoting a viable and
healthy domestic enrichment industry.
Mr. Shimkus. And I want to follow up on your statement. You
advocate that DOE should hold off enrichment of its depleted
uranium inventories until after 2012, when the plant plans to
close. After 2012, re-enrichment of the depleted tails could
keep the plant open. However, if we wait until 2012, isn't
there a risk that the price of uranium will come back down to a
level where it is no longer economic to re-enrich?
Mr. Ervin. Yes, sir. That was my perfect world scenario
that obviously doesn't exist.
Mr. Shimkus. Well, sometimes we think it exists here until
2012 comes around, or something like that.
Mr. Ervin. According to the UX Consulting Company, who is
an industry participant, in January of 2006, uranium feed
prices were at $35 a pound. In June of 2007, they were $135 a
pound. In January of 2008, they were $75 a pound. So we see a
significant increase in a very short period of time, and there
is concrete data that reflects that.
Based on those types of fluctuations, I would be hard-
pressed to tell you that a logical and realistic option would
be for us to sit on the tails at Paducah, where they have been
for 50 years and no one wanted to take them off our hands when
they weren't worth anything. That there would still be
sufficient value to sit on them in that manner. That is just
not a guarantee that I can make. I would love to be able to do
that because then my facility could enter into a re-enrichment
activity at the conclusion of our commercial enrichment
activity. But I don't have a crystal ball, and I can't make
that assumption in good faith.
Mr. Shimkus. Great. Thank you. Mr. Fertel, in your
testimony, you note that if DOE decided to auction the depleted
uranium, eight utilities representing 25 nuclear reactors would
not be interested in purchasing the completed tails.
Considering their value in today's uranium market, why would so
many utilities skip an auction of this material? I mean simply
put, why?
Mr. Fertel. Yeah, I didn't talk to them directly,
Congressman Shimkus.
Mr. Shimkus. Well, go talk to them and find out.
Mr. Fertel. But the way individual buyers and companies
look at things, one, they may have already built up inventory
and they are not looking for things right now. Two, there are
some utilities that would just as soon not deal with the
government because it is too hard. So there could be a number
of business decisions as to why those don't. What I think is
interesting is if you look at the numbers that wanted, it is
large fleets. And I think that is because large fleets can deal
with diversity of supply and manage the risk of dealing with
different suppliers better. That is my guess. I honestly didn't
look at the details, and I didn't call them directly myself.
Mr. Shimkus. No, and I am just teasing you. The last
question I have, Mr. Chairman, for Mr. Fertel. In your
statement, you indicate that DOE should contract exclusively
with USEC until 2020 for re-enrichment of depleted uranium. And
we already talked about the sole debate. But come 2013, USEC
may not be the sole opportunity. Should DOE also offer LES, New
Mexico, 2013, Arreva, and GE sometime in the future the
opportunity to re-enrich some of the depleted uranium if these
companies build enrichment facilities here in the U.S.?
Mr. Fertel. Absolutely, and the statement in my testimony
indicated that, while they should do that, they should also
auction a portion. And to be honest, I would see more being
auctioned as you get out in the other facilities.
NEI is in a strange place in some of these discussions
because we try to look at the whole industry, and no one wants
LES, Arreva, GE, USEC to succeed more than we do. But the only
operating facility right now and the only one that is on the
move towards operation are USEC and LES. And if the others
don't get up, we need this one to keep operating, not only to
get rid of tails but to supply fuel to 104 reactors.
So parochially, I want to maintain some security supply
domestically for as long as I can, until I know I have enough
diversity.
Mr. Shimkus. Well, and I am there too. I just think the
issue is 2020 versus 2013. I think you have got some folks in
your industry who are not pleased with the 2020.
Mr. Fertel. And I think they should get some through the
auctions, and I think that if I were DOE, I might actually
auction more with time, as there are more options.
Mr. Shimkus. And I guess we would follow up why the
auctions and not through the contract?
Mr. Fertel. Well, if you only had a couple, maybe what you
would do is do sole sources with a couple. But if you had four
or five, you ought to auction.
Mr. Shimkus. Well, we are only going to have--by 2013,
hopefully we will have two. Well, hopefully two. They are
saying maybe three, but maybe two.
Mr. Fertel. OK.
Mr. Shimkus. I yield back. Thank you, Mr. Chairman.
Mr. Stupak. Thank you, Mr. Shimkus. Mr. Barton for
questions please.
