[Senate Hearing 110-307]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-307
 
                        URANIUM ENRICHMENT FUND

=======================================================================



                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   TO

    RECEIVE TESTIMONY ON S. 2203, A BILL TO REAUTHORIZE THE URANIUM 
  ENRICHMENT DECONTAMINATION AND DECOMMISSIONING FUND, AND FOR OTHER 
                                PURPOSES

                               __________

                           November 15, 2007


                       Printed for the use of the
               Committee on Energy and Natural Resources




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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           BOB CORKER, Tennessee
KEN SALAZAR, Colorado                JOHN BARRASSO, Wyoming
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Brown, Hon. Sherrod, U.S. Senator From Ohio......................     2
Bunning, Hon. Jim, U.S. Senator From Kentucky....................     3
Domenici, Hon. Pete V., U.S. Senator From New Mexico.............    10
Fertel, Marvin S., Senior Vice President and Chief Nuclear 
  Officer, Nuclear Energy Institute..............................    21
Longenecker, John R., Longenecker & Associates, Inc., Las Vegas, 
  NV.............................................................    32
Nazzaro, Robin M., Director, National Resources and Environment, 
  Government Accountability Office...............................    12
Rispoli, James A., Assistant Secretary for Environmental 
  Management, Department of Energy...............................     4
Salazar, Hon. Ken, U.S. Senator From Colorado....................     2
 Warren, Wesley P., Director of Programs, Natural Resources 
  Defense Council................................................    25

                                APPENDIX

Responses to additional questions................................    45


                        URANIUM ENRICHMENT FUND

                              ----------                              


                      THURSDAY, NOVEMBER 15, 2007

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:08 a.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. Why don't we go ahead and get started. As you 
might guess, this sort of bumping up against the end of this 
week a little bit, we're going to have some people coming and 
going, including myself, here, as we proceed.
    But let me start, and make a few statements and then call 
on Senator Bunning for any comments he's got, and then hear 
from our Assistant Secretary and then we'll bring on the next 
panel, as well.
    The purpose of today's hearing is to receive testimony on 
S. 2203, the Uranium Enrichment and Decontamination and 
Decommissioning Fund Reauthorization Act of 2007.
    We thank the witnesses for taking time from their schedules 
to be here.
    The bill that has been referred to the committee, proposes 
to reauthorize section 1802 of the Atomic Energy Act, more 
commonly known as the Uranium Enrichment and Decontamination 
and Decommissioning Fund. This was a bill enacted into law by 
the 1992 Energy Policy Act. At The time that this section was 
enacted we were privatizing our government's uranium enrichment 
facilities, which had entered into contracts with the utilities 
to enrich uranium for our light water reactors. This was in 
addition to producing enriched uranium for our nuclear weapons 
program.
    As part of that privatization, the Congress determined that 
the utilities should contribute an equitable amount toward the 
cleanup of these enrichment plants, prior to the date of 
privatization. The utilities' share was determined to be $150 
million annually for 15 years, capped at $2.2 billion, with the 
government paying, on average, $30 million annually, to make an 
annual contribution of $480 million.
    The Act's authorization has expired, but the cleanup 
continues at the plant in Oak Ridge, Tennessee. It has not yet 
begun in earnest at the two other facilities in Paducah, 
Kentucky, and Portsmouth, Ohio. The Paducah plant is still 
operated by the United States Enrichment Corporation, USEC, 
with operations ending in 2012. The Portsmouth plant is 
currently leased to USEC until 2009, where USEC is also 
building a new centrifuge facility.
    In a report to Congress, the Department of Energy notes the 
Fund has receipts of $9.2 billion, has spent $4.2 billion, and 
projects cleanup to extend to the year 2044 with an $11 billion 
shortfall.
    The bill before us today proposes to reauthorize the 
existing program for another 10 years, raising the annual cap 
to $700 million. It continues the $150 million annual 
assessment on the utilities, capped again at $2.2 billion, 
referenced from the date of the reauthorization.
    I look forward to hearing the views of all witnesses on the 
subject, and let me call on Senator Bunning for any comment he 
has.
    [The prepared statements of Senators Salazar and Brown 
follow:]
   Prepared Statement of Hon. Ken Salazar, U.S. Senator From Colorado
    Thank you Mr. Chairman and Ranking Member Domenici for holding 
today's hearing on the reauthorization of the Department of Energy's 
Uranium Enrichment Decontamination and Decommissioning Fund. The D&D 
Fund is critical to the ongoing cleanup of several contaminated sites 
across the Nation, and today's hearing is an important opportunity to 
assess the Fund's framework.
    The legacy left by decades of uranium mining and enrichment 
activities has been a number of environmentally contaminated sites in 
need of remediation. The environmental damage wrought by uranium mining 
and enrichment is a burden that we still bear, and our shared duty to 
clean up these sites and repair the land has not yet been discharged.
    Fifteen years ago, Congress did the right thing by creating the D&D 
Fund. The sites and communities that mined and enriched uranium 
provided a crucial service to our military and our domestic nuclear 
utilities. Their product clearly had broad societal benefits. The 
Fund's original principle that the cost of cleanup should be shared 
between the Government and the electric utilities was sound in 1992 and 
is sound today.
    My state of Colorado has benefited directly from the Fund. While 
the principal reason the Fund was created was to cleanup the three 
legacy uranium enrichment facilities in Tennessee, Kentucky and Ohio, 
cleanup of a number of uranium mines--including two in my state--has 
also been facilitated by the Fund. In fact, nearly $53 million has been 
provided by the fund to cleanup uranium mine tailings in two Colorado 
communities.
    By failing to reauthorize the Fund, we would jeopardize the 
continuation of these important environmental remediation projects. As 
stewards of our land, water, and air, we owe it to future generations 
to restore our environment where past acts of necessity have caused 
harm. The D&D Fund is a critical tool in minimizing the long-term 
environmental impacts of our past uranium production and enrichment 
efforts. We should act to ensure that the Fund provides sufficient 
resources to achieve these goals.
    I look forward to hearing from the members of our distinguished 
panel and discussing this important legislation.
                                 ______
                                 
    Prepared Statement of Hon. Sherrod Brown, U.S. Senator From Ohio
    Thank you Chairman Bingaman and members of the Committee.
    I appreciate the opportunity to submit testimony on behalf of the 
people of Pike County, Ohio and McCracken County, Kentucky, for whom a 
stable and fully-funded Decontamination and Decommissioning (D & D) 
Fund is critically important.
    We need to ensure we clean up our nuclear legacy sites and we need 
to do this as part of our future policy regarding nuclear energy. If we 
don't clean up our nuclear waste, we can't in good faith consider a 
future for nuclear energy in this country.
    In 1992, Congress created the D & D fund. The program was to clean 
up the old gaseous diffusion enrichment plants in Tennessee, Kentucky, 
and Ohio. The fund was designed as a partnership between the nuclear 
industry and the federal government.
    The commercial nuclear power industry has long benefited from its 
partnership with the federal government. The government transferred 
domestic nuclear technology it had invented to private companies for 
domestic electricity production. As part of this partnership, the 
nuclear industry has and continues to purchase enriched uranium from 
the old enrichment plants.
    After nearly 50 years of operation, these enrichment plants are 
some of the most contaminated areas in our country. Since Paducah and 
Piketon are both within the Ohio River Basin's watershed, without the 
proper cleanup, contamination from these facilities could endanger the 
entire population from Cincinnati to New Orleans.
    The D & D fund has worked. But, as we all know, much more needs to 
be done. Decades of cleanup remain.
    We can debate the numbers and the amount of money it will cost to 
clean up the sites, but we all know that the current account of the 
fund is woefully short. After 15 years, the D & D fund was supposed to 
expire. In those 15 years, we've learned that the cleanup is going to 
cost much more than originally thought.
    S. 2203, the Uranium Enrichment Decontamination and Decommissioning 
Fund Reauthorization Act of 2007, is a straight reauthorization. It 
simply extends the D & D hind for 10 more years.
    We know after these 10 years there still might not be enough money 
to complete the cleanup, but this is a fair amount of time to start the 
work and after a decade, we can better determine how to go forward. S. 
2203 also calls for a study by DOE to look into how best to use the 
uranium tails at Piketon and Paducah for the benefit of the sites.
    This provision will permit all parties to come together and 
determine how best to use a federal government asset for the betterment 
of its people.
    For too long, policies have pitted the people of the Appalachian 
cities of Paducah and Piketon against one another. This has to end. 
This bill works with, rather than dictates to, the people of the 
enrichment communities. S. 2203 aims to bring everyone to the table to 
figure out how to go forward.
    These communities helped the United States win the Cold War and 
have supplied the commercial nuclear power industry for decades. We 
can't turn out backs on them.
    The need for the D & D fund is just as great today as when it was 
created. S. 2203 is a fair and forward looking bill that will help 
clean up our nuclear past. If we do not plan for this clean up in a 
responsible manner, that breach of trust will surely compromise support 
for nuclear power in the future.
    Thank you Mr. Chairman.

          STATEMENT OF HON. JIM BUNNING, U.S. SENATOR 
                         FROM KENTUCKY

    Senator Bunning. Thank you, Mr. Chairman. I would like to 
thank the witnesses for appearing here this morning, to discuss 
this important issue.
    There are three plants, as the Chairman has said, one in 
Tennessee, one in Kentucky, and one in Ohio, that together 
allowed America to make rapid advancements in nuclear energy 
and weapon technology in the last century.
    These plants push the envelope, often without realizing the 
environmental and safety consequences. I have worked tirelessly 
to ensure that the uranium worker in Paducah, Kentucky, and the 
other two plants, receive the medical benefits they deserve for 
their services.
    I appreciate this committee's help in the last few years, 
as we moved the Energy Employees Occupational Illness 
Compensation Program from the DOE to the DOL, and as I have 
worked for more funding for the Farmer Medical Workers 
Screening Program.
    We have a Federal obligation to these workers, and I am 
proud to work for their benefits in Congress.
    But today we will address--as the Senator from New Mexico 
has said--S.2203, the cleanup at the plants themselves. This 
has been a 15-year agreement, since 1992, on decontamination 
and decommissioning of these plants. As the GAO will tell us 
today, we have not had enough money in the D&D Fund to 
accomplish our goals.
    I would like to hear from the witnesses today about the 
Federal Government's responsibility to clean up these three 
plants. The proposals for moving forward, and what Congress 
needs to do to ensure a fair outcome for the taxpayers, the 
communities, in particular, and the nuclear energy industry, 
also.
    I believe that we owe it to these communities--I can only 
talk to you about two, I have not been to the Tennessee plant, 
but I have been to the one in Portsmouth, and the one in 
Paducah numerous times--and the cleanup, as the Chairman said, 
is only occurring in Tennessee. We have some cleanup, but not 
the decontamination and decommissioning going forward at all, 
because they're still producing enriched uranium at those two 
plants, one in Paducah and one in Portsmouth.
    I believe that we owe it to the communities, particularly, 
and the land that they sacrifice for our national security, and 
the nuclear energy industry.
    I look forward to the testimony today. Thank you very much, 
Mr. Chairman.
    The Chairman. Thank you very much.
    Let me see, Senator Domenici, did you wish to make a 
statement now, or to wait until after this witness?
    Senator Domenici. I'll wait and when I make my first 
questions, I'll do that.
    The Chairman. All right, very good.
    Our first witness is Assistant Secretary of the Department 
of Energy for Environmental Management, Mr. James Rispoli, and 
we very much appreciate you being here. Go right ahead.

    STATEMENT OF JAMES A. RISPOLI, ASSISTANT SECRETARY FOR 
         ENVIRONMENTAL MANAGEMENT, DEPARTMENT OF ENERGY

    Mr. Rispoli. Good morning, Mr. Chairman, Senator Domenici, 
Senator Bunning. It's good to be here, I'm happy to be here to 
address questions and issues, regarding the Uranium Enrichment 
and Decontamination and Decommissioning Fund. I particularly 
want to thank you, Mr. Chairman for--and the committee--for 
your interest in the D&D of the Nation's gaseous diffusion 
plants in Tennessee, in Kentucky and in Ohio.
    These three plants were used to support the production of 
nuclear materials for the Nation's weapons program, and also, 
to support the commercial nuclear power industry, and are some 
of the largest buildings ever constructed.
    Since the establishment of the Fund, the Department has 
completed cleanup of three out the 12 very large, massive 
process buildings, 242 of 523 support facilities, and 116 of 
231 planned environmental remedial action. As a direct result 
of past cleanup efforts, we have made significant headway at 
the first of the three gaseous diffusion plants.
    That is, the one in Tennessee at the East Tennessee 
Technology Park, formerly known as the K-25 plant, and of 
course it's on the Oak Ridge reservation in Tennessee. The East 
Tennessee Technology Park's five main processing buildings 
alone, covered 114 acres. I would just interject that the other 
two plants are not quite as big, but they're in the same range 
of size. The one in Tennessee is 114 acres under roof, in just 
the main process plants.
    To put that in perspective, that is bigger than all of 
Rocky Flats which, as you know, we had to D&D and clean up, and 
an older golf course, a regulation golf course, typically an 
older one would be about 100 acres. Today, if you build golf 
courses of that scale, they're 80 to 120 acres. We have 114 
acres under roof at ATTP. Very, very significant sized 
buildings.
    Much cleanup still must be performed at these gaseous 
diffusion plants. In order to sustain funding over the life 
cycle of this D&D and environmental remedial action, the 
Department of Energy is recommending that the Fund be 
reauthorized to allow the government to make up its 
contribution shortfall to the fund.
    These shortfalls date from the first 3 years of the fund. 
If the Congress reauthorizes the Fund to allow the government 
to complete its contribution obligation under the Energy Policy 
Act of 1992, if we do that, then we project that the Fund will 
remain sufficient until approximately 2020.
    If you look in the report we've provided, there's a base 
case, but again, the range is--we are quite sure it would be 
sufficient until 2020.
    To complete all of the gaseous diffusion plant cleanup, our 
conclusion is that an additional $8 billion to $21 billion more 
will be needed. Our 2007 report to the Congress, as I 
mentioned, does present a base case, and calculates a shortfall 
of about $11 billion in current year dollars, to complete the 
gaseous diffusion plant cleanup activities.
    We also recommend that environmental remedial action 
activities, an integral part of the D&D work scope, continue to 
be funded from this Fund, to provide stability and consistency 
in the cleanup efforts.
    Thank you for allowing me this opportunity to testify. I 
would be pleased to take any questions at this time.
    [The prepared statement of Mr. Rispoli follows:]
    Prepared Statement of James A. Rispoli, Assistant Secretary for 
             Environmental Management, Department of Energy
    Good morning. My name is James Rispoli, Assistant Secretary for 
Environmental Management at the Department of Energy (DOE). I am 
pleased to be here today to answer your questions regarding the Uranium 
Enrichment Decontamination and Decommissioning (UED&D) Fund. Mr. 
Chairman, I want to thank you and the Committee for your interest in 
this complex and challenging program of decontaminating and 
decommissioning the Nation's gaseous diffusion uranium enrichment 
plants--also called ``GDPs''--in Oak Ridge, Tennessee; Paducah, 
Kentucky and Piketon, Ohio. These three uranium isotope separation 
facilities were created in part to support the production of nuclear 
materials for the Nation's weapons arsenal and are some of the largest 
buildings ever constructed.
    In 1992, the U.S. Congress enacted the Energy Policy Act of 1992 
(EPAct 1992), which amended the Atomic Energy Act of 1954 and created 
the UED&D Fund. The primary purpose of the Fund is to provide resources 
for the cleanup liability of past uranium enrichment operations at the 
GDPs 1 through deposits from annual appropriations, domestic nuclear 
utility contributions, and accumulated interest. EPAct 1992 provided 
that as long as sufficient funds remained, all costs for 
decontamination and decommissioning and environmental remedial action 
cleanup efforts of the Department shall be paid from the Fund until 
such time as the Secretary certifies and Congress concurs that such 
activities are completed.
    Much work remains to complete this important program. The task of 
completing decontamination, decommissioning and environmental remedial 
action projects involves the planning and execution of large projects. 
These facilities are contaminated with a mixture of industrial, 
chemical, special nuclear and radiological materials. Since the 
establishment of the Fund, the Department has completed cleanup of 
three out of the 12 massive process buildings, 242 of 523 support 
facilities, 116 of 231 planned environmental remedial actions, and 
disposal of 12.8 million cubic feet of the expected 46 million cubic 
feet of waste materials. As a direct result of past cleanup efforts, we 
are nearing the completion of cleanup at the first of the three GDPs, 
namely, the East Tennessee Technology Park (ETTP), formally known as 
the K-25 Plant, in Oak Ridge, Tennessee. The ETTP's five main process 
buildings alone covered 114 acres. Our current projection to 2 complete 
the cleanup of this site is 2012. Detailed progress for each site is 
contained within DOE's fifth Triennial Uranium Enrichment 
Decontamination and Decommissioning Report (fifth Triennial Report),* 
which the Department recently provided to Congress.
---------------------------------------------------------------------------
    * Report has been retained in committee files.
---------------------------------------------------------------------------
    A major benefit of the work completed at ETTP and the other plant 
sites is the accumulation of project experience upon which to base a 
more accurate cost estimate for the remaining work. In order to provide 
the Congress with this information, the Department has recently 
completed an extensive revision of the previously reported cost 
estimates including independent cost estimates for the Portsmouth and 
Paducah Plants by the U.S. Army Corps of Engineers. The results of this 
revised estimate are captured in a ``Base Case'' to illustrate a 
projected cost estimate and several sensitivity cases. The Base and 
sensitivity cases address a range of economic factors, scope, and 
schedule assumptions. Utilizing this recent information, the ``Base 
Case'' and sensitivity case options became the cornerstone of the Fund 
analysis provided in the fifth Triennial Report. Our conclusion is that 
the UED&D Fund would need, in addition to the current balance of $4.1 
billion, between $8 billion to $21 billion more to complete the GDP 
cleanup activities, with $11 billion estimated under the Base Case. All 
estimates assume that the 3 Government will make up its contribution 
shortfalls which occurred when the Department did not deposit its full 
obligations during the first three years of the UED&D Fund.
    Significant cleanup activities remain to be performed at the GDPs. 
In order to sustain funding over the life-cycle of these D&D and 
environmental remedial action projects, DOE is recommending that the 
UED&D Fund be reauthorized to allow the Government to make up its 
contribution shortfalls to the Fund. If the Congress reauthorizes the 
Fund to allow the Government to complete its obligation under EPAct 
1992, we project the Fund will remain sufficient until approximately 
the 2020 timeframe. We also recommend that environmental remedial 
action activities, as an integral part of the D&D workscope, continue 
to be funded from the UED&D Fund. The Department recognizes that there 
are a range of options available to address the projected shortfall in 
the Fund: Government only contributions, both Government and nuclear 
utility contributions, direct appropriations, or some combination of 
these options. One of these options will be needed to provide funding 
to complete the cleanup at the three GDP sites. As required by EPAct 
1992, the Secretary of Energy was directed to collect special 
assessments from domestic utilities that benefited from the uranium 4 
enrichment operations. The assessments were based upon a ratio of each 
utility's share of material purchased from the government resulting in 
a total annual assessment of $150 million, adjusted for inflation, for 
the 15 years. In FY 2007, the domestic nuclear utilities completed 
their 15-year assessment obligation as enacted in EPAct 1992.
    DOE continues to focus on the recommendations from the GAO and the 
Congress to improve our cost estimates, schedules and plans for the 
GDPs. We continue to seek disposal alternatives and recycling 
opportunities with our stakeholders to reduce cost and shorten cleanup 
schedules. Our most recent initiatives include a business strategy to 
develop a competitive procurement for the cleanup of the Portsmouth 
facilities. We are leaning heavily on our lessons learned from projects 
at ETTP and other decontamination projects with a history of waste 
minimization. We look forward to continued discussions with the 
Congress as new opportunities are realized, and as our GDP cleanup 
projects progress.
    Thank you for allowing me this opportunity to testify before your 
Committee. This completes my formal statement. At this time, I would be 
pleased to answer any questions.

