[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]






               ENERGY AND REVENUE ENRICHMENT ACT OF 2011

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 13, 2011

                               __________

                           Serial No. 112-59






      Printed for the use of the Committee on Energy and Commerce
                        energycommerce.house.gov


                                _____

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky               EDWARD J. MARKEY, Massachusetts
JOHN SHIMKUS, Illinois               EDOLPHUS TOWNS, New York
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
MARY BONO MACK, California           BOBBY L. RUSH, Illinois
GREG WALDEN, Oregon                  ANNA G. ESHOO, California
LEE TERRY, Nebraska                  ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan                GENE GREEN, Texas
SUE WILKINS MYRICK, North Carolina   DIANA DeGETTE, Colorado
  Vice Chairman                      LOIS CAPPS, California
JOHN SULLIVAN, OKlahoma              MICHAEL F. DOYLE, Pennsylvania
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            CHARLES A. GONZALEZ, Texas
MARSHA BLACKBURN, Tennessee          JAY INSLEE, Washington
BRIAN P. BILBRAY, California         TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire       MIKE ROSS, Arkansas
PHIL GINGREY, Georgia                ANTHONY D. WEINER, New York
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana              Islands
BRETT GUTHRIE, Kentucky
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                  (ii)
                    Subcommittee on Energy and Power

                         ED WHITFIELD, Kentucky
                                 Chairman
JOHN SULLIVAN, OKlahoma              BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois
GREG WALDEN, Oregon                  JAY INSLEE, Washington
LEE TERRY, Nebraska                  JIM MATHESON, Utah
MICHAEL C. BURGESS, Texas            JOHN D. DINGELL, Michigan
BRIAN P. BILBRAY, California         EDWARD J. MARKEY, Massachusetts
STEVE SCALISE, Louisiana             ELIOT L. ENGEL, New York
CATHY McMORRIS RODGERS, Washington   GENE GREEN, Texas
PETE OLSON, Texas                    LOIS CAPPS, California
DAVID B. McKINLEY, West Virginia     MICHAEL F. DOYLE, Pennsylvania
CORY GARDNER, Colorado               CHARLES A. GONZALEZ, Texas
MIKE POMPEO, Kansas                  HENRY A. WAXMAN, California (ex 
H. MORGAN GRIFFITH, Virginia             officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)












                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Comonwealth of Kentucky, opening statement.....................     1
    Prepared statement...........................................     2
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     3
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     4

                               Witnesses

Hon. Mitch McConnell, a United States Senator from the 
  Commonwealth of Kentucky.......................................     6
    Prepared statement...........................................     9
Gene Aloise, Director of Natural Resources and Environment, 
  Government Accountability Office...............................    13
    Prepared statement...........................................    15
Daniel B. Poneman, Deputy Secretary, U.S. Department of Energy...    30
    Prepared statement...........................................    32
Herman R. Potter, President, United Steelworkers Local 689.......    47
    Prepared statement...........................................    51
Jim H. Key, Vice President, United Steelworkers Union Local 550..    59
    Prepared statement...........................................    62

                           Submitted Material

Letter of May 31, 2011, from the International President of the 
  United Steelworkers to Secretary Chu, submitted by Mr. 
  Whitfield......................................................    81
Letter of June 10, 2011, from the Governor of Kentucky to the 
  Subcommittee, submitted by Mr. Whitfield.......................    83
Letter of June 10, 2011, from the Mayor of Paducah, Kentucky to 
  Senator Rand Paul, submitted by Mr. Whitfield..................    85
Letter of June 12, 2011, from the County Judge of McCracken 
  County, Kentucky, submitted by Mr. Whitfield...................    87
Letter of June 16, 2011, from Senator Rand Paul to the 
  Subcommittee, submitted by Mr. Whitfield.......................    88