Mr. Barton. Thank you. I think I will start off with our
NEI witness. And I didn't read your opening testimony. Does it
take a position on this GAO question of the DOE's legal
authority to auction or sell the depleted uranium tails? Do you
all have----
Mr. Fertel. No, we didn't take any position on the legal
issues, but I think that seemed to be vetted pretty well during
the discussion, but we did not take a position.
Mr. Barton. OK, I wasn't here for the first panel, but it
would assume to be that the Department of Energy would have the
authority to do that because depleted uranium is a form of
uranium. And we clearly give DOE the authority under certain
terms and conditions to sell uranium, which I would think would
extend to various configurations of uranium, including depleted
mine tailings, which would be my position if the committee
decides to take a position on it.
Mr. Fertel. I know, Mr. Barton, that you and I are both
engineers, and we would think logically. But that is a legal
thing, and I never find that the way I think is the way they
think.
Mr. Barton. Right. Luckily, though, it is the engineers who
solve the problems. My friend from the union, does your group
take a position on just a pure auction? Yes, sir, you.
Mr. Ervin. Yes, sir. We are opposed to a pure auction.
Mr. Barton. And why is that?
Mr. Ervin. Well, without knowing the particulars, we would
assume that the utilities would be interested in acquiring the
material and then shipping it overseas for enrichment. That
would equate to the outsourcing of our jobs.
Mr. Barton. OK, I understand that. That is not an illogical
position. But we have something that was a problem, and now it
is an asset. It would seem that we would want to get maximum
value for that.
Now, I want to ask a question to the chairman, which is a
little unusual. If we were to do an auction, could the proceeds
of that be used in budget reconciliation to offset other areas
in our committee's jurisdiction, like Medicaid? I mean----
Mr. Stupak. That is----
Mr. Barton. Are you enough of an expert on the CBO and the
budget reconciliation outfits?
Mr. Stupak. Since it came out of our committee, we would
have hopefully some jurisdiction on where it went, unlike Mr.
Doyle who suggested it, then went somewhere else. And I don't
know. He hasn't been back. He's the only one who had an answer
to that.
Mr. Barton. Well, when I was chairman and we did a budget
reconciliation package, my recollection is that if it was in
the committee's jurisdiction, we----
Mr. Stupak. That is----
Mr. Barton [continuing]. Could use it----
Mr. Stupak [continuing]. The precedent we are using.
Mr. Barton [continuing]. Within any area of our
jurisdiction because the famous--let us have another spectrum
auction. We could always do a spectrum auction----
Mr. Stupak. Correct.
Mr. Barton [continuing]. And then use that to offset some
of our health issues, which is that would seem to me that this
is a kind of gift from the gods if we can satisfy Mr.
Whitfield's concerns, that $7 to $10 billion could go a long
way in helping on the doctor fix and the physician and some of
those issues.
Mr. Stupak. If we did the legislation which GAO says we
need, and I know you may think that--and DOE says they thought
they had the authority. But if we just did those three letters
and define what value we are going to use, or reasonable value
or whatever it is, then we would have to put in there the
exception to the Miscellaneous Receipts Act. And then,
therefore, the Committee would have jurisdiction over the
proceeds generated from that.
Mr. Barton. OK.
Mr. Stupak. So the key words would be the exception to the
Miscellaneous Receipts Act.
Mr. Barton. OK, and my last question. I believe you said in
your testimony that you want the Paducah plant to stay open. Is
there a timeframe on how long?
Mr. Fertel. Well, I think that is going to be a decision by
USEC and others. But my feeling, Mr. Barton, is that right now
we are deploying new facilities, and we do want them to
succeed. But Paducah is our only reliable source of domestic
capability until LES is up and fully operational and Arreva and
GE do their thing. I don't honestly see how you could shut the
plant down in 2012 even if ACP is successful, in all honesty.
And the other facilities aren't at full capacity until
somewhere in the 2012 to 2015 timeframe, if they are
successful. So I would love to see the plant continue to
operate. My arbitrary date was at least to 2020 doing
something.
Mr. Barton. OK, and this last question is for both of you.
The staff memo indicates that USEC is in some financial
distress. Could you all comment on that if it is true? Now, I
may have misread the memo.