    The Chairman. All right, let me start and ask a few 
questions here.
    Let me just clarify, as I understand your testimony, the 
Department is not in favor of the reauthorization of this 
provision of law, is that right? Or is it in favor?
    Mr. Rispoli. Mr. Chairman, the Department recommends that 
the law be reauthorized to permit the government to make up its 
shortfall in its contribution that dates back to the first 
several years of the Fund's establishment back in the early 
1990s. So, we do request--and have requested in writing--that 
the Act be reauthorized to permit us to do that.
    Now, to put that in perspective, we have a shortfall of 
about $1.8 billion, including the interest that would have 
accrued on this, had the money been in since the days it should 
have been. We've been putting in $450 million a year, roughly, 
so we would like to restore the $1.8 million contribution, as 
we calculate it would be necessary to make the government's 
contribution whole and current.
    The Chairman. You believe you have to have additional legal 
authority to do that?
    Mr. Rispoli. As we understand the law, Mr. Chairman, we 
have the authority to keep withdrawing from the Fund, we don't 
have the authority to deposit to the Fund. The authorization 
has expired. So, we would request the reauthorization for 
several years to be able to contribute the overdue, the 
government share that was not put in back in the early 1990s.
    The Chairman. Your view is that industry should not have to 
contribute any additional funds.
    Mr. Rispoli. At that point in time we have not taken a 
position either that industry should, or should not, 
contribute. We are asking, however, that the Fund be 
reauthorized to permit us to make up, as I stated, that 
government contribution.
    The Chairman. I think a key part of what this committee is 
going to have to decide if we vote on this legislation, is 
whether we believe that the law should direct that industry 
continue contributing. But you take no position on that?
    Mr. Rispoli. That is correct at that time, Mr. Chairman.
    I might add that we have done early analysis, we understand 
that there are pluses and minuses to any option that we take. 
The options, of course, would be the government contributes 
alone--only the government contributes in the future. Another 
would be that both the government and industry contribute. A 
third might be that, after the government makes up its overdue 
payment, that the Fund would not be reauthorized, and we would 
pay from annual appropriations.
    We like the Fund, because it gives us the stability to 
foresee how much is there, we know that we can afford to do the 
work that has to be done with minimal impact to the actual 
progress of the work. But clearly there are options we need to 
evaluate. We would like to dialog with Members of Congress, 
with this committee, other interested committees, stakeholders, 
before we make a recommendation as to whether or not industry 
should contribute, or in fact, which of those options, or any 
others, that might be presented would be the best option.
    The Chairman. Am I right in the information that I have 
here that the cleanup of these three plants is expected to 
continue until 2044, is that your estimate?
    Mr. Rispoli. Yes, Mr. Chairman, that is correct.
    The Chairman. Let me just have you repeat again how much of 
a shortfall you see in the funding.
    I mean, if we go ahead and contribute the $1.8 billion that 
you have indicated you would like authority to contribute, 
there is still a substantial shortfall projected, as I 
understand it, between what would, has been raised, or is 
authorized to be raised, and how much it will cost to do these 
cleanups. Do you know what that figure is, again?
    Mr. Rispoli. Yes, Mr. Chairman, we've spent a good amount 
of effort--as you might know--we had the U.S. Army Corps of 
Engineers review all of the estimates we have. They did the 
review in late 2006, so that now we have a much higher degree 
of confidence.
    I might state that ever since the day the Fund was 
established, both we and the GAO have recognized that the Fund 
would not be sufficient with the 15-year authorization for 
contributions when it was set up. So, that's not a surprise, 
that the Fund is not sufficient.
    To more directly answer your question, after the Army Corps 
of Engineers did their review, they looked at several cases. 
The base case that I will refer to you is that the Fund will be 
deficit by about $11 billion.
    Now, on page 34 of the report, for your future reference, 
is a simplified table that shows different scenarios, where the 
range would go from being short about $11 billion, the low 
point is being short about $8.2 billion, but the high point 
would go all the way to about $21 billion.
    So, there is still a range, but the base case would 
represent about $11 billion shortfall.
    The Chairman. All right, let me defer to Senator Domenici 
or Senator Bunning. I'm going to have to run to another 
meeting, and so I'll just ask Senator Domenici or Senator 
Bunning to conduct the hearing until I'm able to return.
    Thank you.
    Senator Domenici. How long will you be, Mr. Chairman?
    The Chairman. Maybe a half hour.
    Senator Domenici. We'll make it.
    The Chairman. If you're not able to----
    Senator Bunning. We'll make it.
    The Chairman. You guys can handle it until then, and we're 
told Senator Tester is coming to ask some questions and to 
participate, too. So, he can participate.
    Senator Bunning [presiding]. Mr. Secretary, you testified 
based on the updated DOE projection, that the shortfall will be 
anywhere between $8 and $21 billion.
    You also, if I heard your earlier testimony right, said 
that there is a surplus in the Fund presently, that we haven't 
spent out all that is in the Fund, is that incorrect or 
correct?
    Mr. Rispoli. Senator, that is correct. The balance as of 
today is somewhere close to $4 billion.
    Senator Bunning. You need us to act so that you can spend 
out $1.8 billion that you think the Federal Government ought to 
make up the shortfall that they fell in the first 2 or 3 years 
of the program?
    Mr. Rispoli. Senator----
    Senator Bunning. That's all been done at Tennessee, though, 
hasn't it? All of the decommissioning and the things that are 
in this bill?
    Mr. Rispoli. The bulk of the work to this date was, in 
fact, done in Tennessee. Small amounts of work are being, and 
have been done in Portsmouth and Paducah. There actually is--in 
the report, at page, it's in Tab B, there's a separate sheet 
for Tennessee, there's a separate sheet for Portsmouth, Ohio, 
an actual piped-in plant, and there's also a separate sheet for 
Paducah that shows, by year, what the funding plans are, for 
funding the work on----
    Senator Bunning. I've seen the remediation and the changes 
made in Paducah, in person, on the scrap heap and all of those 
kind of things that have been done. But, they're still 
producing uranium at Paducah. So, therefore you're not going to 
decommission the plant until they stop producing it. That's 
supposed to be about 2012. Or thereabouts, depending on what 
USEC does in Portsmouth with their new projected plant, if they 
do actually build their new projected plant in Portsmouth.
    My question to you is, why shouldn't the nuclear power 
energy people that are using a product that's being produced at 
Paducah, the enriched uranium, at their power plants, help 
defer the costs of cleaning up those power plants?
    Mr. Rispoli. Senator, I do understand your question, I will 
indicate to you that the Department is looking at that, we're 
in fact looking for views from Senators and Members of Congress 
on whether or not industry should contribute, whether the 
government should do all future contributions, how to fund the 
balance of the cleanup. We'd like to also have dialog with 
stakeholders.
    I think, again, there are pros and cons either way, as to 
whether or not industry should continue to contribute, but we 
have not made a determination, or a recommendation.
    Senator Bunning. But we're talking about a bill, presently. 
S.2203, that indicates that we think, as a committee, the 
stakeholders are those who use the products that are produced, 
should have a stake in cleaning up the area that is producing 
that uranium. That's what we're asking for information from you 
about.
    We think that there's a stake in the power industry--
particularly our nuclear power industry--it isn't a big burden 
on those who use it, but it's a portion of the overall D&D 
commissioning, decommissioning, that we think would help meet 
that shortfall in the out years. Particularly, when you're 
talking about going to 2020, and knowing full-well that we're 
going to 2044. There's going to be a time that the Federal 
Government's going to have a responsibility, and we'd like 
someone else--if they're using that enriched uranium to make 
energy, and they sell it to the public, they ought to be able 
to help us pay for the cleanup.
    Mr. Rispoli. Yes, Senator. I understand that position, and 
we at the Department understand that position.
    Senator Bunning. You just don't have a position on that.
    Mr. Rispoli. We just don't have a recommendation to the 
Congress as to which way to go.
    What we have asked by letter and in our testimony is that 
this Act be reauthorized, so that we can make up the 
contributions that the government owes, and if it were, say, 
reauthorized for 3 or 4 years, we would be able to get to you a 
recommendation, after we consult with you, and other Senators 
and Congressmen and the industry as to a--as a departmental and 
a----
    Senator Bunning. Then, you'd rather have a short-term, 
rather than a long-term reauthorization.
    Mr. Rispoli. At the present time, that's what we have asked 
for, yes sir.
    Senator Bunning. The bill that we're considering is a 10-
year program.
    Mr. Rispoli. I understand that, that's right.
    Senator Bunning. OK, I've already gone over my time.
    Senator Tester [presiding]. Senator Domenici.
    Senator Domenici. Thank you very much, Mr. Chairman.
    I arrived late and did not have any opening remarks, and I 
was going to give them just before my questions, that was what 
we arranged, and I'm going to do that, it's very brief.
    Senator Tester. That's fine.

   STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM NEW 
                             MEXICO

    Senator Domenici. Welcome to all of the witnesses, I hope 
we won't keep you long. I'm pleased that Senator Bingaman 
scheduled this hearing, to examine the uranium enrichment D&D 
fund and possible need to reauthorize payments into the Fund.
    That said, we have not had a hearing on this program since 
we created the Fund in the Energy Policy Act of 1992, 15 years 
ago. We know very little about the operation of the Fund; you 
know a lot. We know very little about the Department of 
Energy's use of the moneys thus far, or the future cleanup 
plans.
    It is somewhat strange to me, why the committee has rushed 
to legislative hearings on S. 2203, that would simply increase 
annual deposits and extend the Fund for 10 years. This seems 
premature, and it would seem that we need to know an awful lot 
more. It's very complex. It's not as simple as just saying, 
let's redo it. Fifteen years has seen dramatic change in this 
industry, in decontamination and the way we do it.
    There have been tremendous changes, as I indicated, in 15 
years, and all of the circumstances surrounding the former DOE 
enrichment enterprise, its utility customers, the clean up 
technology, and a host of other variables that I'm sure will 
affect our decision on reauthorization and the details of any 
legislation.
    With that in mind, for myself, I intend to proceed very 
thoughtfully and carefully to examine all of the issues related 
to reauthorization of the Fund, and the options that might be 
available. Hopefully, today's hearing will be a first good step 
in getting us, and others, current in a way that will be 
understandable and useable by Congress, and as we look forward 
to extension of the Fund through authorization, it is my hope 
that we will also look at other issues that surround this 
complex matter.
    There are others besides just reauthorizing this fund, are 
there not, Secretary Rispoli?
    Mr. Rispoli. Senator Domenici, I believe we in the 
Department would fully endorse your statement. We realize this 
is, on the surface might be a simple question, like does a 
utility contribute or not, and for how long? But we recognize 
that all--it's part of a much more complex overall issues, and 
that is why the Department would like to take the time to study 
the options, discuss the options with the stakeholders, prior 
to making a recommendation to the Congress, and that is why 
we've asked for a relatively short-term reauthorization to 
deposit to the fund, so the government can restore its share 
while we dialog on those other issues that are all 
interrelated.
    Senator Domenici. I just wanted to say to the members, and 
put on the record before I yield back to the Chairman two 
things, very briefly.
    You know, we've been using a formula for the low-level 
radiation--I think you're aware of the very big dispute that 
exists as to whether the formula that we've used in the past 
properly determines the negative effect of low-level radiation.
    That's very important, what you use as the standard, 
because that determines how much it will cost to clean up. In 
some instances, when you're using the dosage concern that is 
out there, you spend great deals of money just moving earth 
around, just to make sure that you put enough on there, tons 
and tons, so that the low-level radiation is measured right at 
the surface.
    I understand the Department, under a mandate from this 
committee from 3 or 4 years ago--5 years, 6 years, 7 years 
ago--is in the process of analyzing that standard, that has 
been in the law and very questioned by many. If that's solved, 
while you're busy doing this cleanup, it would cause a real 
change in the cost, as you well know. As it's doing for many 
sites.
    I also note, with reference to the industry that in the 
bill that we passed--the Energy Policy Act in 1992, we 
indicated that the total contribution, or the collection of 
$2.25 billion to be annually adjusted for inflation using the 
consumer price index, et cetera, was the amount that was to be 
paid in, and that was all. So we are taking a giant step if we 
decide that that's not right any longer and we've got to have 
more.
    We've got to also know what we're doing, and I, for one, 
think that this is going to be a very big, long-term cleanup 
job. I would hope that if we're going to do this legislatively 
we do it in as simple a form as we can, using the intervening 
time to really push and insist that the plans be done in a most 
modern way, and that we understand what's going on. Otherwise, 
we'll end up with an open-ended obligation, where we'll be 
paying through the nose forever, if we're not careful. It will 
be much more expensive than it would have to be.
    I have a number of questions; I'll submit them in writing. 
Answer them as soon as you can.
    Thanks for the work you do. You've done a good job in a 
very tough office.
    [The prepared statement of Senator Domenici follows:]
    Prepared Statement of Hon. Pete V. Domenici, U.S. Senator From 
                               New Mexico
    Good morning, and welcome to all of our witnesses. I am pleased 
that Senator Bingaman scheduled this hearing to examine the Uranium 
Enrichment D&D Fund and the possible need to reauthorize payments into 
the Fund. That said, we have not had a hearing on this program since we 
created the Fund in the Energy Policy Act of 1992 fifteen years ago. We 
know very little about the operation of the Fund, the Department of 
Energy's use of the monies thus far, or their future cleanup plans. It 
is somewhat perplexing to me, then, why the Committee has rushed to a 
legislative hearing on S. 2203 that would simply increase annual 
deposits and extend the Fund for ten years. This seems premature, at 
best, to me.
    There have been tremendous changes in the past fifteen years in all 
of the circumstances surrounding the former DOE enrichment enterprise, 
its utility customers, cleanup technologies and plans, and a host of 
other variables that I am sure will affect our decision on 
reauthorization and the details of any legislation. With this in mind, 
I intend to proceed very thoughtfully and carefully to examine all of 
the issues related to reauthorization of the Fund and the legislative 
options that might be available. Hopefully, today's hearing will be a 
good first step in that process.
    I look forward to the witnesses' testimony.

    Mr. Rispoli. Thank you, Senator. Thank you very much.
    Senator Tester. Senator Bunning, did you have any further 
questions you wanted to ask?
    Senator Bunning. Not for this witness, for the next 
witnesses.
    Senator Tester. With that, thank you very much, Assistant 
Secretary, and we'll bring up the next panel.
    The next panel consists of Robin Nazzaro, Director of 
Natural Resources and Environment, the Government 
Accountability Office.
    Marv Fertel of the Nuclear Energy Institute here in 
Washington, D.C.
    Wesley Warren, Natural Resources Defense Council, here in 
Washington, D.C.
    John Longenecker, Longenecker and Associates, Las Vegas, 
Nevada.
    Welcome, gentlemen.
    Welcome, Robin, we're going to start with your testimony. I 
appreciate you all being here this morning. We will go with 5 
minutes, if you can make your comments concise to 5 minutes, it 
would be much appreciated.
    Go ahead, thank you.

STATEMENT OF ROBIN M. NAZZARO, DIRECTOR, NATIONAL RESOURCES AND 
         ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Nazzaro. Thank you, Mr. Chairman and members of the 
committee. I'm pleased to be here today to discuss the 
sufficiency of the Uranium Enrichment Decontamination and 
Decommissioning Fund.
    As was discussed today, the Fund was established in 1992 as 
the government's principal source of funding for the 
decontamination and decommissioning of the Department of 
Energy's three uranium enrichment plants, located near Oak 
Ridge, Tennessee; Portsmouth, Ohio; and Paducah, Kentucky. The 
cleanup of these plants will cost billions of dollars and could 
span several decades. Fund revenues come from Federal 
Government appropriations and an assessment on domestic 
utilities which as been, for the past 15 years, and scheduled 
to end in 2007.
    In 2004, we reported on the extent to which the Fund is 
sufficient to cover authorized activities. Because we found 
that the Fund would likely be insufficient, we recommended that 
Congress consider reauthorizing the Fund for three more years, 
to 2010, and require DOE to assess the sufficiency of the Fund 
before it expired, to determine if extensions beyond 2010 would 
be necessary.
    Additionally, to reduce uncertainty regarding the 
sufficiency of the Fund, we recommended that the Secretary of 
Energy develop decontamination and decommissioning plans for 
the Portsmouth and Paducah plants that would identify the most 
probable time frames and costs for completing the cleanup work.
    My testimony today summarizes the findings from our 2004 
report regarding the extent to which the Fund will be 
sufficient to cover authorized activities, and an update on 
DOE's progress in developing decontamination and 
decommissioning plans at the Portsmouth and Paducah plants.
    In summary, the Fund will be insufficient to cover all of 
its authorized activities. Using DOE's estimates for the 
cleanup costs at the three plants, and current and likely 
revenue projections, GAO developed a number of simulation 
models that factored in annual cost and revenue projections, 
and uncertainties surrounding inflation rates, costs, revenues 
and the timing of the final cleanup work at the plants. 
Specifically, our baseline model showed that by 2044, which was 
the most likely timeframe for completing all cleanup activities 
at the plants, cleanup costs will have exceeded revenues by 
between $3.8 billion to $6.2 billion, in 2007 dollars.
    Irrespective of which model we used, we found that the fund 
would be insufficient. Each of the alternative models, 
including accelerated time frames, deferred timeframes and 
baseline timeframes with additional revenues from government 
contributions as authorized under current law, demonstrated 
that the cleanup costs would exceed revenues.
    Uncertainty over the extent of the Fund's sufficiency 
remains because DOE had at the time, not issued plans that 
identified the most probable timeframes and costs for the 
decontamination and decommissioning of the Portsmouth and 
Paducah plants. In 2004, DOE began developing a report to 
Congress containing such information, but because DOE was in 
the process of significantly revising its cost estimates, it 
determined the report would not be accurate, and it did not 
finalize it. According to DOE officials, the Department is now 
in the process of finalizing a report that contains new 
schedule and cost information for both plants and addresses the 
sufficiency of the Fund. However, DOE did not make that 
information available to GAO and, therefore, we are unable to 
assess how any new schedule or cost estimates may affect the 
Fund's sufficiency.
    In closing, we believe that an extension to the Fund may be 
necessary to cover the cleanup costs at the Nation's three 
uranium enrichment plants. The information currently available 
on the projected costs and revenues authorized by the Fund 
suggest that the Fund will be insufficient by up to several 
billion dollars. DOE appears to be taking steps to develop more 
detailed timeframes and costs estimates for the decontamination 
and decommissioning of the uranium enrichment plants. In the 
meantime, unless the Fund is extended beyond its current 
expiration in 2007, cleanup activities could not be paid for 
from the Fund due to a shortfall may have to be financed 
entirely by the Federal Government and could add an additional 
fiscal burden at a time when our government is already facing 
significant long-term fiscal challenges.
    Mr. Chairman, this completes my prepared statement. I'd be 
happy to respond to any questions that you or members of the 
committee might have at this time.
    [The prepared statement of Ms. Nazzaro follows:]
Prepared Statement of Robin M. Nazzaro, Director Natural Resources and 
             Environment, Government Accountability Office
                         why gao did this study
    Cleaning up the nation's three uranium enrichment plants will cost 
billions of dollars and could span decades. These plants--located near 
Oak Ridge, Tenn.; Paducah, Ky.; and Portsmouth, Ohio--are contaminated 
with radioactive and hazardous materials. In 1992, the Energy Policy 
Act created the Uranium Enrichment Decontamination and Decommissioning 
Fund (Fund) to pay for plant cleanup. Fund revenues come from an 
assessment on domestic utilities and federal government appropriations.
    In 2004, GAO reported on the Fund's sufficiency to cover authorized 
activities. GAO recommended that Congress consider reauthorizing the 
Fund for 3 more years, to 2010, and require the Department of Energy 
(DOE) to reassess the Fund's sufficiency before it expired to determine 
if further extensions were needed. Because decisions not yet made by 
DOE could affect the cost of cleanup and the Fund's sufficiency, GAO 
also recommended that DOE develop decontamination and decommissioning 
plans for the Paducah and Portsmouth plants that would identify the 
most probable time frames and costs for completing the cleanup work.
    This testimony is based on GAO's 2004 report. It summarizes the 
extent to which the Fund may be sufficient to cover authorized 
activities and the status of DOE's progress in developing 
decontamination and decommissioning plans for the Paducah and 
Portsmouth plants.
                             what gao found
    GAO's analysis showed that the Fund will be insufficient to cover 
all authorized activities. Using DOE's estimates for the cleanup costs 
at the three plants and current and likely revenue projections, GAO 
developed a number of simulation models that factored in annual cost 
and revenue projections and uncertainties surrounding inflation rates, 
costs, revenues, and the timing of the final cleanup work at the 
Paducah and Portsmouth plants. Specifically, GAO's baseline model 
demonstrated that by 2044, the most likely date for completing all 
cleanup activities at the plants, cleanup costs will have exceeded 
revenues by $3.8 billion to $6.2 billion (in 2007 dollars). 
Importantly, GAO found that the Fund would be insufficient irrespective 
of which estimates were used or what time frames were assumed.
    DOE has not yet issued plans for the decontamination and 
decommissioning of the Paducah and Portsmouth plants as GAO 
recommended. According to DOE officials, the department is developing a 
report to Congress that will contain updated information for both 
plants. DOE did not make that information available to GAO, however, 
and hence GAO was unable to assess how any new schedule or cost 
estimates may affect the Fund's sufficiency. Until DOE issues plans 
that provide the most probable time frames and costs for completing 
decontamination and decommissioning at the Paducah and Portsmouth 
plants, it is not possible to more precisely determine the total 
funding needed to cover the authorized cleanup activities.
    Mr. Chairman and Members of the Committee: Thank you for the 
opportunity to discuss our work on the sufficiency of the Uranium 
Enrichment Decontamination and Decommissioning Fund (Fund) as you 
consider its reauthorization. As you know, the 1992 Energy Policy Act, 
as amended,\1\ established the Fund and authorized contributions for 15 
years (ending in 2007) to be made by federal government appropriations 
and payments from domestic utility companies. The Fund is the 
government's principal source of funding for the decontamination and 
decommissioning of the Department of Energy's (DOE) three uranium 
enrichment plants, located near Oak Ridge, Tennessee; Paducah, 
Kentucky; and Portsmouth, Ohio. These plants, which encompass more than 
30 million square feet of floor space, miles of interconnecting pipes, 
and thousands of acres of land, are contaminated with radioactive and 
hazardous materials. The cleanup of these plants--the responsibility of 
DOE's Office of Environmental Management--will cost billions of dollars 
and could span several decades. Cleanup activities include assessing, 
treating, and disposing of the contamination found at the plants and 
the decontamination and decommissioning of inactive facilities. DOE 
conducts its cleanup activities under the requirements of several 
federal environmental laws and compliance agreements with relevant 
regulatory authorities, including the Environmental Protection Agency 
and state regulatory agencies.
---------------------------------------------------------------------------
    \1\ All further references to the Energy Policy Act refer to the 
Energy Policy Act, as amended.
---------------------------------------------------------------------------
    In 2004, we reported on actions DOE had taken to reduce the cleanup 
costs the Fund is authorized to support and the extent to which the 
Fund is sufficient to cover authorized activities.\2\ Because we found 
that the Fund would likely be insufficient, we recommended that 
Congress consider reauthorizing the Fund for an additional 3 years, to 
2010, and require DOE to reassess the Fund's sufficiency before the 
2007 expiration date to determine if extensions beyond 2010 would be 
needed. Additionally, to reduce uncertainty regarding the Fund's 
sufficiency, we recommended that the Secretary of Energy develop 
decontamination and decommissioning plans for the Paducah and 
Portsmouth plants that would identify the most probable time frames and 
costs for completing the cleanup work. My testimony today (1) includes 
findings from our 2004 report, which examined the extent to which the 
Fund was sufficient to Page 1GAO-08-277T cover authorized activities, 
and (2) provides an update on DOE's progress in developing 
decontamination and decommissioning plans at the Paducah and Portsmouth 
plants.
---------------------------------------------------------------------------
    \2\ GAO, Uranium Enrichment: Decontamination and Decommissioning 
Fund Is Insufficient to Cover Cleanup Costs, GAO-04-692 (Washington, 
D.C.: July 2, 2004).
---------------------------------------------------------------------------
    In preparing our 2004 report, we obtained DOE's estimates for 
cleanup and other key costs at the three plants, and current and likely 
revenue projections. We assessed the reliability of these data and 
determined that they were sufficiently reliable for the purposes of our 
report. We used the data to develop a number of simulation models, 
which factored in cost and revenue projections on an annual basis, as 
well as uncertainties surrounding inflation rates, interest rates, the 
costs and revenues, and the timing of the final decontamination and 
decommissioning work at the Paducah and Portsmouth plants. In addition, 
to prepare for this testimony, we reviewed DOE's status reports 
developed in response to our 2004 report and interviewed DOE 
headquarters officials to determine DOE's progress to date in 
developing decontamination and decommissioning plans at Paducah and 
Portsmouth. We performed our work in accordance with generally accepted 
government auditing standards.
    In summary,