 
               ENERGY AND REVENUE ENRICHMENT ACT OF 2011

                              ----------                              


                         MONDAY, JUNE 13, 2011

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:38 p.m., in 
Room 2123, Rayburn House Office Building, Hon. Ed Whitfield 
[chairman of the subcommittee] presiding.
    Present: Representatives Whitfield, Walden, McKinley, Rush, 
and Waxman (ex officio).
    Staff Present: Charlotte Baker, Press Secretary; Sean 
Bonyun, Deputy Communications Director; Anita Bradley, Sr. 
Policy Advisor to Chairman Emeritus; Cory Hicks, Policy 
Coordinator, Energy & Power; Kirby Howard, Legislative Clerk; 
Ben Lieberman, Counsel, Energy & Power; Dave McCarthy, Chief 
Counsel, Environment/Economy; Mary Neumayr, Counsel, Oversight/
Energy; Andrew Powaleny, Press Assistant; Alex Yergin, 
Legislative Clerk; Jacqueline Cohen, Minority Counsel; Greg 
Dotson, Minority Energy and Environment Staff Director; Jocelyn 
Gutierrez, Minority DOE Detailee; and Caitlin Haberman, 
Minority Policy Analyst.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. I would like to call this hearing to order.
    Today, we have another hearing on the American Energy 
Initiative. This committee has had a series of hearings 
regarding the energy needs of the United States.
    Today, also, we specifically will be looking at H.R. 2054, 
the Energy and Revenue Enrichment Act, which I have introduced 
on the House side and Senator McConnell and Senator Paul have 
introduced on the Senate side.
    H.R. 2054 is a simple bill. It initiates a 2-year pilot 
program to re-enrich the uranium tails. It allows for the sale 
of the re-enriched uranium and deposits the money made into the 
Uranium Decontamination and Decommissioning Fund to be used for 
environmental cleanup.
    I would also like to point out to those of you who may not 
be familiar that what we are talking about here is about 60,000 
14-ton canisters located in two geographical areas of the 
country. There is about 40,000 of these canisters in Paducah, 
Kentucky, of depleted uranium waste and about 20,000 of these 
canisters in Piketon, Ohio.
    For the last 5 or 6 years, I, along with others, have had a 
lot of discussions with the Department of Energy about re-
enriching this material, which would accomplish a number of 
things. Number one, it would provide additional revenue to the 
Federal Government; number two, it would help the environmental 
cleanup, certainly in Paducah as well as in Piketon, Ohio; and, 
number three, it would prolong the life of the uranium 
enrichment plant in Paducah, Kentucky, in which we have 1,200 
jobs at stake.
    So this is an important piece of legislation, and it makes 
a lot of sense for the reasons that I have already stated. It 
appears to be a win, win, win situation.
    I would also like to remind everyone that this is a pilot 
project, a 2-year pilot project, which I think will give the 
Department of Energy adequate time to assess the situation, and 
it certainly would be of benefit to our country. So I look 
forward to the testimony of our witnesses today.
    I would also at this time ask unanimous consent to 
introduce into the record a letter from the International 
President of the United Steelworkers, a letter from the 
Governor of Kentucky, a letter from the Mayor of Paducah, a 
letter from the County Judge of McCracken County, and a letter 
of support from United States Senator Rand Paul.
    [The information appears at the conclusion of the hearing.]
    Mr. Whitfield. I certainly want to welcome Senator 
McConnell being here with us today as well. As you know, he is 
the senior Senator from Kentucky and he is also the Republican 
Leader in the United States Senate, and he is quite familiar 
with this particular issue.
    So Senator, we really appreciate your being here as well.
    At this time, I would like to recognize Mr. Rush for his 5-
minute opening statement.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared Statement of Hon. Ed Whitfield