Mr. Ervin. Well, obviously I am not a corporate executive
officer so a lot of that information would be business
confidential. I will tell you that the recent revised estimates
of their American Centrifuge Plant over the past year have
escalated from $1.8 billion to $2.3 billion and now stand at
$3.5 billion. I cannot imagine any scenario whereby that is
going to prompt investors to line up around the corner to join
the team.
In conjunction with that, the stock price has taken a
considerable nosedive within the past few weeks, and basically
the timeframe paralleled the recent announcement of re-revised
cost estimate for ACP.
I would not consider USEC to be the most financially viable
corporation that trades on the stock exchange.
Mr. Barton. So primarily it is just the cost overruns of
its new plant. Is that a fair statement?
Mr. Ervin. I would have no way of knowing exactly. I would
imagine you could credit it in more than one area if you wanted
to be generous.
Mr. Barton. OK. Mr. Fertel?
Mr. Fertel. I don't have any insight specifically to USEC,
Mr. Barton. But just on the rise in the cost of the ACP, we are
clearly seeing that across the board on every project because
of commodity prices going up, particularly steel and everything
else. So we are seeing it on all the new nuclear plants,
wherever they are.
And the other thing that we are finding, again independent
of the USEC ACP, is that the more engineering we get done, the
better the price, not only the better but always the higher the
price--seems to be because we are finding that companies get
smarter. So I would think that some of what has happened with
the ACP are commodity prices. And they are doing engineering.
Mr. Barton. The new plant doesn't have the capacity that
the existing plant does.
Mr. Fertel. That is correct.
Mr. Barton. Interesting. OK, thank you, Mr. Chairman.
Mr. Stupak. Page 6 of our committee briefing memo indicates
the financial situation on page 6 there, and it indicates USEC
has a CCC credit rating as it is facing large costs, increases
and schedule slippage in that new centrifuge plant that you
mentioned. And it is seeking government loan guarantees for the
project. It is on page 6 there of our briefing memo.
Mr. Barton. It just seems funny that we privatized the
facility or corporation, and it is the sole domestic
corporation. And it is already in financial trouble. You would
think if you give them almost a natural monopoly and protect
them--and I am not throwing stones at Mr. Whitfield's workers
because I know how solid they are. But it would seem that it
ought to be thriving as the nuclear industry revives, is
appearing to do so. It just doesn't seem to make sense.
Mr. Stupak. I am sure Mr. Whitfield wants to jump in on
this one.
Mr. Whitfield. No, I----
Mr. Stupak. Yes, go ahead, Mr. Whitfield. Your time for
questions.
Mr. Whitfield. No, I----
Mr. Stupak. Mr. Barton, you still have a few more minutes.
But go ahead back and forth if you want. Go ahead.
Mr. Barton. Yes, I will yield.
Mr. Whitfield. Well, I am not going to get into any
financial discussion of USEC because I don't have all the
information. But I think everyone would agree that the
gentleman within DOE who was the biggest advocate for
privatizing subsequently became the chairman of USEC. So he was
a government employee, and then he moved there. And I must say
that during his tenure, there were lots of questions raised
about his effectiveness as a manager.
Mr. Barton. Is he still there?
Mr. Whitfield. He is no longer there, and the new
management, I must say, has improved dramatically. I think Rob
Ervin would agree with that and everyone else on The Hill that
has had experience with him would agree with that. I do know
that their electrical costs are unbelievably high, and they are
always trying to negotiate lower costs with TVA.
But one question that I would----
Mr. Stupak. Let me just jump in there if I may. Go to slide
number 8, Kyle. This is one of the slides we had again in the
briefing. This is USEC and then U.S. mine production. That is
one of the things we are concerned about in the certainty we
need because USEC dumped uranium they received from the
government. And you see what it did to mining. So these sales
infused a lot of cash into USEC during that period of time,
which was 2000 to 2005. But then after that, it is a hit-and-
miss type of situation. That is one of the concerns that we
have. But it is in the briefing memo, and it is tab number 8 if
you care to look at it.
Sorry, Mr. Whitfield, questions. We will give you----
Mr. Whitfield. Yeah, and I don't know, Mr. Barton, if you
have ever seen that picture there at the bottom. That is
approximately 40,000 canisters at Paducah, and each one of
those canisters weighs about 14 tons. And so what this
reprocessing would do would certainly help to clean that up and
to extend the life of the USEC plant, which is important for my
parochial interest, but also it is important, I think, from the
national interest because, as Mr. Fertel said, it is good to
have more than one enricher within the country. Right now, we
only have USEC. We do expect another one to be coming online in
New Mexico in the not-too-distant future.