   The Fund will be insufficient to cover all of its authorized 
        activities. Specifically, our baseline model showed that by 
        2044, the most likely date for completing all cleanup 
        activities at the plants, cleanup costs will have exceeded 
        revenues by $3.8 billion to $6.2 billion (in 2007 dollars). 
        Irrespective of which model we used, we found that the Fund 
        would be insufficient. Each of the alternative models--(1) 
        accelerated time frames, (2) deferred time frames, and (3) 
        baseline time frames with additional revenues from government 
        contributions as authorized under current law--demonstrated 
        that the cleanup costs would exceed revenues. We recommended 
        that Congress consider reauthorizing the Fund for an additional 
        3 years, to 2010, and require DOE to reassess the Fund's 
        sufficiency before the expiration date to determine if 
        extensions beyond 2010 would be needed.
   DOE has not yet issued plans for the decontamination and 
        decommissioning of the Paducah and Portsmouth plants as GAO 
        recommended. According to DOE officials, the department is now 
        in the process of finalizing a report that contains new 
        schedule and cost information for both plants and addresses the 
        sufficiency of the Fund. However, DOE did not make that 
        information available to GAO and therefore, we were unable to 
        assess how any new schedule or cost estimates may affect the 
        Fund's sufficiency. Until DOE issues plans that provide the 
        most probable time frames and costs for completing 
        decontamination and decommissioning at the Paducah and 
        Portsmouth plants, it is not possible to more precisely 
        determine the total funding needed to cover the authorized 
        cleanup activities.
                               background
    The federal government has enriched uranium for use by commercial 
nuclear power plants and for defense-related purposes for more than 40 
years at three plants, located near Oak Ridge, Tennessee; Paducah, 
Kentucky; and Portsmouth, Ohio (see fig. 1).* The Oak Ridge plant, 
known as East Tennessee Technology Park, is located on 1,500 acres of 
land; the oldest of the three plants, it has not produced enriched 
uranium since 1985. The Paducah plant, located on about 3,500 acres, 
continues to enrich uranium for commercial nuclear power plants under a 
lease to a private company, the United States Enrichment Corporation 
(USEC). The Portsmouth plant, a 3,700-acre site, ceased enriching 
uranium in May 2001 because of reductions in the commercial market for 
enriched uranium. Later that year, the plant was placed on cold standby 
(an inactive status that maintains the plant in a usable condition), so 
that production at the facility could be restarted in the event of a 
significant disruption in the nation's supply of enriched uranium. USEC 
was awarded the contract to maintain the plant in cold standby, a 
condition that continues today.\3\ Yet because of newer, more efficient 
enrichment technologies and the globalization of the uranium enrichment 
market, all three uranium enrichment plants have become largely 
obsolete. Therefore, DOE now faces the task of decontaminating, 
decommissioning, and undertaking other remedial actions\4\ at these 
large and complex plants, which are contaminated with hazardous 
industrial, chemical, nuclear, and radiological materials.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
    \3\ USEC was also responsible for uranium enrichment before 
operations ceased and it has begun construction on a new centrifuge 
uranium enrichment plant at this site.
    \4\ Remedial actions refer to environmental cleanup activities 
directed at eliminating or reducing contaminant sources and 
contaminated soil and groundwater.
---------------------------------------------------------------------------
    In 1991, at the request of the House Subcommittee on Energy and 
Power, GAO analyzed the adequacy of a $500 million annual deposit into 
a fund to pay for the cost of cleanup at DOE's three uranium enrichment 
plants.\5\ We reported that a $500 million deposit indexed to inflation 
would likely be adequate, assuming that deposits would be made annually 
into the fund as long as cleanup costs were expected to be incurred, 
which, at the time of our study, was until 2040. Additionally, in a 
related report, we concluded that the decommissioning costs at the 
plants should be paid by the beneficiaries of the services provided by 
DOE--in this case, DOE's commercial and governmental customers.\6\
---------------------------------------------------------------------------
    \5\ GAO, Uranium Enrichment: Analysis of Decontamination and 
Decommissioning Scenarios, GAO/RCED-92-77BR (Washington, D.C.: Nov. 15, 
1991).
    \6\ GAO, Comments on Proposed Legislation to Restructure DOE's 
Uranium Enrichment Program, GAO/T-RCED-92-14 (Washington, D.C.: Oct. 
29, 1991).
---------------------------------------------------------------------------
    In 1992, the Congress passed the Energy Policy Act, which 
established the Uranium Enrichment Decontamination and Decommissioning 
Fund to pay for the costs of decontaminating and decommissioning the 
nation's three uranium enrichment plants. The Energy Policy Act also 
authorized the Fund to pay remedial action costs associated with the 
plants' operation, to the extent that funds were available, and to 
reimburse uranium and thorium licensees for the portion of their 
cleanup costs associated with the sale of these materials to the 
federal government. The act authorized the collection of revenues for 
15 years, ending in 2007, to pay for the authorized cleanup costs. 
Revenues to the Fund are derived from (1) an assessment, of up to $150 
million annually, on domestic utilities that used the enriched uranium 
produced by DOE's plants for nuclear power generation\7\ and (2) 
federal government appropriations amounting to the difference between 
the authorized funding under the Energy Policy Act and the assessment 
on utilities.\8\ Congress specified that any unused balances in the 
Fund were to be invested in Treasury securities and any interest earned 
made available to pay for activities covered under the Fund.
---------------------------------------------------------------------------
    \7\ This assessment is based on a given utility's share of the 
total enriched uranium purchased from DOE, including enriched uranium 
purchased for defense purposes.
    \8\ The following revenue amounts are authorized: $480 million for 
fiscal years 1992-1998; $488.3 million for fiscal years 1999-2001; and 
$518.2 million for fiscal years 2002-2007. Both domestic utility 
assessments and government appropriations are to be adjusted annually 
for increases in the consumer price index.
---------------------------------------------------------------------------
    DOE's Office of Environmental Management is responsible for 
managing the Fund and plant cleanup activities, which, through fiscal 
year 2003, were mostly carried out by DOE contractor Bechtel Jacobs. 
The department's Oak Ridge Operations Office in Oak Ridge, Tennessee, 
had historically provided day-to-day Fund management and oversight of 
cleanup activities at all three plants. In October 2003, however, DOE 
established a new office in Lexington, Kentucky, to directly manage the 
cleanup activities at the Paducah and Portsmouth plants. The Oak Ridge 
Operations Office continues to manage the Fund and the cleanup 
activities at the Oak Ridge plant.
    Currently, the Fund is used to pay for the following activities:

   Reimbursements to uranium and thorium licensees. The Energy 
        Policy Act provides that the Fund be used to reimburse 
        licensees of active uranium and thorium processing sites for 
        the portion of their decontamination and decommissioning 
        activities, reclamation efforts, and other cleanup costs 
        attributable to the uranium and thorium they sold to the 
        federal government.\9\ From fiscal year 1994, when the Fund 
        began incurring costs, through fiscal year 2003, $447 million 
        was used from the Fund for uranium and thorium reimbursements 
        (in 2004 dollars).
---------------------------------------------------------------------------
    \9\ The Energy Policy Act authorizes reimbursements to uranium 
licensees not to exceed $350 million and reimbursements to the thorium 
licensee not to exceed $365 million for the portion of their cleanup 
costs associated with the sale of these materials to the federal 
government. The remaining unused authorized amounts are adjusted 
annually based upon the consumer price index.
---------------------------------------------------------------------------
   Cleanup activities at the uranium enrichment plants.\10\ 
        Cleanup activities at the plants include remedial actions, such 
        as assessing and treating groundwater or soil contamination; 
        waste management activities, such as disposing of contaminated 
        materials; the surveillance and maintenance of the plants, such 
        as providing security and making general repairs to keep the 
        plants in a safe condition; the decontamination and 
        decommissioning of inactive facilities by either cleaning them 
        up so they can be reused or demolishing them; and other 
        activities, such as covering litigation costs at the three 
        plants and supporting site-specific advisory boards. From 
        fiscal year 1994 through fiscal year 2003, a total of $2.7 
        billion from the Fund was used for these cleanup activities (in 
        2004 dollars).
---------------------------------------------------------------------------
    \10\ Cleanup activities are conducted under the requirements of the 
Resource Conservation and Recovery Act of 1976, as amended (RCRA); the 
Comprehensive Environmental Response, Compensation, and Liability Act 
of 1980, as amended (CERCLA); and compliance agreements with regulatory 
authorities, which include the Environmental Protection Agency and 
state regulatory agencies in Kentucky, Ohio, and Tennessee.
---------------------------------------------------------------------------
   at projected costs and revenues, the fund will be insufficient to 
                  complete cleanup at the three plants
    Under a variety of models using DOE's projected costs and revenues, 
the Fund will be insufficient to cover all of its authorized 
activities. Using DOE's projections that 2044 would be the most likely 
date for completion of cleanup at the plants, we estimated that cleanup 
costs would exceed Fund revenues by $3.8 billion to $6.2 billion (in 
2007 dollars).\11\ Because DOE had not determined when decontamination 
and decommissioning work would begin at the Paducah and Portsmouth 
plants, and because federal contributions to the Fund have been less 
than the authorized amount, we developed several alternative models to 
assess the effects of different assumptions on the Fund's sufficiency. 
Specifically, we developed the following models:
---------------------------------------------------------------------------
    \11\ In our 2004 report, we reported the projected costs in 2004 
dollars. For this testimony, we converted the figures to 2007 dollars.

   Baseline model. This model was developed in consultation 
        with DOE and its contractor officials about what the most 
        likely cleanup time frames would be and used cost estimates 
        assuming that cleanup at all plants would be completed by 2044.
   Accelerated model. Because DOE had not determined when the 
        final decontamination and decommissioning would begin at its 
        Paducah and Portsmouth plants, we developed the accelerated 
        model under the assumption that cleanup work could be completed 
        faster than under the baseline model, given unconstrained 
        funding. DOE and its contractor officials provided additional 
        cost estimates, where Paducah's final work would begin in 2010 
        and be completed by 2024 and Portsmouth's final decontamination 
        and decommissioning work would begin in 2007 and be completed 
        by 2024.
   Deferred model. This model was developed under the 
        assumption that, given current funding constraints, it may not 
        be realistic for two major decontamination and decommissioning 
        projects to be done concurrently. Thus, deferred time frames 
        were determined by DOE, assuming that all work would be 
        completed at the Portsmouth plant first and then initiated at 
        the Paducah plant. For the deferred model, Portsmouth's final 
        decontamination and decommissioning work was estimated to be 
        completed from 2010 to 2037 and Paducah's from 2038 to 2052.
   Revenue-added model. This model was developed to assess the 
        effect of the government's meeting its total authorized annual 
        contributions on the balance of the Fund, which by the start of 
        fiscal year 2004, was $707 million less than authorized under 
        the Energy Policy Act. For the revenue-added model, we used 
        baseline time frames but assumed that government contributions 
        to the Fund would continue annually at the 2004 authorized 
        level until all government contributions as authorized by law 
        had been met, which would occur in fiscal year 2009.
   Revenue-added-plus-interest model. For this model, we built 
        on the revenue-added model to include the effect of forgone 
        interest that the Fund could have earned had the government 
        contributed the full authorized amount. We assumed that these 
        additional payments would be made to the Fund in the same 
        amounts as the 2004 annual authorized amount and extended 
        payments through fiscal year 2010.

    Irrespective of which model we used, we found that the Fund would 
be insufficient to cover the projected cleanup costs at the uranium 
enrichment plants (see table 1). At best, assuming no additional 
funding is provided beyond the 2007 authorized amount, Fund costs could 
outweigh revenues by $3.8 billion (in 2007 dollars). Even with current 
authorized amounts extended out through fiscal year 2010, the Fund 
could still be insufficient by close to $0.46 billion (in 2007 
dollars).

                                   TABLE 1: FUND BALANCE AT COMPLETION OF ALL CLEANUP UNDER DIFFERENT MODEL SCENARIOS
                                                                   Dollars in Billions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   Revenue-added-plus-
                                                  Baseline model  Accelerated model    Deferred model     Revenue-added model         interest model
--------------------------------------------------------------------------------------------------------------------------------------------------------
Completion date (fiscal year)                               2044               2024               2052                     2044                     2044
--------------------------------------------------------------------------------------------------------------------------------------------------------
Constant 2007 dollars                             -$6.2 to -$3.8     -$5.7 to -$4.4     -$6.8 to -$4.4           -$5.2 to -$2.0          -$4.6 to -$0.46
                                                         (-$5.3)            (-$5.0)            (-$5.7)                  (-$3.9)                  (-$3.0)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current dollars                                      -$18.5 to -     -$9.8 to -$5.7    -$26.4 to -$8.8          -$15.1 to -$4.3          -$13.3 to -$1.0
                                                            $7.6            (-$7.6)           (-$16.7)                  (-$9.3)                  (-$7.1)
                                                        (-$12.5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Present-value 2007 dollars*                           -$3.4 to -     -$4.2 to -$2.0    -$3.4 to -$0.69          -$2.8 to -$0.69         -$2.5 to -$0.098
                                                           $0.84            (-$3.0)            (-$1.6)                  (-$1.4)                  (-$1.1)
                                                         (-$1.9)
--------------------------------------------------------------------------------------------------------------------------------------------------------
 Source: GAO analysis of DOE data.
 Note: Fund balances given as range, with mean in parentheses.
* Because of the difference in completion dates, a comparison of the Fund balances in constant 2007 dollars would not be meaningful. To make comparison
  of the various models possible, we estimated the present value of the Fund's blance in 2007 dollars. Because present-value analysis reflects the time
  value of money--that costs are worth more if they are incurred sooner and worth less if they occur in the future--the present value under the deferral
  model declines more than in the other options. In reality, however, the net effect would depend on many other factors. If, for example, deferral would
  add substantially to such costs as safeguarding and security or costs associated with increased health risks, then the reduction due to adjusting for
  the time value of money could be more than offset by increases in other costs.

    Although our analysis was able to capture several uncertainties 
potentially affecting the Fund--including interest rates, inflation 
rates, cost and revenue variances, and the timing of decontamination 
and decommissioning--additional uncertainties exist that we could not 
capture. These uncertainties included possible changes to the scope of 
the cleanup; whether the Fund would be required to pay for additional 
activities, such as long-term water monitoring once the plants were 
closed; and the extent of potential future litigation costs that the 
Fund would have to support. For example, a risk analysis completed by 
DOE in 2004 for the Paducah plant indicated that changes in the scope 
of cleanup could increase cleanup costs by more than $3 billion and 
extend the time frame for cleanup to more than 30 years past the 
original scheduled date of 2019.\12\ In addition, when they developed 
their cleanup cost estimates, DOE officials assumed that the costs of 
long-term stewardship activities--such as groundwater monitoring, which 
may continue after all necessary cleanup costs have been completed--
would be covered by a separate funding source. DOE officials 
acknowledged, however, that if another funding source were not 
available, they may be required to use resources from the Fund.
---------------------------------------------------------------------------
    \12\ This end date does not include final decontamination and 
decommissioning of the plant but only the major remedial actions 
planned at the site.
---------------------------------------------------------------------------
uncertainty over the extent of the fund's insufficiency remains because 
    doe has yet to issue plans for the paducah and portsmouth plants
    Uncertainty over the extent of the Fund's insufficiency remains 
because DOE has not issued plans that identify the most probable time 
frames and costs for the decontamination and decommissioning of the 
Paducah and Portsmouth plants. DOE was required to develop a report to 
Congress containing such information, but because DOE was significantly 
revising its cost estimates, it determined the report would not be 
accurate and did not finalize it.\13\ According to DOE officials, it is 
now in the process of finalizing a report that contains new schedule 
and cost information for both plants and addresses the sufficiency of 
the Fund.\14\ This report was due to Congress in October 2007 but has 
yet to be issued by DOE. Because the report has not been finalized, DOE 
officials were unwilling to provide us with updated information on 
current schedule and cost estimates. As a result, we are unable to 
assess how any new information may affect the Fund's sufficiency. Until 
DOE resolves uncertainties surrounding the plants' cleanup, including 
when cleanup activities are expected to both begin and end, it is not 
possible to more precisely determine the total funding needed to cover 
the authorized cleanup activities. If, however, closure and cleanup 
time frames extend past the originally projected schedules at the 
plants, then the total costs the Fund is authorized to support may 
increase, particularly costs for maintenance, safety, and security 
activities and other fixed costs that must be maintained until cleanup 
work at the plants is complete.
---------------------------------------------------------------------------
    \13\ According to the Energy Policy Act, the Secretary of DOE shall 
provide a report to Congress at least once every 3 years on progress 
made under title XI of the act.
    \14\ According to the Energy Policy Act, the fifth report to 
Congress was to contain recommendations by the Secretary for the 
reauthorization of the program and Fund under title XI.
---------------------------------------------------------------------------
    In closing, we believe that an extension to the Fund may be 
necessary to cover cleanup costs at the nation's three uranium 
enrichment plants. The information currently available on the projected 
costs and revenues authorized by the Fund suggests that it may be 
insufficient by up to several billion dollars. DOE appears to be taking 
steps to develop new, detailed time frames and cost estimates for the 
decontamination and decommissioning of its uranium enrichment plants. 
However, until this detailed information is made available, we cannot 
assess how DOE's updated time frames and cost estimates may affect the 
Fund's sufficiency. As a result, we believe that DOE should finalize 
plans for the Paducah and Portsmouth plants so that it can better 
determine the extent to which Fund extensions may be needed. Unless the 
Fund is extended beyond its current expiration in 2007, cleanup 
activities that could not be paid for from the Fund because of a 
shortfall may have to be financed entirely by the federal government 
and could add an additional fiscal burden at a time when our government 
is facing already significant long-term fiscal challenges.
    Mr. Chairman, this completes my prepared statement. I would be 
happy to respond to any questions you or other Members of the Committee 
may have at this time.

    Senator Tester. Thank you, Robin. I'm sure there will be 
questions, we're going to go through all of the witnesses and 
then we'll come back.
    Marv Fertel. Thank you for being here.

STATEMENT OF MARVIN S. FERTEL, SENIOR VICE PRESIDENT AND CHIEF 
           NUCLEAR OFFICER, NUCLEAR ENERGY INSTITUTE

    Mr. Fertel. Thank you very much, Mr. Chairman, Senator 
Domenici, Senator Bunning.
    As you know, NEI represents all of the nuclear generating 
companies that have already paid almost $2.7 billion into the 
D&D fund for the GDPs, and could be subject to additional 
liabilities under S. 2203.
    The industry fully supports the need to assure that the 
decontamination and decommissioning of the GDPs is accomplished 
in a safe, environmentally responsible and economically 
efficient manner. The communities that host these facilities 
should expect nothing less from the Federal Government.
    This industry position is totally consistent with the 
responsibility each operator of a commercially licensed power 
plant or fuels facility has for providing adequate assurance 
for the protection of the health and safety of the public 
surrounding those facilities during operation, and for safely 
and responsibly decommissioning the commercial facilities once 
they stop operating.
    In this regard, nuclear energy is unique as a source of 
electricity generation, in that it internalizes all of its 
costs in the price of electricity. Nuclear reactors and fuel 
facilities must provide dedicated decontamination and 
decommissioning funds as part of the terms at licensing. 
Nuclear generation pays for its regulation through licensing 
fees, and pays for waste disposal through the fee to the U.S. 
Department of Energy. No other energy source provides this 
explicit cradle-to-grave, full cost accounting.
    From the first days of commercial nuclear generation 
through the mid-1980s, the U.S. Government was the sole source 
of enrichment services available to domestic utilities. The 
enrichment was provided by the three federally built, owned and 
operated gaseous diffusion plants, which were originally built 
to provide uranium enrichment for the government defense 
programs.
    These facilities were contaminated as a result of their use 
for Defense programs about 15 years prior to the provision of 
any services to the commercial sector.
    As such, the D&D burden would have been the same for the 
government if the facilities would never used to service the 
commercial sector.
    Also, the contract signed by electric utilities with the 
Federal Government for the enrichment services provided by the 
GDPs, were required, by law, to include all costs which should 
have included any perceived additional D&D costs.
    Given the above facts, the industry would have expected it 
had no future liability for the D&D of the GDPs. The Energy 
Policy Act of 1992 created the Uranium Enrichment and 
Decontamination and Decommissioning Fund. The D&D Fund supports 
cleanup of the three gaseous diffusion plants.
    In the interests of moving forward with the restructuring 
of the enrichment enterprise, the commercial industry--working 
through ANEC and the Edison Electric Institute, agreed to a 
compromise in the EPACTS that resulted in a special assessment 
of $2.25 billion, based on pre-1992 purchases of enrichment 
services by utilities.
    The DOE had, in fact, estimated that the appropriate share 
of fee utilities was only $1.6 billion. The industry agreed to 
the higher amount, in return for a cap and a total amount to be 
paid, and a provision that the fees could be included in the 
nuclear fuel charges.
    Beginning in Fiscal Year 1993, domestic utilities were 
assessed up to $150 million per year, adjusted for inflation. 
As of October 24 of this year, the utilities have completed 
their contribution to the Fund. The remainder of the annual 
deposit was to have come from the Federal Government 
appropriations, however, based on a report I saw last night, 
the government still owes about $1.6 billion.
    The industry is fully supportive of Congress taking 
appropriate actions to assure that adequate funding is 
available for the safe and environmentally responsible D&D of 
the government-owned GDPs. In this regard, the industry 
recommends that as you systematically discuss S. 2203, you 
consider modifying it, as follows.
    One, extend the collection of D&D Fund contributions from 
the Federal Government to require it to immediately contribute 
the $1.6 billion that is in arrears for the period 1992 through 
2007.
    Two, extend the collection of D&D Fund contributions from 
the Federal Government prospectively, to ensure adequate 
funding of the D&D Fund.
    Three, prohibit the use of D&D Fund contributions for use 
in addressing cleanup requirements created by ongoing 
operations of the GDPs.
    Four, eliminate the reinstatement of the D&D Fund on 
nuclear generators, since they should have no residual 
liability or obligation for the D&D, going forward.
    Five, instruct the DOE to conduct a study on the most 
effective and responsible way to sell future, U.S. Government 
surplus, highly enriched uranium into the commercial market.
    Six, require the DOE to sell its existing supply of surplus 
nuclear fuel into the commercial market in a responsible way.
    Seven, instruct the DOE to enter into contracts for the re-
enrichment of depleted uranium tails, and to sell the resulting 
uranium into the commercial market in a responsible way, and 
finally, grant DOE receipt authority for the sale of the 
surplus nuclear fuels into the market, and use the receipts for 
first, payment to re-enrich depleted tails and deal with that 
waste, two, provided contributions to the GDP D&D fund, if 
required, to make up any deficit, and three, be available for 
use in other DOE priority programs.
    Also, we encourage the DOE to pursue commercial proposals 
for the D&D that provide innovative and risk-sharing from 
imminently qualified organizations.
    Finally, we commend this committee for its active interest 
in pursuing effective D&D of the GDPs, and encourage the 
committee to provide robust oversight to the overall situation, 
including the use of a D&D Fund, the disposition of the surplus 
government inventories, and the actual activities to D&D the 
GDPs.
    Thank you, and I'd be glad to answer any questions.
    [The prepared statement of Mr. Fertel follows:]
Prepared Statement of Marvin S. Fertel, Senior Vice President and Chief 
               Nuclear Officer, Nuclear Energy Institute
    The Nuclear Energy Institute (NEI), on behalf of the nuclear energy 
industry, appreciates the opportunity to provide this testimony for the 
record regarding the Uranium Enrichment Decontamination and 
Decommissioning Fund and on Senate Bill S. 2203, a bill to reauthorize 
the Uranium Enrichment Decontamination and Decommissioning Fund.
    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 paid into the D&D fund since 1993.
    Nuclear energy currently supplies twenty 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 are currently planning 
to submit license applications for potentially 31 new plants that could 
be built in the 2015-2020 time period. Also, one new centrifuge 
enrichment facility is being built in New Mexico, and at least three 
other advanced enrichment technology facilities are being considered 
for deployment in the United States. The deployment of new advanced 
technology enrichment facilities in the United States will both enhance 
our energy security and increase the likelihood that the existing 
gaseous diffusion plants (GDP) will be retired and decommissioned.
    The industry is committed to continuing to be a major contributor 
to meeting both the nation's electricity demand and its environmental 
goals. In this regard, the industry fully supports the need to assure 
that the decontamination and decommissioning of the GDP's is 
accomplished in a safe, environmentally responsible and economically 
efficient manner. The communities that host these facilities should 
expect nothing less from the federal government. The industry position 
is totally consistent with the responsibility each operator of a 
commercially licensed power plant or fuels facility has for providing 
adequate assurance of the protection of the health and safety of the 
public surrounding these facilities during operation and for safely and 
responsibly decommissioning the commercial facilities once they stop 
operating. In this regard, nuclear energy is unique as a source of 
electricity generation in that it internalizes all of its costs in the 
price of electricity. Nuclear reactor facilities and fuel facilities 
must provide dedicated decontamination and decommissioning funds as 
part of the terms of licensing. Nuclear generation pays for its 
regulation through licensing fees, and pays for waste disposal through 
the fee to the U.S. Department of Energy. No other energy source 
provides this explicit, cradle-to-grave full cost accounting.
    From the first days of commercial nuclear generation through the 
mid 1980s, the U.S government was the sole source of enrichment 
services available to domestic utilities that operated nuclear power 
plants. Enrichment services were sold to utilities by the U.S. 
government under long-term, cost recovery contracts. The enrichment was 
provided by the three federally built, owned and operated gaseous 
diffusion plants (Oak Ridge, TN; Paducah, KY; Portsmouth, OH), the same 
plants that were created to and did provide uranium enrichment for the 
Governments post-WWII defense programs. These facilities were 
contaminated as a result of their use for defense programs about 15 
years prior to the provision of any services to the commercial sector. 
As such, the D&D burden would have been the same for the government if 
the facilities were never used to service the commercial sector. 
Furthermore, the contracts signed by electric utilities with the 
federal government for the enrichment services provided by the GDP's 
were required by law to include all costs, which should have included 
any perceived additional D&D cost. Given the above facts, the industry 
would have expected it has no future liability for the D&D of the 
GDP's.
    When the Congress decided to privatize the enrichment enterprise in 
the 1990s, the privatized company was not held responsible for 
decontamination and decommissioning needed as a result of activities 
that took place before privatization. That would remain the 
responsibility of the U.S. government. The government then decided that 
the utilities that had purchased enrichment services from DOE or its 
predecessors should be required to contribute to the clean-up, even 
though they should not have had any residual liability for the D&D.
    The Energy Policy Act of 1992 created the Uranium Enrichment 
Decontamination & Decommissioning Fund (D&D Fund). The D&D Fund, 
managed by DOE, supports clean-up at the three government-owned gaseous 
diffusion plants. The D&D Fund also supports a reimbursement program 
for clean-up of uranium and thorium processing sites that sold their 
products to the US government. The utilities maintained that the prices 
paid for enrichment services prior to privatization of the government's 
enrichment services had taken the cost of D&D into account, so the 
assessment in the EPACT was not justified. Further, the enrichment 
facilities were created for national security purposes and would have 
required D&D regardless of whether any enrichment was sold for civilian 
use. In the interest of moving forward with the restructuring of the 
enrichment enterprise, the commercial industry, working through the 
American Nuclear Energy Council and the Edison Electric Institute, 
ultimately agreed to a compromise in the EPACT that resulted in a 
special assessment of $2.25 billion based on pre-1992 purchases of U.S. 
government enrichment services by domestic utilities. The DOE had in 
fact estimated that an appropriate share for the utilities was $1.6 
billion. The industry agreed to the higher amount in return for a cap 
on the total amount to be paid and a provision that the charges could 
be included in the nuclear fuel charges.
    Beginning in Fiscal Year 1993, domestic utilities were assessed up 
to $150 million per year, adjusted for inflation, for 15 years based on 
their historic purchases of uranium enrichment services from the 
federal government, prior to the privatization of the enrichment 
enterprise. The EPACT language specifically provided for termination of 
the assessment against utilities after the earlier of 1) 15 years after 
October 24, 1992 or 2) the collection of $2,250,000,000 adjusted for 
inflation. Currently, based on an industry estimate, the fund has 
accumulated over $2.5 billion from the industry and the 15 year time 
period has expired on October 24, 2007. Therefore, the utilities have 
completed their contribution to the Fund, as specified by the law. The 
remainder of the annual deposit was to come from federal government 
appropriations. However, based on the best information available, the 
government still has not provided its full share.
    Turning now specifically to S.2203, the ``Uranium Enrichment 
Decontamination and Decommissioning Fund Reauthorization Act of 2007.'' 
The industry is fully supportive of Congress taking appropriate action 
to assure that adequate funding is available for the safe and 
environmentally responsible D&D of the government owned GDP's. In this 
regard, the industry recommends that S.2203 be modified as follows:

          (1) Extend the collection of D&D fund contributions from the 
        federal government to require it to immediately contribute all 
        money that is in arrears for the period 1992-2007.
          (2) Extend the collection of D&D fund contributions from the 
        federal government prospectively to ensure adequate funding of 
        the D&D fund.
          (3) Prohibit the use of D&D fund contributions for use in 
        addressing cleanup requirements created by ongoing operations 
        of the GDP's.
          (4) Eliminate the reinstatement of the D&D fee on nuclear 
        generators, since they should have no residual liability or 
        obligation for the D&D.
          (5) Instruct the DOE to conduct a study on the most effective 
        way to sell future U.S. government surplus highly enriched 
        uranium (HEU) into the commercial market in the future, 
        particularly given the end of the U.S.-Russian HEU Agreement in 
        2013.
          (6) Require the DOE to sell its existing supply of surplus 
        nuclear fuel into the commercial market in a responsible way.
          (7) Instruct the DOE to enter into contracts for the re-
        enrichment of depleted uranium tails and to sell the resulting 
        uranium into the commercial market in a responsible way.
          (8) Grant DOE receipt authority for the sale of surplus 
        nuclear fuel into the commercial market and use the receipts 
        for: (1) payment to re-enrich depleted uranium tails; (2) 
        contributions to the GDP-D&D fund, if required to make up 
        deficits; and (3) if available for use on DOE priority 
        programs.

    With respect to the sale of uranium that could be generated by re-
enrichment of the substantial quantities of depleted uranium now stored 
at DOE sites, this approach is most effective if implemented in the 
near term rather than being studied for a year. Currently, the nuclear 
energy industry is expanding throughout the world and several 
applications for new nuclear plants have been submitted to the U.S. 
Nuclear Regulatory Commission. This resurgence of interest in nuclear 
power combined with the draw down on nuclear fuel inventory has 
resulted in considerable tightening of the nuclear fuel market. This 
has been most notably in the uranium market. Pursuing this activity in 
the near-term would both address the issue of disposing of the existing 
tails, by turning them into an asset, and would also allow the 
government to sell them into a market that is seeing its highest prices 
in decades.
    Another significant consideration should be to ensure the effective 
and responsible management of the D&D efforts. Money in the D&D fund 
should be designated for D&D efforts only, and should not be available 
for diversion to unrelated projects. The D&D of the gaseous diffusion 
plants will be ongoing for several decades and the Fund has the 
potential for considerable interest earnings if it is appropriately set 
aside. Currently, our understanding is, the fund is being accessed for 
remediation of events which occur during the existing operation. The 
rational is that the spills would need to be remediated during the 
decommissioning phase. Events which occur doing current operations 
should be remediated out of current operating funds. Additionally, 
areas which are remediated through the use of the funds should then be 
excluded from any additional radioactive material involvement. If this 
is not the case the area will be recontaminated and require additional 
draw down of the fund to remediate again. Also, we encourage the DOE to 
pursue commercial proposals for the D&D that provide innovative and 
risk-sharing approaches, from imminently qualified organizations.
    Finally, we commend this Committee for its active interest in 
pursuing effective D&D of the GDP's and encourage the Committee to 
provide robust oversight to the overall situation, including the use of 
the D&D funds, the disposition of surplus government inventories and 
the actual activities to D&D the GDP's.
    NEI appreciates the opportunity to address the subcommittee and 
would be happy to answer any questions you may have.

    Senator Tester. Thank you very much, Mr. Fertel.
    Mr. Warren.