But, Mr. Fertel, let me ask you a question. I know you
don't support my legislation, but do you think legislation is
necessary? I get the impression that we could be sitting here
next year, and the Department of Energy still would not have
this solved. And if we have legislation directing maybe a
combination auction, reprocessing at Paducah, we certainly
could put in some protections. Even if you just did
reprocessing at Paducah, you could put in protections to
guarantee more of a competitive price. I mean there are things
that could be done on that front.
But just from a perspective without regard to H.R. 4189, do
you think legislation is necessary to address this or not?
Mr. Fertel. I think legislation could, on a couple of
fronts, potentially be very helpful. One is what, I think,
seems to frustrate everybody sitting up there, is how long it
takes, and legislation may stimulate action faster. And that is
good.
And going to my certainty statement, if legislation
provided some certainty on timing of what is coming and how
much, I think that helps everybody that is trying to work this
issue no matter what their perspective is. They may not like
everything exactly the way it is, but it allows them to deal
with it. It is the uncertainty that hurts, which could hurt the
country and Paducah if we don't know what is happening and you
get bad decisions. So I wouldn't dismiss legislation as a good
vehicle, Mr. Whitfield, to both get things going and to try and
provide more certainty to all the players in the field.
Mr. Whitfield. Well, recognizing, of course, that this
committee is not a legislative committee, but it certainly does
focus on important issues. So I am hopeful that as a result of
this hearing that maybe we could--and Ranking Member Shimkus
could maybe use H.R. 4189 or come up with another bill that
could help us address this and speed this issue along so we can
try to take advantage of some of these prices.
And, Mr. Ervin, thank you very much for your leadership on
this issue. You have done a tremendous job not only in Paducah
but up here working on the issue, and we appreciate your time
and effort very much.
Mr. Ervin. Thank you.
Mr. Stupak. I thank the gentleman, and we do have votes on
the floor. We have about 8 minutes left. I have no further
questions. Any further questions, Mr. Shimkus? Then I will
dismiss this panel and thank them for their testimony today.
And I am sure you will see legislative action on this matter.
That concludes our questioning. I want to thank all of our
witnesses for coming today and for your testimony. I ask
unanimous consent that the hearing record will remain open for
30 days, for additional questions for the record. And I know
Mr. Dingell had asked for time to put this one response from
Mr. Spurgeon. So we will hold it open for that. So without
objection, the record will remain open. I ask unanimous consent
that the contents of our document binder be entered into
record. No objection, documents will be entered into record,
and the documents you suggested, Mr. Shimkus. That concludes
our hearing. Without objection, the meeting of the subcommittee
is adjourned.
[Whereupon, at 12:33 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Statement of Hon. Joe Barton
Mr. Chairman, thank you for holding this important hearing.
The Department of Energy has a vast inventory of uranium that
is worth potentially tens of billions of dollars. Significant
increases in the price of uranium over the past few years have
meant that even the Department's stockpile of depleted
uranium--recently considered a waste to be buried-is now a
valuable asset.
Indeed, what was once considered a waste is now a treasure,
and we want to ensure that the Department is getting the most
value from these new riches.
The Department recently finalized its policy to determine
how much uranium should be kept in its stockpile and how much
could be sold or transferred to support the Department's
missions and maintain a healthy domestic nuclear
infrastructure.
There may be a desire by some to act quickly and convert
these uranium inventories to dollars while the price of uranium
is high, but we must consider what impact any government sale
may have on the viability of the domestic uranium mining
industry. If DOE floods the market with its uranium, it could
drive down the price of uranium and discourage any investment
in domestic uranium infrastructure. At the same time, the
taxpayer deserves to benefit from the sale of this asset. Maybe
we could even generate enough new income to afford a tax cut.
I am encouraged that the nuclear industry has come together
to develop a consolidated proposal on how DOE can sell some of
its inventories without disrupting uranium markets. I hope the
Department will pay close attention to their proposal.
It seems to me that DOE should first focus its attention on
finding a way to sell or transfer the depleted uranium we have
in inventory. Most of this material is stored at the Paducah
Site in Representative Whitfield's district in Kentucky. I
think Representative Whitfield may already have some good ideas
on how to manage these materials.
I thank the Chairman and I yield back.
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