 STATEMENT OF WESLEY P. WARREN, DIRECTOR OF PROGRAMS, NATURAL 
                   RESOURCES DEFENSE COUNCIL

    Mr. Warren. Thank you, Senator Tester. I would like to 
thank the entire committee for the opportunity to testify 
today, including Senators Domenici, and Senator Bunning.
    My name is Wesley Warren, I'm Director of Programs for the 
Natural Resources Defense Council, an environmental advocacy 
group. I've worked in Washington for about 23 years on 
environmental and energy issues, and I'm a former Associate 
Director for the Office of Management and Budget.
    I read with great interest the DOE report that just came 
out, and I think that that really could be the focus of much of 
our attention today at this hearing.
    In fact, it supersedes a lot of the preliminary analysis 
that we had in my testimony, so I would really like to address 
my oral comments on what the implications of the DOE report 
are.
    I think there's three main implications. One, the DOE 
report acknowledges that cleaning up these facilities is a 
serious problem that needs to be addressed, and it's something 
that the communities and the workers at these facilities 
deserve.
    Two, that the 15-year program that was authorized in Energy 
Policy Act in 1992 had been very successful at starting to 
address these needs, especially the work that's been done at 
the Oak Ridge facility. That a key part to the success, 
including bringing the overall cost estimates down, is the 
substantial money that's being provided, and the stable source 
of money, including the distribution of the cost between the 
beneficiaries of the program in the past, the government and 
the utilities.
    But third of all, the report indicates that much still 
needs to be done. The base case acknowledges an $11 billion 
shortfall, assuming the government makes up its missing 
contribution, which is--and without that, the fund essentially 
goes bankrupt in the year 2020, which will be here before the 
15-year program period of time, that previously the program has 
been underway. So, it's going to be here before you know it.
    Where will that money come from? I think that's the big 
question. The Department of Energy does not have a proposal for 
making up that shortfall--what does that mean? At Oak Ridge are 
we going to cut research programs to pay for cleanup programs? 
Are we going to cut other DOE laboratory work to pay for 
cleanup at Portsmouth? Are we going to reduce DOE defense 
activities to pay for cleanup at Paducah?
    These are very hard choices, and really is where, I think, 
the legislation that we're looking at today, S. 2203, comes in. 
Because it offers a 10-year plan to answer that question, and 
where do we come up with the money, substantial, stable source 
of revenue.
    The legislation authorizes $700 million a year for 10 
years, that's indexed to inflation, as the program has been in 
the past. Leaving inflation out, that's $7 million right there. 
That takes out a big chunk of the missing amount of money, when 
you add interest that the Fund might be generating during that 
period of time, it could make up the entire shortfall.
    But, the key is it's an opportunity for the committee, in 
passing this legislation to really address most of the serious, 
remaining, outstanding shortfall.
    An additional point I would make about the legislation, is 
that it continues this very successful philosophy that was 
embodied in the 1992 Act, which is that the beneficiaries of 
the program in the past, should be the one to share the 
contributions to the Fund. That contribution has been basically 
on a two-to-one ration--that the government got about two-
thirds of the benefits of the program, in terms of the 
enrichment services, private sector got about a third, that was 
the ratio in the Act, and the legislation would continue that 
ratio going forward. We think that this is very fair where the 
taxpayer is concerned.
    The previous witness, by the way, mentioned an estimate 
that the Department of Energy had of $1.6 billion in terms of 
their original obligation. I would like to say that that 
estimate was based on a DOE study from 1987, that said the cost 
of cleanup was only going to be $3 billion, and that it should 
be split 50/50.
    We now know the cost is going to be much more. We're, in 
this legislation, only endorsing a two-to-one ratio, and 
believe that it's an important principle to embrace.
    The last thing that I would mention that's in the 
legislation is a study about depleted tails, which are an asset 
that the government has, with rising uranium prices, that they 
could, perhaps, auction off to the private sector, and realize 
some revenue toward this program.
    If they do, we have two important points that we would 
emphasize. One, that's a government asset, any proceeds that 
are realized should go for the government's contribution, 
including any missing past payments--not for the utility's 
share of the contribution, which we think they should be 
making--and finally, that the government should not be drawn 
back into the uranium enrichment business, which they got out 
of in 1992.
    Thank you very much, I'd be willing to answer any 
questions.
    [The prepared statement of Mr. Warren follows:]
 Prepared Statement of Wesley P. Warren, Director of Programs, Natural 
                       Resources Defense Council
    Good morning Mr. Chairman and Members of the Committee. My name is 
Wesley Warren and I am the Director of Programs for the Natural 
Resources Defense Council (NRDC). NRDC is a not-for-profit 
environmental advocacy organization with over 1 million members and 
activists whose mission is to safeguard the Earth: its people, its 
plants and animals and the natural systems on which all life depends. 
Before joining NRDC, I served as Associate Director for Natural 
Resources, Energy and Science at the Office of Management and Budget 
and the Chief of Staff for the Council on Environmental Quality in the 
White House. I thank the Committee for inviting me to testify today and 
I am here in support of Senator Sherrod Brown's bill, S. 2203, to 
reauthorize the Uranium Enrichment Decontamination and Decommissioning 
Fund.
    S. 2203 solves an important problem in a direct and equitable 
fashion. The legal authority for the Uranium Enrichment Decommissioning 
and Decontamination Fund (D&D Fund) of the Department of Energy (DOE), 
established in the Energy Policy Act of 1992 (hereafter EPACT), expires 
this year and needs to be extended. This extension should apply both to 
the authorization to spend money to cleanup contaminated nuclear sites 
and to the authority to collect contributions from the beneficiaries of 
the program. S. 2203 performs this task in the simplest fashion 
possible, by extending the framework of the current program for ten 
additional years. We urge your support for this important bill.
                               background
    The nuclear weapons program of the DOE has supported the military 
forces of the federal government by producing nuclear material for 
warheads and reactor fuel for the navy. Even before DOE--and its 
predecessor, the Atomic Energy Commission--were created, the government 
for decades has relied on nuclear materials produced from the mining, 
milling and processing of raw uranium at numerous sites across the 
country, and enriched into a usable form at special government plants. 
Starting in 1964 the government's three uranium enrichment plants 
(located at Oak Ridge, Tennessee; Paducah, Kentucky; and Portsmouth, 
Ohio) were put into service enriching uranium for commercial reactor 
fuel at electric utility power plants, subject to a legal requirement 
that the utilities pay the full costs of operating the plants to 
provide that service (section 161v of the Atomic Energy Act).
    This arrangement was highly beneficial to the electric utility 
industry, which was spared the cost of financing, building, and 
operating a completely new enrichment plant, including paying all the 
costs of the eventual cleanup of the plant. However, during the decades 
that this arrangement was in effect and despite the full cost recovery 
requirement in law, no money was set aside by the nuclear utilities to 
pay their fair share of the cost of decommissioning and decontaminating 
the existing three enrichment plants. This situation left the taxpayer 
facing a cleanup effort that was expected to take decades to complete 
and cost billions of dollars.
    EPACT rectified this situation by creating a Decommissioning and 
Decontamination (D&D) Fund that would cleanup old uranium and thorium 
mill tailings sites and the three DOE enrichment plants. The design of 
the D&D Fund and the contributions to it was based on three general 
principles:

   The amount of money going into the Fund should be sufficient 
        to achieve its environmental purpose of cleaning up the 
        contamination at these facilities;
   The taxpayer should not have to pick up all the costs of 
        cleanup, rather, the costs should be split with the other 
        beneficiaries of the program and allocated according to the 
        benefits received; and
   The activities at the three uranium enrichment plants should 
        contribute to the well-being of the local communities, 
        including jobs from the cleanup efforts.

    The cleanup work at the uranium enrichment facilities is far from 
concluded and adherence to these principles is just as necessary and 
relevant today as it was when the Fund was created. In a timely 
fashion, S. 2203 addresses the looming shortfall discussed below.
                         sufficiency of funding
    In an attempt to help evaluate and contain the eventual cost of 
enrichment plant cleanup, the 1992 EPACT mandated a report by the 
National Academy of Science, which was completed in 1996. This study 
made 13 major recommendations for reducing cost, which the DOE has 
generally followed, according to the non-partisan General Accounting 
Office (GAO) in a 2004 review of the program. Estimates in this 
testimony are largely based on NRDC's calculations derived from 
information in this GAO report.
    However, the GAO also concluded that, if the authority to collect 
revenue expires in 2007, then the contributions to the Fund will fall 
short of the amount necessary to finish cleanup activities. More 
specifically GAO's baseline model determined that the Fund would have 
sufficient revenue to reimburse uranium and thorium licensees for 
cleanup at processing sites, but that it would fall short of completing 
work at the three enrichment plants by up to $5.7 billion in 2004 
dollars--which would be about $6.5 billion in 2008 dollars. GAO also 
projects cleanup activities would need to continue at least through 
2044.
    Furthermore, GAO acknowledges that the upper end of this estimate 
could be too low, contingent on the additional cleanup activities that 
may need to be performed, such as long-term groundwater monitoring--
work that could add another estimated $3 billion in costs to the 
project. Indeed, DOE currently lacks comprehensive long-term cleanup 
plans and appropriate cleanup standards for the Paducah and Portsmouth 
plants, and both sites will require long-term stewardship.
    We note for the Committee that the D&D Fund has an existing 
projected balance of $4.4 billion for the end of FY 2007, according to 
the Office of Management and Budget (OMB). However, this net balance is 
not available to offset the $6.5 billion shortfall, since GAO has 
already assumed that the net balance in the Fund will be used to help 
pay for cleanup, so the shortfall that needs to be made up is in 
addition to the existing Fund balance.
                            taxpayer equity
    EPACT provided that both the taxpayers and the utilities that 
benefited from the program would make contributions to the cleanup 
fund, and that those contributions would be allocated in proportion to 
the benefits each had received from the program. Benefits are 
calculated based on a standard unit used to measure enrichment services 
called a Separative Work Unit (SWU). GAO has also historically endorsed 
this principle of ``beneficiary pays'' for revenue collection under the 
program and in its recent July 2004 report. Section 2 of S. 2203 
continues the status quo of this equitable agreement and ensures that 
the states of Ohio, Tennessee, and Kentucky avoid a serious problem.
    Using the original EPACT formula, the overall cap on revenue was 
set at $480 million a year, indexed to inflation, with a subcap on 
utility contributions of $150 million (31.4% of the total), a figure 
also indexed to inflation. Taxpayers paid the difference (68.6%) to 
cover services received by the government and by foreign utilities for 
which there was no certain mechanism by which fees could be collected. 
The utility sector portion was further prorated among individual 
utilities in proportion to the amount of SWU that had been contained in 
fuel shipments that they had received from DOE in the past.
    Since the original passage of the Act, Congress has twice raised 
the overall funding cap somewhat (mainly to authorize additional 
appropriations for a thorium site) while leaving the utility 
contribution the same, potentially shifting more of the relative cost 
of the program to the taxpayer. However, analysis by NRDC indicates 
that actual payments to the Fund have closely approximated the original 
ratio set out in EPACT based on SWU benefits. In the 15-year period 
from FY 1993 to FY 2007, taxpayers seem to have contributed about $5.27 
billion (66.4%) compared to the nuclear utility contribution of $2.66 
billion (33.6%), based on an examination of annual budget documents 
from OMB.
    If, as we urge, Congress passes and the President signs S. 2203, 
then the current status quo and an equitable management of long-term 
cleanup liabilities will continue. In short, if S. 2203 is adopted into 
law, both the taxpayer and the utility contribution, indexed to 
inflation, will extend for ten years and the overall cap on revenue 
will be set in proportion to the original benefits-based ratio 
contained in EPACT. Following the formula set out in EPACT, S. 2203 
sets the overall authorization cap on contributions to the Fund in FY 
2008 at about $700 million, with the utility contribution set at $220 
million. As has been done in the past, S. 2203 directs that both caps 
be indexed to inflation.
                     well-being of the communities
    Title X of the 1992 EPACT was meant to help serve the interests of 
the local communities affected by mill tailings sites and enrichment 
plants in several ways, and Section 2 and Section 3 of S. 2203 
continues that work. For all of the affected communities there was a 
concern that greater certainty be brought to the process for cleaning 
up contaminated materials. In addition to the potential public health 
and environmental benefits of greater certainty, there are also 
technical and economic benefits to having a sure and predictable way of 
maintaining a trained and experience workforce in cleanup operations.
    Section 2 of S. 2203 ensures both sufficiency and certainty in 
future funding by extending revenue contributions to the D&D Fund for 
10 years. In 2004 GAO recommended a three-year extension in the program 
while DOE considered longer-term issues. However, that period of time 
has passed and the authority for the entire cleanup expires this year. 
S. 2203 addresses the issue of funding sufficiency by providing enough 
time to ensure the collection of sufficient revenues to pay for the 
projected shortfall.\1\ Meanwhile, S. 2203 presumes vigorous ongoing 
oversight to DOE's cleanup activities at these sites.
---------------------------------------------------------------------------
    \1\ The sufficiency of Section 2 of S. 2203 can be calculated by 
dividing the $6.5 billion estimated shortfall by the proposed $700 
million a year in collections for a total period of 9.3 years, rounded 
up to an even 10 years for the reauthorization period.
---------------------------------------------------------------------------
    In continuing the original framework of the EPACT D&D program, S. 
2203 serves the parallel interest Congress had in reforming the 
longstanding DOE program that provided uranium enrichment services to 
the private sector. For decades, in addition to failing to collect 
money to pay for cleanup costs, DOE had undercharged nuclear utilities 
billions of dollars for the enrichment services that it provided to 
them, with some of the past GAO estimates of the unrecovered costs 
running between $3 billion and $11 billion. At the same time growing 
international competition in the uranium enrichment market had limited 
the ability of DOE to hike its charges to collect these past debts. To 
help address these matters, EPACT authorized the eventual privatization 
of the DOE program into the United States Enrichment Corporation 
(USEC).
    Importantly, I would like to raise one final issue concerning S. 
2203 and the potential impact of the cleanup fee on nuclear utilities 
and their decisions regarding whether to purchase enrichment services 
from USEC in the future. Since the fee is based on historical purchases 
prior to October 24, 1992, there would be no additional fee payments 
associated with present or future utility purchases of enrichment 
services from USEC or any other source. Therefore, the extension of the 
special assessment should have no impact on trade balances or future 
utility decision-making about the use of nuclear power.
    And last, Section 3 of S. 2203 directs the DOE, not later than 1 
year after enactment, to complete a study for the use of proceeds from 
the sale of the product of enriching uranium tailings. This sensible 
provision, which we support, provides both the Administration and the 
Congress an opportunity to assess whether additional enrichment of 
uranium tailings may be used to supplement the taxpayer contribution to 
the cleanup fund and to provide assistance to local government and 
community reuse organizations. We also believe any final decision to 
sell off this government asset: (1) should use the proceeds to help pay 
for obligations that would otherwise be borne by taxpayers and not to 
relieve the industry of its contribution to cleanup; (2) should not 
draw the government back into the uranium enrichment business but 
should leave those activities to the private sector; and (3) should 
comply with all environmental laws, including the National 
Environmental policy Act.
              response to concerns of the nuclear industry
    At the present time and in the past, nuclear utilities have opposed 
paying into the cleanup fund a special assessment based on the concept 
of ``beneficiaries pay.'' They have generally offered two objections--
in their view the fee costs them too much and they have already paid 
their share. However, both of these arguments are flawed and so I will 
briefly examine each in turn to explain.
    First, the special assessment is a minor expense to the utility 
industry but makes a major contribution to the DOE cleanup fund. For 
the past 15 years, the special assessment has provided nearly a third 
of the cleanup expenses of the D&D Fund, helping to ensure the 
program's solvency and the adequacy of environmental cleanup. Without 
this stream of revenue the overall success of the program, which until 
now has run fairly smoothly, would be brought seriously into doubt.
    By contrast the size of the contribution from utilities to the Fund 
is so small in comparison to their annual revenue that it is almost 
difficult to calculate precisely what it equals. In 2005 (the last year 
for which there are consistent data for these calculations) total 
utility revenue was $298 billion, of which the special assessment was 
less than seven-tenths of one percent of the total. Another way to 
think about this is to consider the overall increase in residential 
electricity prices including inflation in the 15 years between 1991 and 
2006. That increase was 29.35% including the special assessment; but an 
almost indistinguishable 29.29% without it. Finally, one could consider 
that the amount of the fee paid monthly by the average residential 
customer is just over a nickel (5.6 cents), or less than the cost of a 
stamp for the average household.
    Second, the special assessment is a fair share for the utilities to 
pay and is fair to the taxpayer too. The special assessment is 
allocated based on the relative proportion of enrichment services 
received by the two main beneficiaries of the program, nuclear 
utilities and the government. Utilities have argued in the past that 
they should have to pay little or nothing to this program because the 
plants were already contaminated by defense use before they started 
receiving services, and so they should only have to pay at most 
incremental expenses. However, this position is contrary to the history 
of the program and a basic sense of fairness to those taxpayers who did 
not benefit from the nuclear power that was produced in the past.
    During the 1960s when the government made fuel services available 
to electric utilities the question was raised about what to charge for 
enrichment services and how to treat the fixed overhead costs of the 
plants that were already built. The decision was made then that 
utilities should not only pay for the variable costs of providing those 
services but also a share of the fixed costs, such as plant 
depreciation. This policy position was embodied in the famed ``Conway'' 
formula, and was adopted by the Atomic Energy Commission and supported 
by Congress in part because of a desire even then to pave the way for 
privatizing these plants by charging full production prices for their 
services.
    After it was realized that DOE had failed to collect sufficient 
revenue to pay for the cost of cleanup of the enrichment plants, 
Congress made the decision then in EPACT to allocate the costs in 
proportion to the services provided to these two sets of beneficiaries. 
DOE testified in 1991 in support of the principle that the costs of 
cleanup should be divided between government and civilian beneficiaries 
based on past purchases of SWU. The next year, the first proposal for a 
fee on utilities to collect their share of the allocation was included 
in the budget of President George H.W. Bush.
    Nuclear utilities have maintained that they agreed to a 15-year, 
$2.25 billion payment and that they have now paid their share. However, 
the conference report for EPACT records no such agreement. Indeed if 
Congress had meant to strike such a deal, it would have extended the 
authorization for the government's share for an additional 25 years, 
the period of time estimated in 1992 that it would take to complete 
cleanup. In addition, the behavior of nuclear utilities since 1992 
belies that there was any such deal to which they were a party, since 
they have repeatedly brought (and lost) lawsuits to keep from paying 
any of the special assessment.
    In any case, since no past Congress can in fact bind the actions of 
a future Congress, the real question is, what is the fair decision to 
make? The need for cleanup at DOE's cleanup plants continues to be a 
pressing need to protect the environment and the nearby communities. If 
utilities do not pay their share of the costs, then all of the 
remaining expenses will fall on the taxpayer. While it may be true that 
all ratepayers of nuclear utilities are also taxpayers, it is not true 
that all taxpayers get their electricity from nuclear power. Even now 
19 states get no power from nuclear power. It is quite simply not fair 
for the taxpayers who did not benefit from the below-cost power to 
shoulder all of the remaining cost of that cleanup.
                               conclusion
    S. 2203 addresses the serious issues raised by the expiring 
authorities for the DOE's uranium cleanup D&D Fund by reauthorizing the 
Fund and ensuring the sufficiency of environmental funding, taxpayer 
protection, and community well being. We strongly urge your support for 
it.
    Thank you for allowing me to testify and I look forward to your 
questions.


    Senator Tester. Thank you, Mr. Warren.
    Mr. Longenecker.

  STATEMENT OF JOHN R. LONGENECKER, LONGENECKER & ASSOCIATES, 
                      INC., LAS VEGAS, NV

    Mr. Longenecker. Thank you, Senator Tester, Senator 
Domenici, Senator Bunning, it's a pleasure to be here today.
    A little more than 20 years ago when I first testified 
before the Senate on the subject of uranium enrichment, at that 
time, I was the Deputy Assistant Secretary of DOE, for Uranium 
Enrichment, so this is a subject that I know quite well.
    As such, I believe strongly that the issue of how to 
decontaminate and decommission the existing GDPs is really, 
vitally important. Certainly important to everybody who lives 
around those three GDP sites, but it's also vitally important 
to the nuclear industry, the electric rate-payers, and the 
Federal Government.
    Now, there's no question that the GDP sites--all three of 
them--must be cleaned up. DOE is working to define the how, you 
know, the specific scenario under which they can be cleaned up. 
However there are significant public policy questions regarding 
how to pay for the GDP D&D.
    I strongly believe that the U.S. Government should be 
liable for all the future cost of GDP cleanup, just as they 
were prior to the enactment of this provision in 1992.
    The U.S. Government can secure all the funds required for 
GDP cleanup by selling, in a controlled manner, its excess 
inventories of highly enriched uranium and other forms of 
uranium, including high-assay tails.
    Now, this highly enriched uranium and these other forms of 
uranium were generated by the gaseous diffusion plants as part 
of the Nation's defense effort under programs that were paid 
for by all of the taxpayers. It seems a reasonable public 
policy to recover the value of this material, and to use the 
proceeds for a range of DOE and other programs that have broad 
public benefit, such as GDP cleanup, to provide supplies, 
security for new nuclear power plants in the United States, as 
a key part of U.S. non-proliferation policy, and to help 
stabilize future nuclear fuel prices.
    This approach is particularly attractive, given the recent 
increase in uranium and enrichment prices.
    Now, there's a strong factual base that U.S. utilities were 
not responsible for the radioactive contamination of these 
plants. Essentially, all of the contamination at the GDP sites 
occurred during the first 15 to 20 years of their operation, 
when they operated solely to produce highly enriched uranium 
for the military.
    When these plants were taken over for commercial enrichment 
in 1969, 15 to 20 years after each of them was built, they were 
fully and totally contaminated.
    The three GDPs, when they were operated for commercial 
enrichment, which was my responsibility when I was in the 
Department of Energy, established its pricing structure to 
include all program costs, including the eventual D&D of these 
plants.
    Now USECs GDP lease, which was approved by DOE in 1993, 1 
year after the enactment of this Act, reflects this fact with 
USEC having no residual GDP D&D liability for either Portsmouth 
or Paducah. As a commercial enterprise, USEC has the liability 
for any depleted uranium and other waste that it generates 
after 1993, and for any new facilities that it constructs, like 
the advanced centrifuge plant. Seems to me, that this 
definition of liability is fair and equitable and also should 
extend, in the future, to the U.S. utilities that purchased 
enrichment services produced by the GDPs in the past.
    Mr. Chairman, in summary I believe that the U.S. Government 
should be liable for all future costs of GDP cleanup, as it was 
prior to the enactment of this provision in 1992. U.S. utility 
payments over the past 15 years of approximately $2.66 billion 
more than satisfy the desire for industry to make an equitable 
contribution to GDP cleanup in the public interest. The U.S. 
Government can secure all of the funds required for GDP cleanup 
by selling its excess inventories in a controlled manner of 
highly enriched uranium and other forms of uranium. These 
inventories, again, were purchased by the government using 
taxpayer money are now excess to need, and certainly from a 
public policy point of view, it seems to me, selling them to 
clean up the GDPs just makes good sense.
    The quantities to be sold, however, the timing and the 
sales process have got to be carefully developed with strong 
industry participation, to assure that a healthy domestic 
nuclear fuel cycle industry continues in the future.
    Now, the fact is the industry knows these excess 
inventories are there, and they're concerned that the 
government is going to sell them someday, and they want the 
certainty of having a firm plan as to when they'll be sold, at 
what rate, and by whom. So, developing that plan would provide 
certainty to USEC and to everybody else who wants, who aspires 
to be in this business in the future in the United States.
    It's troubling to me, 25 years later that today we're more 
highly dependent in this country on uranium enrichment services 
than we are on crude oil. We actually import more of our 
uranium enrichment services for nuclear fuel than we do crude 
oil. The USEC market share of the world market is substantially 
less, almost half of what it was 20 years ago. So, this 
definition of what we do with these inventories can be a key 
part of rebuilding a viable commercial nuclear fuel cycle 
industry in the United States.
    Thank you for your attention, I'd be pleased to respond to 
any of your questions.
    [The prepared statement of Mr. Longenecker follows:]
 Prepared Statement of John R. Longenecker, Longenecker & Associates, 
                          Inc., Las Vegas, NV
    Mr. Chairman, thank you for the opportunity to appear today to 
present my views on the Uranium Enrichment D&D Fund. The United States 
has an overarching need for a comprehensive strategy for how to 
maintain viable, competitive nuclear fuel cycle companies in this 
country for the decades ahead. Addressing nuclear fuel cycle issues is 
a key element in allowing the US to continue to rely on nuclear power 
in the future. Over the past several years DOE has been working to put 
in place the policy and technology base for a sustainable, competitive 
domestic nuclear fuel industry for the future.
    A healthy US uranium enrichment business is a key part of a 
sustainable domestic nuclear fuel industry. It's troubling that today 
the US imports a higher percentage of its uranium enrichment services 
for nuclear fuel than it does crude oil. However, it's gratifying to 
see that there are multiple efforts underway to construct new uranium 
enrichment capacity in the US.
    The issue of how to decommission and decontaminate the existing 
GDPs is also vitally important. GDP D&D is an important issue to those 
who reside in the vicinity of the three US GDP sites, the nuclear 
industry, electric ratepayers, and the federal government.
    There is no question that the GDPs sites must be remediated, and 
DOE is working to define the most effective approach to that task. 
However, there are significant public policy questions regarding how to 
pay for the GDP D&D.
    I strongly believe that the US government should be liable for all 
future costs of GDP D&D, just as they were prior to the enactment of 
this provision in 1992. The US government can secure all of the funds 
required for GDP D&D by selling in a controlled manner its excess 
inventories of HEU and other forms of uranium, including high assay 
tails, material previously considered as waste.
    US HEU was generated by the GDPs as part of the nation's defense 
effort under programs that were paid for by all taxpayers. It seems 
reasonable public policy to recover the value of this material, and to 
use the proceeds for a range of DOE and other programs that have broad 
public benefit, such as GDP D&D.
    There is a strong factual base that US utilities were not 
responsible for the radioactive contamination of the gaseous diffusion 
plants. Essentially all of the contamination at the three GDP sites 
occurred during the first 15-20 years of operation, during which time 
these plants were devoted solely to generating enriched uranium for US 
military needs. When the GDPs began operating for commercial fuel 
enrichment in the late 1960's, the three GDPs were already highly 
contaminated. When DOE managed the GDPs for commercial enrichment 
operations, its pricing structure was developed to include all program 
costs, including the eventual D&D of the GDPs.
    USEC's GDP lease, that was approved in 1993, reflects this fact, 
with USEC having no GDP D&D liability for either the Portsmouth or 
Paducah GDPs. As a commercial enterprise, USEC has the liability for 
any depleted uranium that it generates, and for new facilities that it 
constructs like the Advanced Centrifuge Plant. It seems to me that this 
definition of D&D liability is fair and equitable, and also should 
extend to the US utilities that purchased enrichment services produced 
by the GDPs in the past.
    Despite this, over the past 15 years, utilities were assessed more 
than $2.5 billion for GDP D&D, as well as uranium and thorium mill 
tailing remediation costs.
    Extension of the current tax on utilities that operate nuclear 
power plants to fund future D&D activities could place added pressures 
on USEC and other evolving US uranium enrichment businesses that are 
already under strong competitive pressures.
    Taxes like this lead utilities to be concerned about future 
assessments to generate funds for US government programs, and are just 
one additional factor encouraging US utilities to buy enrichment 
services from foreign suppliers. Since this provision was enacted in 
1992, USEC's share of the US SWU market has decreased from more than 
80% to about 45% in 2006. Even more striking, this reduction in market 
share occurred in the face of trade sanctions imposed against foreign 
competitors.
    Also, of the SWU delivered to US utilities today, an overwhelming 
majority is obtained by USEC from Russia under the Megatons to 
Megawatts program, which downblends weapons grade uranium for 
commercial use. The Russian government agreed to downblend 500 MT of 
its HEU inventories in 1993 and this program has had significant non 
proliferation benefits.
    But, the US now is very dependent on these supplies from Russia, 
and deliveries are scheduled to terminate in six years.
    Based on the success of the Russian HEU downblending program, it 
seems that there is an obvious and equitable source for funding future 
GDP D&D--namely, the downblending and sale in a controlled manner of a 
portion of the excess inventories of US HEU and other forms of uranium. 
This HEU was produced by the US GDPs, and can be used to fund their 
clean up, to provide supply security for new nuclear power plants in 
the US, as a key part of US non proliferation policy, and to help 
stabilize future nuclear fuel prices.. This approach is particularly 
attractive given the increase in uranium and enrichment prices.
    The quantities to be sold, the timing, and the sales process must 
be carefully developed to assure that a healthy domestic nuclear fuel 
cycle industry continues in the future. Since the existence of large 
government inventories of HEU and other forms of uranium will always be 
a concern impacting future investment in the commercial nuclear fuel 
cycle industry, a firm disposition plan and schedule are essential.
                                summary
    In summary, I believe that the US government should be liable for 
all future costs of GDP D&D as it was prior to the enactment of this 
provision in 1992. US utility payments over the past 15 years of 
approximately $2.66 billion more than satisfy the desire for industry 
to make an equitable contribution to GDP D&D in the public interest.
    The US government can secure all of the funds required for GDP D&D 
by selling in a controlled manner its excess inventories of HEU and 
other forms of uranium. US HEU was generated by the GDPs as part of the 
nation's defense effort, and was paid for by all taxpayers. Its seems 
reasonable public policy to recover the value of this material and to 
use the proceeds for a range of programs that have broad public 
benefit.
    Thank you for your attention.

    Senator Tester. I want to thank you for your testimony, 
too, and I want to thank the entire panel for their conciseness 
in their remarks.
    Thank you much, we're going to start with Senator Domenici.
    Senator Domenici. Let me say to you, Mr. Longenecker, I 
hope that record is brief, but I hope your description of who 
you are adequately depicts you as an expert in this field.
    Now, you've been doing these kinds of things for an awful 
long time, at a very high level of participation, and so it is 
good to hear from you because you kind of were there when it 
happened. Even though you're not 100 years old, you still look 
pretty good.
    Mr. Longenecker. It could prove that working in the nuclear 
industry has positive health effects.
    [Laughter.]
    Senator Domenici. That's true, there's no question about 
it. Some people say that's true.
    Let's see, I had one question that I thought was very 
interesting. You were talking about, Mr. Longenecker, in the 
closing remarks about U.S. dependency--if we are going to go 
have a renaissance and start building nuclear power plants, and 
it looks like we are unless something or someone throws a 
wrench into the wheel--it seems to me that the question of 
where we're going to get our enriched uranium is very 
important.
    I think it's absolutely important that we further clarify 
your statement, because there is a new enrichment plant that's 
up and going, and belongs to LES. It's going to be a major 
plant, and it's in New Mexico, so I know more about it than 
normal. It's a twin to the one that they have in Europe, which 
we've seen.
    Now, AREVA has just announced that they are going to build 
a uranium enrichment plant in the United States, so that's two 
that we didn't have when we started preparing for these 
hearings. Those two will help the shortfall, will they it not, 
that you have been talking about?
    Mr. Longenecker. They will, indeed, and I think it's, 
again, it's gratifying that we have those three companies 
interested in building new capacity in the United States which 
will provide supply security, but again the issue that I 
mentioned, the existence of the government inventories, as well 
as responding to Senator Bunning's question as to whether the 
government is going to place a surcharge on enriched uranium 
services produced in the United States is very important to 
whether they continue those plants.
    Because if I were a U.S. utility, when I was running the 
business, this happened all the time. If we raised the price or 
placed a surcharge on them, they just got it abroad. Today 
we're getting, you know, 80 percent of our enrichment services 
generated overseas, and there is excess capacity in other 
countries, not in this country--but they do have an option as 
to why they buy.
    So to create the market for those, it's going to be very 
important that we set good public policy, and a level playing 
field.
    Senator Domenici. You bet. I mean those who are looking at 
the United States don't expect a surcharge at this point, they 
don't expect the excess or assets that are held by the 
Department, and they don't expect them to be thrown on the 
market, willy-nilly. At least they're making business judgments 
and assume the government will make business judgments as they 
dispose of their assets.
    I think that it would be important to find out what the 
Department intends in that regard, and I'm going to ask the 
Chairman, and then I'm finished here, if we could come up with 
a joint letter that him and I would sign, asking the Department 
if they have any plans with reference to the disposition of 
tails and the other things and also remind them that if they 
are going to, they ought to do that in a manner that provides a 
calmness to the market so everybody can expect a game plan that 
is participatory of what the private sector's planning, not 
just arbitrarily coming up with how they're going to dispose.
    We've heard that they have a lot of assets that might pay 
part of this, a big part of their bill here. You weren't in 
when that happened, but I don't think we know enough about it, 
about what they plan, and I think we should now try to compose 
a letter and see if it makes sense.
    With that, I just want to say to all of you, thank you very 
much.
    Mr. Warren, knowing who you represent and what your main 
interest is, I can say I was very interested in your testimony. 
We don't agree on certain things, but I thought it surely 
indicated that you know what you're talking about, so I thank 
you for that. You're not coming too off the wall like some used 
to 15 years ago, this is very good.
    Mr. Warren. I appreciate that.
    Senator Domenici. Thank you.
    Thank you, Mr. Chairman.
    The Chairman [presiding]. Senator Bunning.
    Senator Bunning. Thank you very much.
    There are so many questions because if you look at the 
agreement that was struck in 1992, and the sharing of the 
burden between the industry and the Federal Government for the 
last 15 years, you wonder why--as Mr. Warren said--there's not 
going to be a continued sharing, realizing that we are in 
competition worldwide for enriched uranium.
    I have a son who works at a nuclear power plant, who's a 
nuclear power plant operator, and they buy their enriched 
uranium not only from Paducah, but from other places. So if 
there is a surcharge put on domestic enriched uranium, we have 
real problem. Because, I am sure if I were a commercial 
operator of the nuclear power plant, like Excelon or someone 
like that, and enriched uranium from Europe was cheaper than it 
was from Paducah, I would be buying it from the best place 
possible.
    So, there's a balance we have to strike in this new 
agreement that we're trying to come to, where we're seeking 
information, and the reason we're seeking information is that 
this thing has worked, and there's a shortfall. Because, I 
guarantee you, none of us are going to be alive when--and I 
don't care how young you are when this thing's finished. If you 
go to Paducah, or go to Portsmouth and look at--including you, 
Senator Tester, and I know you're younger than the rest of us--
if you look at the contamination that occurred prior to 
commercial uranium being sold on the market in 1992 when the 
commercial agreement was reached, contamination occurred 30, 40 
years prior to that, when we started building nuclear bombs for 
our products for our military.
    So, we're trying to determine who's responsible. Who owns 
the tails? The DOE does. So, they should use some of that 
money, in my opinion, to pay for the cleanup of what they 
contaminated during the use of those plants, prior to this 
agreement.
    But, we've got bills going in the House that say the 
operators, USEC, should get some of that money. Yes, they 
should get money for processing it, but not for the ownership 
of those tails. The DOE owns those.
    My question to all of you is, what portion--or should all 
of those--tails be sold and owned by the DOE, should that money 
go into the funding to be used for the cleanup? I want to ask 
the GAO, because they've been here longer than all of us.
    Not you, specifically----
    [Laughter.]
    Senator Domenici. The organization.
    Senator Bunning. Not you----
    Ms. Nazzaro. Not me, personally.
    [Laughter.]
    Senator Bunning. Not you, but your capacity as an entity. 
So, can you give us a handle on that?
    Ms. Nazzaro. Senator, we haven't looked at that issue. What 
you'd want to look at is, how much is there, and what is it 
worth? What can the market really bear, because, I mean, you 
can't dump it all into the market immediately. We'd want to be 
able to do some analysis to figure out, whether that makes 
sense.
    Senator Bunning. The DOE----
    Ms. Nazzaro. It sounds like from a conceptual point of 
view, to be able to sell off some of that to help offset costs, 
certainly makes sense. How much? I couldn't tell you just off 
the top of my head.
    Senator Bunning. But that would be a source of revenue that 
is not anticipated in any agreements that we now have?
    Ms. Nazzaro. Not from what I've seen, no.
    Mr. Fertel. Senator, that's clearly what we're proposing be 
looked at. I think John Longenecker said it the right way--you 
don't want to just dump material on the market, because then 
you hurt the uranium market in this country, you can hurt the 
enrichment market if you dump other things. So, it's a matter 
of selling it smart. One of those things that you've said, and 
the Secretary said, is this is a long-term project that goes 
out to at least 2040. You can do it smart, and you can generate 
the revenue.
    From a commercial standpoint, we have paid--we think--our 
obligation, not only to the GDPs, but we do it at our 
facilities right now, we put aside decommissioning funds----
    Senator Bunning. For your local facilities.
    Mr. Fertel. Our understanding, and Mr. Longenecker 
mentioned in his testimony was that the price of the product 
that the companies bought included whatever D&D cost----
    Senator Bunning. It was supposed to.
    Mr. Fertel. It was supposed to.
    Senator Bunning. Sometimes, in competition, it did not.
    Mr. Fertel. I know, I know in the world of government from 
we know from the waste fund, we don't always have a contract 
work the same way we expect it works in the commercial world, 
but usually when you sign a contract and you pay your part, you 
get your product. They don't come back later and say, ``Gee, we 
forgot something.''
    Senator Bunning. ``By the way, you owe us----''
    Mr. Fertel. So, we honestly have always met our obligation 
when we believe we have one. If we don't think we have one, we 
look for another way to generate revenue for you, and I think 
again, John Longenecker offered up a good point--the GDPs 
produce the excess HEU that we have, it produced the tails that 
we have with taxpayer money. Figuring out how to use that 
surplus HEU, and use these tails as an asset, and put them in 
the market in a way that doesn't disrupt the market--and you 
have a lot of time to do it--will be a major revenue source 
that could be used to make up deficits on the GDP D&D Fund.
    Senator Bunning. If the Department of Energy would just 
come forward and say, ``Yes, we own these things,'' it would 
really be a big step forward. Because I know there's going to 
be some things put in the House that say that the plant 
operators who have produced these tails in the production of 
enriched uranium have a legitimate interest in owning them. Or, 
the communities, for that matter, would like to see some of 
that money come back into the communities.
    For the cleanup of those plants, I agree, that that may be 
the use of it.
    Thank you very much for your--go ahead, Mr. Warren.
    Mr. Warren. I'm sorry, Senator, if I could just address a 
couple of issues briefly.
    The 1992 Act did several balancing acts. One was what 
should the ratio between the beneficiaries be, and it was based 
on services received. But another was this issue of not wanting 
to injure the trade position of the domestic enrichment 
industry.
    So, I want to dispel what, I think, might be a 
misconception, which is that the portion which is collected 
from the utility sector is not done as a surcharge on 
enrichment services. That the 1992 Act, in effect, said that 
for the utilities that received past services, this is your 
share of the total, we're going to send you a bill. They 
basically sent a bill.
    So now it's free to USEC and other domestic producers to go 
out and produce their product at a competitive market rate, and 
without prejudice toward utilities buying domestically.
    So, I just wanted to make it clear that if this 
legislation, 2203, extends that special assessment, it would 
not be in the form of a surcharge on enrichment services.
    Mr. Longenecker. Can I just address that? Because, if I'm a 
utility, and you're placing a $200 to $300 million surcharge 
retroactively if I buy domestically, and I have no surcharge if 
I buy foreign, I think I'd continue to buy foreign, basically 
to avoid the risk that I could get a surcharge like this in the 
future.
    Senator Bunning, on the depleted uranium, I think the key 
there, because you raise a very, very good point--if we don't 
re-enrich those tails, and there's several billion dollars out 
of residual uranium value there in today's prices, the plan 
would be to dispose of them as waste.
    So, we have something, again, paid for from taxpayer 
dollars that we can either pay to dispose of as waste in the 
DUF6 plants, or have someone re-enrich and get back with the 
taxpayers, and it can be used for GDP D&D or any other thing 
that Congress decides.
    But there is several billion dollars of residual value 
there, that can be obtained by finding an economic enrichment 
source to strip them and get that uranium.
    It does seem logical to me that since they were generated 
by the GDPs, that you would devote those revenues to GDP 
cleanup. But that's a decision for Congress to make.
    Senator Bunning. Thank you very much.
    Senator Tester. Ms. Nazzaro, I've got a question, in 
regards to the shortfall in the report that you've mentioned. I 
guess the question is, when was--I assume there's a previous 
report to this one--it put out? Then, can you tell me the 
correlation between that report, whether there was a potential 
shortfall in it or not, and this report?
    Ms. Nazzaro. Between the DOE reports?
    Senator Tester. I assumed it was----
    Ms. Nazzaro. You're referring to DOE, which did a report in 
2001----
    Senator Tester. That'd be fine. The DOE report is fine, and 
I would assume there was a previous DOE report----
    Ms. Nazzaro. Right. In 2001, DOE did a report.
    Senator Tester. Right.
    Ms. Nazzaro. DOE did not do one in 2004, and they just did 
one now in 2007, which we have not really had time to analyze. 
They would not share the information with us. Committee staff 
did share it with us late yesterday afternoon. We do see that 
there are some date changes, although very modest, and we do 
see some number changes. We would really have to take some time 
to go in and analyze the numbers, verify the accuracy, and look 
at the source of those numbers.
    But, we are concerned that this not be considered even as a 
final plan, because DOE has continued to identify a number of 
uncertainties. For example, one of them has to do with the 
onsite storage issue at Portsmouth and Paducah, which has not 
been resolved with the State.
    So, if onsite storage is not a strategy that's pursued, 
that could add additional money, to the cleanup exercise. So, 
really what DOE is laying out right now still may not be even 
the final numbers of what this is all going to cost.
    Senator Tester. OK.
    Ms. Nazzaro. That was where, in 2004, we were suggesting, 
extend the Fund until 2010, and give DOE time to develop a 
report that would give us that final data. The final report on 
the D&D was supposed to come from DOE in 2007, that was due 
October 2007. So, what we would like to still see, is that they 
develop this report, tell us what it's going to cost, so we can 
make some assumptions, as to how we're going to pay for it.
    Senator Tester. OK, thank you.
    Mr. Warren, as far as re-enrichment of the leftover 
material, do you support doing that to defray costs? I thought 
you indicated that in your comments, but I just wanted to make 
sure.
    Mr. Warren. What we support is the approach in this 
legislation which is to have the Department do a study of it. 
What we want to emphasize, is that that study should be guided 
by certain principles. One would be that any revenue that might 
be realized from this process--which we believe would take in 
the form of some kind of controlled auction of the depleted 
tails to the private sector, that you want to maximize the 
return to the taxpayer, you want to get fair market value for 
it, and then you want to take that money toward the taxpayer's 
obligations, not toward the utility sector's obligations.
    The second principle is that you don't want to get the 
government back in the uranium enrichment business. It was a 
long journey to get us where we are now, where that's a private 
sector activity, and that's what's appropriate. So that would 
be the second principle.
    Then, of course, compliance with all environmental laws.
    Senator Tester. All right, so do you support the re-
enrichment of that material?
    Mr. Warren. We're open to that. We think that, depending on 
what the study comes back and recommends, we'll have a better-
informed decision, but we think it's well worth looking into. 
It could provide a valuable contribution toward the 
government's share.
    Senator Tester. OK.
    Ms. Nazzaro. Senator.
    Senator Tester. Yes.
    Ms. Nazzaro. It's my understanding that the committee has 
asked GAO to look into that. Apparently, we're looking at 
whether advocating it is selling the HEU into the marketplace, 
or re-enriching leftover high SA material from prior enrichment 
operations. It's my understanding that it's too preliminary for 
me to give you any results at this time, but early Spring, we 
should be able to brief the committee on that study.
    Senator Tester. That would be good, that would very good.
    Mr. Longenecker, you had said in your statement that the 
contamination of the plants that occurred prior to 1969, which 
you had said was only used for military purposes at that point 
in time. The plants were--I believe you said fully contaminated 
by the time the contracts were entered into with the utilities.
    Mr. Longenecker. That's correct.
    Senator Tester. Could you explain that a little bit, and 
really, what I'm looking for is that statement indicates to me 
that the utilities have no liability whatsoever, because it was 
fully contaminated. I guess, if you started at ground zero, and 
I don't know a lot about uranium or atomic power or whatever--
but if you started at ground zero, would there be contamination 
that occurs simply by the enrichment. Do you see what I'm 
saying?
    Mr. Longenecker. When the plants were built, what you had 
was, basically, clean steel, nickel and other alloys sitting 
there. When the military began using them, first at Oak Ridge 
to generate highly enriched uranium for the bomb, we had all 
types of radioactive and non-radioactive components to those, 
and operating them, particularly the major cost of cleaning up 
those plants is getting rid of the large volumes--uranium-
contaminated--metal, although it's low-enriched, and the barium 
in them is classified, putting in a classified burial ground.
    So, from the time over the first year, certainly in the 15 
years, 20 years that Oak Ridge ran, that plant was fully 
radioactively contaminated. The same with the chemicals that it 
had in it.
    The residual contamination that you would have from 
continued operation after AEC, ERDA, DOE took them over in 
1969, was the depleted uranium, the tails that we're talking 
about here today, that's being handled separately, and of 
course USEC and LES and AREVA will all pay to have their 
depleted uranium disposed of.
    But the plant proper, excluding the tails, the waste 
stream, the plant proper was contaminated as soon as you loaded 
it with nuclear material and generated the first highly 
enriched uranium. You had this large volumes, huge volumes, of 
metal and concrete that were radioactively and chemically 
contaminated.
    Senator Tester. If such a plant were built today, that 
would be the same case.
    Mr. Longenecker. That would be exactly the same case.
    Senator Tester. OK. So your contention is that, because it 
was used for military purposes first, that the utilities really 
have no liability there, even though utilities have been 
getting a benefit from it?
    Mr. Longenecker. That's correct and, you know, again, look 
at how the USEC lease was generated. USEC is a commercial 
company, when DOE gave USEC the lease for the GDPs, and that 
was signed in 1993, it said the plants are fully contaminated, 
and USEC will only be liable for residual contamination that it 
creates. the depleted uranium, any additional waste that it 
generated, and if USEC built new facilities.
    Now, that is a different thing if USEC were to build the 
American centrifuge plant, they would be liable for that, but 
otherwise, those things were fully contaminated, paid for by 
the taxpayer, and we told--when I was selling enrichment 
services to customers, because it was very important, that D&D 
was in our price, and it was all in price, and we wouldn't be 
coming back to them.
    What I think was interesting we haven't talked about today, 
in 1992 the surcharge that we put on utilities, we excluded all 
of the non-U.S. buyers of enrichment services. So, all of the 
non-U.S. companies that bought enrichment services to run their 
nuclear plants that are our commercial competitors aren't 
paying a surcharge.
    Senator Tester. OK.
    Mr. Longenecker. So we excluded them because we couldn't 
find a way to tax them, but that's why it is not good public 
policy, it seems to me, to continue that, either for our 
domestic industry or for competitive position in the world.
    Senator Tester. OK, Mr. Warren, you had a comment to that?
    Mr. Warren. Yes, this issue has come up a couple of times, 
and it is a key issue in terms of the plants were already 
contaminated, so why should the utilities have to pay anything 
for it? So, I'd like to focus on that for a moment.
    You have to go back in time to the 1960s, really, which was 
before my time on this issue. But, at that time, basically 
there was a choice that the Nation faced. We wanted to promote 
nuclear power as a domestic source, we had these military 
facilities. Either the domestic industry could have built its 
own enrichment plants, or the government could make its 
facilities available.
    If the private sector had built its own plants, it would 
have been responsible for 100 percent of those cleanup costs. 
Instead, we thought it made better sense to take advantage of 
these existing facilities with the understanding that the 
private sector would pay--not only the variable costs of 
operating them--but pay toward the fixed plant investment.
    Now, at that time, we didn't have a very sophisticated 
understanding of cleanup, and so we didn't, you know, estimate 
and set the money aside in the way that we should have.
    But the philosophy was that, we were saving the industry 
this fixed investment, they had to contribute to the 
government's fixed investment.
    So, then you have to jump forward to the 1990s, and when we 
sort of said, ``We have this cleanup liability, the Atomic 
Energy Act Section 161(v) said, we're supposed to collect all 
of the costs, but we haven't, so now how are we going to pay 
for the cost?''
    At that time, the DOE testified, in 1991, that it should be 
on the basis of enrichment services purchased, which they 
estimated to be about 50/50. It's true, we couldn't collect 
from foreign utilities, and so the government picked that up, 
so it went down to a third.
    But they said that the concept would be 50/50, based on 
enrichment services. The next year, the first Bush 
Administration, President Bush, in 1991 said, the way to 
collect it is on a fee on utilities. So, that decision then 
became embodied in the 1992 Energy Policy Act and really is the 
basis for our position that that should be the philosophy going 
forward.
    Senator Tester. Gotcha.
    Mr. Fertel. Senator, I feel like Paul Harvey--and now the 
rest of the story--Wes is right, the government did have the 
utilities use their facilities, because the utilities weren't--
the commercial industry was not allowed to have the technology 
to build enrichment facilities in our country so, we ought to 
be clear, it wasn't an option, the commercial industry had at 
all.
    Having said that, he's right--161(v), which is the Atomic 
Energy Act--required the government to collect all of the 
appropriate costs, as Mr. Longenecker said, he ran the program, 
they did look at D&D costs, there is a requirement in the Code 
of Federal regulations that they include certain D&D costs, it 
should have been looking at disposal tails--that's what we 
would have assumed, again, from a commercial standpoint. You're 
buying and paying for a service. You don't have any choice but 
to buy it from this one supplier, who is the Federal 
Government, at this point, they're pricing it at whatever price 
they want, and you're paying for it. You're told it includes 
everything, including D&D, and in 1992, when Wes was on the 
House side, and believes firmly in what he's saying, because he 
believed it then, a deal was struck--not a contract, not an 
assessment--a deal.
    The deal was, the industry would make the payments they're 
making, they would go through as a fuel adjustment clause 
payment, and we've done that. The government hasn't met its 
part of the 1992 deal.
    There were some utilities that went to court, because the 
deal was cut, and people testified before this committee and 
before the House committee at that time, the courts didn't rule 
in favor of the utilities, because they said, ``You agreed to 
it.'' OK? That wasn't because they thought they had the 
obligation, they were doing a deal.
    So, what we need to do is look at this, and figure out how 
to do the right thing for the GDPs. We've got to clean them up. 
It's a long-term thing. Studying what to do with HEU--we can 
study it to death, we ought to figure out how to do it--it's 
not a study of can you do it, it's how you put it in the market 
so you don't disrupt the market, the surplus HEU, and also re-
enriching the tails.
    Don't wait forever on re-enriching the tails, because the 
reason it's become an asset is uranium prices are high. Uranium 
prices will stay way above where they were for a long time, but 
the reason it's a real good asset now is because they are high. 
So, begin to figure out how to take advantage of that.
    There is about 74 million pounds of U308 equivalent in the 
tails. At today's price, which you probably couldn't get 
forever, that would be $7 billion, if you could sell it.
    So, we ought to figure out how to use the waste which is 
now an asset, and the assets that came out of the GDPs to help 
solve this problem and move forward on it, and that's a good 
solution in using material the government produced.
    The Chairman. No problem, thanks for those good questions.
    Let me just ask one question, Mr. Longenecker, as you, 
under this Energy Policy Act of 1992, the special assessment on 
utilities was imposed on the basis of, ``the total amount of 
seperative work units purchased from the Department of Energy 
before the date of enactment of that bill.''
    The bill before us, the one we're now considering, does not 
change that basis for additional assessments. So, if we were to 
go ahead with this bill, how would the bill provide a 
disincentive to future purchases from LES or USEC, if the 
assessments are made on the basis of past purchases from DOE.
    Mr. Longenecker. Senator, I think my position on that is, 
if you're buying from a U.S. supplier, and the utilities who 
are just a handful of major commercial nuclear utilities 
realize that buying from a domestic supplier, they were one, 
subject to a retroactive assessment, and they may be again 
under U.S. law. If I were them, I would make that a 
consideration. Because, again, the $200 million a year, I'd 
say, ``If I bought AREVA or the Russians, I'm not facing that, 
I don't have to face a U.S. Government surcharge, and if I buy 
from them 20 years in the future, the U.S. Government may 
decide again that they need funds for some environmental 
cleanup and they may tax me.'' That's the concern I have.
    The fact that, for a lot of reasons, one would be this type 
of surcharge, USEC's market share went from 80 percent of the 
United States in 1992 when this bill was passed, to, you know, 
less than half now. So, I mean, there has been a significant 
impact, people are not buying enrichment services in this 
country, and my thought is, from a public policy point of view, 
we ought to give the utilities in this country as few reasons 
as possible to buy offshore.
    The Chairman. OK.
    Mr. Longenecker. It's not a direct linkage, I would agree, 
but----
    The Chairman. Mr. Warren.
    Mr. Warren. I would certainly agree that there's no direct 
linkage, and we have 15 years of experience since 1992, and I 
don't think there's any evidence that there's been a prejudice 
against buying U.S. services because of this special 
assessment.
    If you bought enrichment services before 1992, and really, 
the question for the committee now is, going forward, whether 
you want to say future purchases are not going to have to pay a 
surcharge, we're just going to collect this special assessment 
on these pre-1992 services. So, I think that the trade issue is 
really a bit of a canard.
    But the one issue that I want to make sure that I address 
is this notion that there was a deal in 1992, that the nuclear 
utility industry would never have to pay anything again. In 
fact, the deal in 1992 was, utility industry would pay for 15 
years, not more than two and a quarter billion dollars, and 
that the government would pay for 15 years, the difference, 
which was about $15 billion, adjusted for inflation. That was 
the deal.
    Then it left open what Congress would do in the future 
when, at the end of that 15-year period when we could assess 
the success of the program. Now we're at that point in time, 
and I believe that the philosophic principle that was 
established in 1992 should be the governing principle, which is 
the beneficiaries of the program should share the expense, and 
in proportion to which they got enrichment services.
    The Chairman. Why don't we stop with that, thank you all, 
it's been very useful testimony, a good hearing, and that will 
conclude the hearing.
    [Whereupon, at 11:33 a.m., the hearing was adjourned.]
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

    Responses of Marvin S. Fertel to Questions From Senator Bingaman
    Question 1. Your testimony indicates that the contracts signed by 
the utilities with the government included all costs including any D&D 
costs--can you please explain that in more detail--was it part of the 
contract that the utilities were paying into a D&D fund?
    Answer. The ``established DOE pricing policy'' at the time the 
parties contracted was that DOE's prices would recover only the 
government's costs over a reasonable period of time. This policy was 
mandated by section 161(v) of the Atomic Energy Act of 1954, which 
provided that ``any prices established under this subsection shall be 
on a basis of recovery of the Government's costs over a reasonable 
period of time.'' 42 U.S.C. Sec.  2201(v) (1988). Section 161(v), as 
amended, also directed DOE to ``establish criteria in writing setting 
forth the terms and conditions under which services provided under this 
subsection shall be made available.'' Id. Pursuant to this directive, 
see 10 C.F.R. Sec.  762.1(a) (1987) (``these criteria are established 
pursuant to section 161(v)''), DOE published its Uranium Enrichment 
Services Criteria (Enrichment Criteria). The final Enrichment Criteria 
were published in 1986 and echoed section 161(v)'s cost-recovery based 
pricing policy. See id. Sec.  762.5. The Enrichment Criteria also 
listed the costs included in DOE's charge, which included, inter alia, 
certain decontamination and decommissioning (D & D) costs.
    Question 2. Approximately how much percentage wise is the 
assessment on the net revenues of the industry?
    Answer. As stated in my testimony, the industry is fully supportive 
of Congress taking appropriate action to assure that adequate funding 
is available for the safe and environmentally responsible D&D of the 
government owned GDP's. In this regard, as required by EPACT, the 
industry has already fully paid its obligation of $2.6 billion to the 
fund. Further, as indicated during the hearing, Mr. Longenecker, who 
was the DOE official responsible for the government's enrichment 
program, indicated that the commercial sector should not have any 
additional liability for D&D at the GDP's. Unlike any other source of 
electricity, nuclear power plants have internalized the costs for 
externalities, including the cost for waste disposal, decommissioning, 
fees paid to the NRC and FEMA, etc. As such, we are committed to paying 
for those obligation and liabilities legitimately owed. In the case of 
additional payments to the D&D fund for the GDP's, regardless of 
whether they are a large or small portion of net revenues, we do not 
see this additional cost as a legitimate charge that the consumers of 
electricity from nuclear power plants should have to bear.
    Question 3. Your recommendation includes sales of the HEU stockpile 
and the supply of surplus nuclear fuel into the markets in a 
``responsible way''--can you please explain this in more detail?
    Answer. Sales of HEU stockpile need to be metered into the market 
in order to not disrupt the developing uranium recovery and enrichment 
facilities deployment in the United States. It is important to have a 
domestic supply of uranium, conversion, enrichment and fabrication. For 
the past ten years there was no uranium production to speak of and the 
US industry was and still is limited to a sole domestic supplier of 
enrichment services, which doesn't have the capacity to meet 100% of 
domestic demand. Currently uranium mining is staging a come back as 
well as four companies have either started licensing and construction 
or announced plans for enrichment facilities in the US. While the 
market can accommodate the introduction of surplus US government 
nuclear fuel and still support the development of new primary 
production facilities in the US, its introduction into the market needs 
to be done in a fair, transparent, limited and certain manner.
    Question 4. Since you have mentioned the HEU stockpile and US-
Russian HEU agreement to blend down Russian weapons HEU, our 
understanding is Russia has stated they do not want to extend it--would 
the NEI support extending it?
    Answer. Clearly, from a non-proliferation perspective, the existing 
US-Russian HEU Agreement and any extension of it is extremely positive 
and NEI is fully supportive of achieving this desirable non-
proliferation goal. We understand that after 2013 Russia may desire to 
continue to blend-down HEU and to sell the LEU, or its component parts 
into the global market, but we also understand they likely will not 
continue to do so, post-2013, in the same way they do under the current 
agreement.
                                 ______
                                 
  Responses of John R. Longenecker to Questions From Senator Bingaman
    Question 1. You advocate selling HEU from the U.S.--Russian HEU 
agreement to offset the cost of clean up of these plants, would it be 
both U.S. and Russian HEU or just U.S.?
    Answer. My testimony referred solely to surplus US HEU held by DOE.
    Question 2. Your testimony mentions ``other forms of uranium''--is 
re-enriching the existing left over material or tails of high assay 
content at the existing plants a feasible option for generating clean 
up revenue as compared to the sale of down blended HEU?
    Answer. Yes, reenrichment of the high assay tails and the sale of 
the recovered natural-assay uranium, worth several billion dollars at 
today's market prices, is both feasible and desirable, in my opinion.
    Question 3. Your testimony indicates that the plants were already 
contaminated by the time they entered into contracts with the 
utilities--can you please explain this in more detail.
    Answer. The GDPs were radioactively contaminated when enrichment 
operations for defense purposes began. Since the GDPs began operation 
in the late 1940s and early 1950s, the volume of equipment in each 
plant that must be disposed of as LLW has not changed, and thus the 
government's total liability for D&D was unchanged when the three GDPs 
were subsequently dedicated to commercial enrichment operations in 
1969, 15-20 years after they were built.
    USEC's GDP lease, that was approved in 1993, reflects this fact, 
with USEC having no GDP D&D liability for either the Portsmouth or 
Paducah GDPs. It seems to me that this recognition of the government's 
D&D liability is fair and equitable, and also should extend to the US 
utilities that purchased enrichment services produced by the GDPs in 
the past.
    Question 4. My understanding is that when we build an enrichment 
plant such as the one in New Mexico, the cost of the clean up bond is 
most likely built into the cost of conversion for the utility--did the 
government do this as well?
    Answer. DOE did include D&D in its price for enrichment services 
charged to utilities, but did not accrue the money so generated in a 
special fund set aside for D&D, as LES and USEC are now doing.
  Responses of John R. Longenecker to Questions From Senator Domenici
    Question 1. You stated that there are a number of ways that the 
Department of Energy can raise the necessary funds required for cleanup 
of the plants by selling excess HEU and other material previously 
considered as waste. Recognizing that you are no longer with the 
Department, do you nevertheless have a rough estimate of what this 
material might be worth?
    Answer. The value depends on the market price of uranium, 
conversion and SWU when the inventories are sold, less the processing 
cost to prepare the material for sale; but at today's prices the total 
value of all excess government inventories is in the tens of billions 
of dollars. As an example, DOE's declared excess inventory of 160.3 
Million lbs U3O8e at $100 /lb U3O8 would be worth approximately $16 
Billion. The value of LEU that would be generated by downblending 500 
MT of US HEU would be approximately $22 Billion.
    Question 2. Your testimony notes that when the GDP's began 
operating for commercial enrichment, the facilities were already 
completely contaminated from earlier weapons production. Can you 
elaborate on why the commercial operations did not further add to the 
contamination of the facilities?
    Answer. The basic hardware in the three GDPs was radioactively 
contaminated when enrichment operations for defense purposes began in 
the late 1940s and early 1950s. This was because a portion of the GDP 
feed at that time was reprocessed uranium from the defense fuel cycle. 
That uranium contained some radioactive materials that resulted in 
contamination of the processing equipment in the three GDPs. For 
commercial uranium enrichment operations, that began in 1969, only 
natural uranium was used as feed in the U.S. plants.
    Since the GDPs began operation, the volume of equipment in each 
plant that must be disposed of as LLW has not changed, and thus the 
government's total liability for D&D was unchanged when the plants were 
subsequently dedicated to commercial enrichment operations, 15-20 years 
after they were built. As I mentioned in my testimony, USEC's GDP 
lease, that was signed in 1993, reflects this fact, with USEC having no 
GDP D&D liability for either the Portsmouth or Paducah GDPs.
    Question 3. You also note that the commercial pricing structure 
from the very beginning took into account the eventual D&D of the 
plants, as reflected in the United States Enrichment Corporation's 
lease. Could you please elaborate on that point?
    Answer. DOE acknowledged that it had to decontaminate and 
decommission (D&D) the GDPs at the end of their useful life. The 
assumption when I was managing the program, was that D&D would be paid 
for out of annual revenues from the uranium enrichment program. That 
is, the cost of D&D would be expensed in the year that costs were 
incurred.
    DOE later recognized that it needed to change this assumption when 
a government corporation, USEC, was formed. The utilities were charged 
for the D&D in the SWU price. However, the Government did not set up a 
special fund to hold the D&D funds, but rather used these funds for 
other purposes.
    Question 4. What is your opinion of the payment from the Fund to 
owners of uranium and thorium mill tailing sites for their cleanup 
costs coming partially from funds contributed to the Fund by utilities?
    Answer. US utilities should have no liability for these costs. 
There has never been a commercial thorium fuel cycle in the US, to my 
knowledge, with the vast majority of thorium being used for non nuclear 
industrial applications. Funds for uranium mine cleanup costs were to 
be set aside by the mining companies to pay for eventual cleanup of the 
properties and structures.
                                 ______
                                 
    Responses of Wesley P. Warren to Questions From Senator Bingaman
    Question 1. Does NRDC advocate paying the utility assessment as 
long as the fund exists?
    Answer. NRDC supports S. 2203--legislation to reauthorize the 
Department of Energy's (DOE) uranium enrichment Decommissioning and 
Decontamination (D&D) Fund established in the Energy Policy Act of 1992 
(EPACT 1992), including extension of its cleanup fee on the nuclear 
power industry. Central features of any reauthorization should be that 
it adequately addresses issues of the sufficiency of funding to 
complete cleanup, the equitable distribution of costs between the 
taxpayer and the utility industry, and the well-being of the community.
    Before the enactment of EPACT 1992, the DOE and the GAO both 
endorsed the concept that the costs of cleanup for the government's old 
enrichment plants should be split in proportion to the services that 
the beneficiaries had received from those plants. OMB under the first 
Bush administration proposed that this utility industry share be 
collected in the form of a fee. However, at the time the estimates for 
what the cleanup would eventually costs were quite uncertain, although 
the total amount of time was expected to take at least 40 years.
    The agreement on the D&D Fund in EPACT 1992 contained certain key 
elements: (1) that the percentage of the fee that domestic utilities 
paid would be equal to the benefits they had historically received from 
the plants; (2) that the fee paid by the domestic utilities would be 
considered a necessary and reasonable fuel charge for ratemaking 
purposes; (3) that the National Academy of Sciences would conduct an 
assessment of how to reduce the costs of cleanup; and (4) that neither 
the taxpayer nor the utility industry would be subject to an open-end 
and uncapped obligation to pay for cleanup.
    The cap that was eventually placed on taxpayers and the industry 
was a payment obligation for a 15-year period, not to exceed $2.25 
billion for the utilities. While there was not a determination in EPACT 
1992 that utilities would never have to make another contribution, 
there was an understanding that they neither they nor the taxpayer 
should face an unlimited obligation until more information about the 
ultimate costs of cleanup were available. As with other elements of the 
agreement in EPACT 1992, this general approach is the right one to use 
as a model.
    Thus NRDC supports extending the fee for a fixed period that is 
likely to be sufficient to pay for the cost of the cleanup, with a cap 
to be placed on utility and taxpayer contributions during that period 
equal to the proportional benefits that they received from the plants. 
S. 2203 follows this approach by extending the fee for 10 years. 
However, recent information from the DOE indicates that this period of 
may not ensure sufficient contributions to the D&D Fund. Therefore 
Congress should consider a fixed period of time that is greater than 10 
years if that is what is needed to ensure that payments to the Fund are 
sufficient.
    Question 2. Your testimony indicates that the annual cap on 
contributions will be $700 million with a utility contribution set at 
$220 million--can you please explain this since the legislation calls 
out an indexed to inflation amount of $150 million?
    Answer. NRDC supports allocating the costs of the cleanup at DOE's 
old enrichment plants based on the proportion of past services the 
program provided to its beneficiaries--nuclear utilities and the 
taxpayer. The original contributions to the D&D Fund established in 
EPACT 1992 were based on this division of costs, with $150 million 
allocated to utilities and $330 million to the taxpayer for a total of 
$480 million a year.
    Another provision of EPACT 1992 indexed all of these figures to 
inflation. NRDC estimates that inflation from 1993-2008 would increase 
these figures about 46%. Therefore, the original authorization numbers 
in EPACT 1992 for annual contributions of $150 million for the utility 
fee and $480 million overall should be adjusted in 2008 to $220 million 
and $700 million respectively (and indexed to inflation thereafter).
    These revised authorization figures estimated by NRDC are 
consistent with those specified in S. 2203. However, please note that 
S. 2203 explicitly sets the FY 2008 total authorized contribution to 
the D&D Fund at $700 million but simply extends the utility fee at its 
current level, which would be $150 million in 1992 dollars indexed to 
inflation to FY 2008 and beyond.
    Question 3. Do you support the possible re-enrichment of the left 
over material or tails to help defray the costs? Won't running the tail 
back throught the same plant further contaminate it and extend the date 
at which it shuts down?
    Answer. NRDC supports the approach proposed in S. 2203 to study the 
financial, economic and environmental implications of re-enriching 
depleted uranium tails owned by the government. This assessment would 
provide better information than is currently available on issues such 
as the environmental consequences of re-enrichment activities at 
specific plants.
    It is true that re-enriching depleted tails may lead to additional 
contamination at an existing enrichment facility and could extend the 
life of that plant. However, any additional contamination that might 
result should be the responsibility of the private sector entity doing 
the re-enrichment and should be included in the pricing of that 
product. It may also be the case that re-enrichment of depleted tails 
is actually environmentally preferable to the mining, transportation 
and processing of raw uranium to produce a feedstock for current 
enrichment activities. Finally, continuing the operation of the plant 
could be beneficial to the economic well-being of the surrounding 
community. Therefore, NRDC is open-minded on the subject of making 
government owned tails available for re-enrichment by the private 
sector.
    Nevertheless, we feel it is important to note that any such 
decision needs to be guided by three fundamental principles. First, as 
a government asset these tails are really owned by the taxpayers, so 
any proceeds from the sale of these assets should be used to pay for a 
taxpayer need. This could include the taxpayer's share of the cost of 
cleaning up the old enrichment plants but must not include paying for 
the utilities share of the cleanup cost.
    Second, if these depleted tails are made available to the private 
sector, it should be done in a way that does not draw the government 
back into the enrichment business, which was privatized as a result of 
EPACT 1992. The simplest way to achieve this would be to directly 
auction the depleted tails to the private sector in a way that permits 
the tails to be enriched by a private sector entity without liability 
to the government.
    Finally, any plan for the re-enrichment of depleted tails must 
comply with all environmental laws, including the National 
Environmental Policy Act (NEPA). A full NEPA review would in fact 
provide a detailed answer to the question you have posed.
                                 ______
                                 
    Responses of Robin M. Nazzaro to Questions From Senator Bingaman
    Question 1. It is my understanding that the DOE's report on the 
fund came in yesterday--has the GAO had time to review the report and 
assess whether the over all costs have changed since the last report?
    Answer. Similar to our 2004 report, DOE's 2007 report to the 
Congress on the Uranium Decontamination and Decommissioning Fund (Fund) 
found that the Fund will be insufficient. While some of DOE's 
assumptions differed from those used in our analyses, DOE found, as we 
did, that the Fund would be insufficient under any of the scenarios 
that it considered. For example, in developing our baseline model, we 
assumed that final decontamination and decommissioning (D&D) would 
occur between 2018 and 2032 at the Paducah plant. DOE's report assumes 
that Paducah D&D will start in 2017 and be complete in 2040. Although 
DOE's 2007 report states that cleanup and decontamination and 
decommissioning costs have been revised significantly, without a more 
in-depth review of the cost estimates DOE used to develop its report, 
we cannot determine how DOE's cost estimates changed or the reasons for 
any changes.
    Question 2. All of the non-governmental witnesses have advocated 
either selling HEU into the market or re-enriching left over high assay 
material from prior enrichment operations, has the GAO looked at this 
issue and do they have any comment?
    Answer. At the request of the Senate Committee on Energy and 
Natural Resources, the House Committee on Energy and Commerce, and the 
Chairman of the Subcommittee on Oversight and Investigations, House 
Committee on Energy and Commerce, we are currently examining DOE's 
options for beneficially re-using depleted uranium hexafluoride left 
over from prior uranium enrichment operations. Although our work is not 
yet completed and it is therefore premature to comment on our findings, 
we have briefed members of your staff on our work and expect to 
complete our review by the end of March 2008.
    Question 3. Does GAO have any comment on the range of cost 
projections offered by the DOE in the latest report? Do you think they 
could go higher?
    Answer. The scenarios used by DOE to develop the range of 
shortfalls reported in its 2007 report are similar to the baseline and 
alternative simulation models we developed to determine the sufficiency 
of the Fund. For example, similar to our 2004 report, DOE looked at the 
impact that delaying the final decontamination and decommissioning at 
the uranium enrichment plants would have on the Fund's sufficiency. 
Although DOE's analyses incorporated a range of economic factors, 
scope, and schedule assumptions, many of the uncertainties that we 
believed could impact the costs of cleanup have not yet been resolved. 
For example, in 2004, we reported that DOE cost estimates assumed that 
on-site disposal facilities will be built at Paducah and Portsmouth, 
but that if DOE cannot build these on-site facilities, waste disposal 
costs could increase substantially. In its 2007 report, DOE listed the 
construction of on-site disposal facilities at both Paducah and 
Portsmouth as key uncertainties associated with the cleanup of these 
plants. Until DOE resolves the uncertainties that we (and DOE) 
identified, we cannot determine the impact on the Fund's sufficiency. 
However, it is possible that additional demands could be placed on the 
Fund.
    Responses of Robin M. Nazzaro to Questions From Senator Domenici
    Question 1. You stated that by 2044, there would be a shortfall in 
the Fund somewhere between roughly 3 to 6 billion dollars. What portion 
of your estimate of the total cost of the cleanup is attributable to 
annual remedial actions that have been taken or will be taken since the 
Fund was created in 1992?
    Answer. Although we obtained DOE's remedial action cost estimates 
as a part of our review, we merged all of authorized cleanup cost 
estimates together when analyzing the extent to which the Fund would be 
sufficient. Because we developed a range of potential cost projections 
based on randomly selected values for such variables as interest rates, 
inflation rates, and cleanup costs, we cannot say specifically what 
portion of the projected shortfall might be attributable to remedial 
actions. However, according to DOE cost estimates, remedial action 
costs appear to be a relatively small portion of the total projected 
costs. For example, in 2004, DOE estimated that remedial action costs 
would represent about 21 percent of the total cleanup costs remaining 
at the Oak Ridge site where decontamination and decommissioning work is 
well underway. Similarly, one of the scenarios presented in DOE's 2007 
report was its base case with remedial actions removed. Under this 
scenario, the Fund's projected shortfall declined by $2.7 billion or 
about 25 percent of the $10.9 billion projected shortfall under the 
base case scenario.
    Question 2. Of the total amount that will be required to clean up 
the three sites, how much is attributable to enrichment activities that 
have or will be undertaken at the sites since 1992?
    Answer. The objective of our work was to determine the extent to 
which the Fund would be sufficient and did not include an assessment of 
how much of the cleanup may be attributable to enrichment activities 
that have or will be undertaken at the uranium enrichment sites since 
1992.
     Response of Robin M. Nazzaro to Question From Senator Salazar
    Question 1. The hearing generated discussion of the possible future 
use of the Government's existing surplus uranium mine tailings. I would 
like a clearer picture of this resource and its history. Why have these 
tailings not been used to produce usable uranium? Please provide 
information regarding the size of this surplus and its legal status 
(i.e., under whose control it resides). Please also provide an estimate 
of the potential value of the tailings as compared to present U.S. 
share of the global uranium market.
    Answer. DOE has almost 500,000 metric tons of uranium in the form 
of depleted uranium hexafluoride, the leftover ``tails'' remaining from 
the uranium enrichment process--a process that increases the 
concentration of the fissile uranium-235 isotope used in nuclear 
weapons and in nuclear reactors. This material is currently stored at 
DOE facilities near Piketon, Ohio, and Paducah, Kentucky. DOE has 
determined that about 78,000 metric tons of these tails have enough of 
the useful uranum-235 isotope remaining to make them potentially 
valuable, especially given recent increases in the price of uranium. 
This depleted uranium could be sent through the enrichment process 
again, re-enriching it for potential use as nuclear reactor fuel. At 
the request of the Senate Committee on Energy and Natural Resources, 
the House Committee on Energy and Commerce, and the Chairman of the 
Subcommittee on Oversight and Investigations, House Committee on Energy 
and Commerce, GAO is currently reviewing DOE's options for beneficially 
re-using depleted uranium hexafluoride left over from prior uranium 
enrichment operations. Our work is incomplete and it is therefore 
premature to provide an estimate of the potential value of these tails. 
We expect to complete our review by the end of March 2008.
                                 ______
                                 
    Responses of James A. Rispoli to Questions From Senator Bingaman
    Question 1. It is my understanding that the clean up for the three 
plants will not end until 2044--why does the Department maintain that 
the industry assessment is not required at the end of the first 15 
years?
    Answer. The Department of Energy (the Department) has not yet taken 
a position as to whether the nuclear utilities should continue to pay 
into the Fund to complete the cleanup. The Department recognizes that 
there are several options to fund the cleanup of the three Gaseous 
Diffusion Plants, including continued assessments of the nuclear 
utilities. The Department is currently evaluating these options, as 
well as having further discussions with Congress and stakeholders, 
before formulating a recommendation.
    Question 2. What are the ranges from worst to best case total costs 
on the clean up and why?
    Answer. The best case is approximately a $21.9 billion lifecycle 
cost estimate and the worst is $33.6 billion, with a ``Base Case'' (as 
described in the Uranium Enrichment Decontamination & Decommissioning 
Fund 2007 Report to Congress) life cycle cost estimate of $24.0 
billion. The best case assumes that remedial actions would not be 
funded from the UED&D fund (but would have to be funded from a general 
fund appropriation). The worst case is based on future economic 
conditions (lower interest rates coupled with higher rates of 
inflation) that are far more pessimistic than recent history.
    Question 3. What is the government's shortfall in contributions to 
the fund and how long will it take to make that up?
    Answer. The government contribution shortfall is $918.6 million. 
Since this shortfall occurred in the first three years of the fund, the 
amount of lost interest is an additional $670.3 million for a total of 
about $1.6 billion. The number of years required to make up the 
shortfall depends on annual appropriations made by the Congress.
    Question 4. What is the Department's opinion of re-enriching high 
assay tails to help pay for the cost of clean up?
    Answer. The Department is evaluating this option as part of 
developing a comprehensive Uranium Management Strategy.
    Question 5. Is it true that under the current contract with the 
tails deconversion company they have an option to keep a percentage of 
the proceeds of the sale of the converted uranium?
    Answer. The contract for the Design, Construction, and Operation of 
DUF6 Conversion Plants at the Portsmouth and Paducah sites with Uranium 
Disposition Services, LX, does not contain an ``option'' as such. but 
it does contain Clause li. 32 ``Sale of Product or By-Product.'' Under 
this clause, the contractor may conduct sales for the Government and 
proceeds may offset allowable contract costs. Under this clause there 
also is a possibility for the contractor to share, in certain limited 
circumstances, in ``net acquisition savings'' if such savings (a 
defined term) result from implementation of the Contractor's proposal, 
which proposal must be approved by the Contracting Officer. The clause 
is very clear that a decision to accept or reject all or any part of 
the Contractor's proposal is a unilateral decision of the Contracting 
Officer, and a rejection of the Contractor's proposal provides no claim 
for lost opportunity cost against the Government. Lastly the Government 
reserved the right to use or otherwise dispose of any and all DUF6 and 
uranium products including disposition to third parties.
    Responses of James A. Rispoli to Questions From Senator Domenici
    You noted that since establishment of the Fund, the Department has 
completed 116 of 231 planned environmental remedial actions.
    Question 1a. How much was spent on these 116 remedial actions?
    Answer. As of the end of FY 2006, the Department has spent $1.5 
billion and completed 116 of the 231 planned environmental remedial 
actions.
    Question 1b. What percentage of the total amount spent from the 
Fund since its establishment does this represent?
    Answer. As of the end of FY 2006, the Department has spent $4.2 
billion from the Fund, of which, 35 percent ($1.5 billion) was spent 
towards environmental remedial actions at all three Gaseous Diffusion 
Plants (GDP). The balance of the funds was primarily spent on the major 
decontamination and decommissioning (D&D) activities at the Oak Ridge 
GDP.
    Question 2a. The 1992 Energy Policy Act makes a distinction between 
decontamination and decommissioning costs and remedial action costs. It 
allows expenditures from the Fund for the annual cost of remedial 
actions to the extent the Fund is sufficient.
    How does DOE interpret the provision to allow payment for remedial 
actions in light of its determination that the Fund is not sufficient 
to do all of the required D&D?
    Answer. Since the establishment of the Fund in 1992, the Department 
and GAO have, on several occasions, estimated that the total cost for 
cleanup would most likely exceed the availability of funds as 
authorized over the 15 year period. Throughout this period, the 
Department has requested and Congress has approved the expense of 
remedial actions from the Fund. The Department estimates that the Fund 
will remain sufficient into the 2020 timeframe provided the Government 
makes up its shortfall in contributions including lost interest. The 
Department recommends that funding for remedial actions associated with 
the decontamination and decommissioning of the Gaseous Diffusion Plants 
(GDP) continue to come from the Fund, particularly since remedial 
actions remain to be performed beneath the facilities that are yet to 
be decontaminated and decommissioned.
    Question 2b. How much of DOE's estimated shortfall in the Fund is 
attributable to remedial actions?
    Answer. Included in the estimated $11 billion shortfall needed to 
complete cleanup of the three GDPs (per the ``Base Case'' in the 
Uranium Enrichment Decontamination & Decommissioning Fund 2007 Report 
to Congress) is an estimated $2.33 billion in remedial actions that 
remain to be completed.
    Question 3a. You stated that if payments to the Fund by the 
Government are authorized to ``complete its obligation under EPAct 
1992,'' you project the Fund would remain sufficient until the 2020 
timeframe. Are you referring only to a short-term reauthorization to 
capture the shortfalls in government payments during the first three 
years of the Fund?
    Answer. Yes.
    Question 3b. Are you saying, then, that assuming those additional 
payments, there would be enough in the Fund to allow you to complete 
all of the activities you have planned through 2020?
    Answer. Yes. The Department has estimated that there would be 
enough money in the Fund through the approximate 2020 timeframe, 
provided that the Government contributes an additional $1.8 billion 
including lost interest.
    Question 3c. Is the Department's position that the Fund should be 
reauthorized through 2010 to authorize Government contributions to the 
Fund as requested by Secretary Bodman in his letter of July, 2006?
    Answer. Yes.
    Question 4. Please provide an estimate of DOE's annual cost to 
provide adequate safeguards to protect its stockpiles of uranium, 
uranium mill tailings, and HEU.
    Answer. The estimate to provide adequate safeguards to protect the 
uranium, depleted uranium hexafluoride (DUF6), and highly enriched 
uranium (HEU) at the Portsmouth ($14 M) and Paducah ($9M) site or 
approximately $23 million annually. This figure however is the total 
site wide safeguards and security annual cost (FY 2007 dollars). 
Isolated pro-rata costs for individual materials or on site facilities 
safeguards and security are not available. In addition to the above EM 
costs, there are safeguards and security costs for uranium stockpiles 
managed by NNSA and NE.
    Responses of James A. Rispoli to Questions From Senator Salazar
    Question 1. When will DOE provide cost estimates and plans for 
cleanup of the Paducah and Portsmouth enrichment plants and when will 
this information be shared with Congress and the GAO?
    Answer. The Department provided the cost estimates and plans for 
clean up of these sites in the Uranium Enrichment Decontamination & 
Decommissioning Fund 2007 Report to Congress that was transmitted to 
Congress and the GAO on November 14, 2007.
    Question 2. The hearing generated discussion of the possible future 
use of the Government's existing surplus uranium mine tailings. What 
barriers exist to the future use of this resource?
    Answer. Uranium mine tailings are the residues of commercial 
uranium mining and milling operations which produced uranium oxides and 
have little or no economic value. However, the potential reuse and/or 
sale of depleted uranium hexafluoride (DUF6) tails was discussed at the 
hearing. DUF6, resulting from over 40 years of Gaseous Diffusion Plant 
(GDP) operations, has been stockpiled in large quantities at both the 
Portsmouth and Paducah GDPs. The Department is currently evaluating the 
cost effective re-use or sale of DUF6 tails.

                                    

      
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