    I would like to call this hearing to order.
    In 2008, this Committee's Subcommittee on Oversight and 
Investigations held a hearing on the Department of Energy's 
inventory of depleted uranium hexafluoride canisters called 
``tails,'' where the Government Accountability Office (GAO) 
testified that reenriching these tails to secure the useable 
uranium would be worth around $7.6 billion, and maybe as much 
as $20 billion.
    Since that time, this potential value has dropped to $4 
billion, as the GAO will testify today. Simply put, the 
Department of Energy has failed to realize the value of the 
uranium tails and as a result they have already lost the 
taxpayers roughly $3.6 billion.
    That is the reason we are here today considering my 
legislation--the Energy and Revenue Enrichment Act. DOE has 
talked to my office about these tails for 5 years and for 5 
years we have not seen any results. All the while, this 
Committee has been waiting patiently, as have the taxpayers, 
for DOE to initiate a program that makes sense and should be a 
no-brainer.
    The time for waiting is over. My bill is simple. It 
initiates a 2 year pilot program to re-enrich the uranium 
tails, allows for the sale of the re-enriched uranium, and 
deposits the money made into the Uranium Decontamination and 
Decommissioning Fund to be used for environmental cleanup.
    Now, I want to direct your attention to the poster board 
located at the front of the room. Many people say a picture 
speaks for itself. This poster shows the amount of waste that 
we have been dealing with for the past 60 years. There are 
40,000 of these canisters located in Paducah, Kentucky and 
20,000 located in Piketon, Ohio. These canisters are scheduled 
to be converted to a less harmful substance and will be 
disposed of at an approved disposal facility. But, if this 
conversion occurs before re-enrichment, we will lose $4 
billion.
    In addition, my bill will reduce the amount of waste for 
disposal by 30,000 tons. This reduction in waste will save the 
government $200 million and result in less harm to the 
environment.
    The bill does limit the pool of facilities where this work 
can occur. We do this for two reasons. First, there is 
contamination in these tails. The DOE sites are already 
similarly contaminated, so reenriching the tails at the DOE 
location will not further contaminate other sites. By contrast, 
new facilities will be hesitant to take many of these tails, 
further denying the taxpayer.
    Second, the communities that have supported the 
government's reenrichment program for decades need these jobs. 
We will hear from the Steelworkers Unions about the equity 
involved in this project. They will explain that for nearly 60 
years, these communities have been home to millions of tons of 
waste tails and now that the tails are recognized to have 
value, and they should be the ones to benefit. They aren't 
asking for a government handout, and they aren't asking for a 
bailout, all they are asking for is to let them finish the 
work, all in service to the taxpayer.
    As I stated earlier, the uranium that will be extracted 
through this pilot program will generate roughly $4 billion, 
which my bill puts into the Uranium Decontamination and 
Decommissioning fund. That money will help clean up these DOE 
plant sites, which is so important to the communities where 
they are located, both for purposes of human health and safety 
and for economic development.
    I am pleased we are making progress to make this bad 
situation better by cleaning up these sites and trying to 
repair injured families, but there is still 40 years worth of 
environmental cleanup work left to do at these sites. This 
money will go a long way in advancing this cleanup and it is 
logical for this money to be used there.
    I now yield to the Ranking Member of the Subcommittee for 
his opening statement. I'd just like to thank the Ranking 
Member for working with me on getting the updated GAO report we 
will hear about today, and I hope he will join me as a 
supporter of this legislation.
    Before I yield, I would like to insert letters of support 
from Governor Steve Beshear and the United Steelworkers Union's 
International President.
                              ----------                              


 OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Rush. I want to thank you, Mr. Chairman; and I want to 
thank our distinguished guests, including our distinguished 
colleague from the other side, Senator McConnell, the Senate 
Minority Leader, as well as all the other guests for being here 
today. The minority leader's presence here today speaks to the 
importance of today's hearing on Chairman Whitfield's 
legislation to the good people of the great State of Kentucky.
    Chairman Whitfield and I have had conversations about the 
Energy and Revenue Enrichment Act, better known as the Kentucky 
Enrichment Act; and I hope and expect that we will be able to 
move this bill through this committee in a collegial and a 
bipartisan manner.
    Mr. Chairman, I also hope and expect that this can be a 
turning point toward a more collaborative and bipartisan 
approach for enacting other initiatives and other pieces of 
legislation in this committee that holds importance to both the 
majority and minority sides.
    With that being said, the Energy and Revenue Enrichment Act 
will launch a pilot program to re-enrich uranium tails that are 
currently stockpiled in yards in Paducah, Kentucky, and 
Portsmouth, Ohio. These two plants hold up to 40,000 and 20,000 
such tails, respectively. This bill will direct the Secretary 
of Energy to re-enrich these tails and sell them at a profit 
for the government. As written, the bill would then redirect 
the revenue from the sale of these tails to the Uranium 
Decontamination and Decommissioning Fund for environmental 
cleanup.
    This bill will also allow DOE to increase the domestic 
uranium supply from 10 percent to 15 percent for 4 calendar 
years.
    Mr. Chairman, this hearing is also in response to a letter 
that you and I wrote to DOE back on March 1 asking the agency 
to update its 2008 report on DOE's conditional options for 
dealing with these uranium tails. Of course, we have DOE here 
today; and they will testify on different options for handling 
these tails, as well as the value of selling these tails in 
today's global market.
    So, Mr. Chairman, I hope, sincerely hope, that my 
willingness to work with you on this issue is evident to all 
and that we will be able to move a bipartisan bill that will 
bring and maintain jobs for the good people of Kentucky and 
Ohio, while also ensuring that we have a transparent and open 
bidding process that brings forth the best value for the 
American taxpayers. Hopefully, Mr. Chairman, this bill will set 
the tone for a brand new era of collaboration and 
bipartisanship in addressing the important issues that all of 
our constituents face, yours and mine.
    I want to thank you, Mr. Chairman, and I want to again 
thank our distinguished guests; and I look forward to hearing 
from our witnesses and the experts on this issue.
    With that, I yield back the balance of my time.
    Mr. Whitfield. Thank you very much, Mr. Rush.
    Mr. Waxman, you are recognized for 5 minutes.

 OPENING STATEMENT OF HON. HENRY A WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman.
    Today, the subcommittee is examining H.R. 2054, Chairman 
Whitfield's legislation to direct the Department of Energy to 
enter into a contract to enrich its depleted uranium tails and 
then sell the enriched uranium on the market. The way that this 
bill is currently drafted, the only entity that the DOE could 
contract with for these enrichment services is the United 
States Enrichment Corporation, or USEC.
    When USEC was privatized in the 1990s, proponents said 
there would be many benefits from privatizing uranium 
enrichment. Wall Street underwriters and lawyers made millions 
of dollars on the transaction, but USEC failed to live up to 
many of these promises.
    Within a few years of being privatized, USEC abandoned 
important national initiatives, announced layoffs of more than 
800 workers, closed its Portsmouth facility in Ohio, sold off 
large amounts of uranium, whipsawing the domestic uranium 
industry.
    With USEC's planned closure of its Paducah, Kentucky, 
facility in 2012 fast approaching, we are being asked to direct 
DOE to enter into a sole-source contract with USEC to process 
what has become a valuable asset: DOE's uranium tails.
    DOE already has the authority under law to do this. So the 
question is, should DOE be forced by Congress to exercise this 
authority?
    I am concerned this legislation is not carefully drafted to 
yield the best deal for the American taxpayer.
    First, it is not clear how many hundreds of millions, maybe 
even billions, of dollars this contract would cost the American 
taxpayer. We should ask USEC about its capacity to execute this 
contract, but the company refused to testify, and the majority 
has not insisted that USEC send a witness today.
    Second, by ordering DOE to enter into a sole-source 
contract, it is almost guaranteed that the government won't be 
able to negotiate the best deal for its uranium tails. The way 
this legislation is drafted, as long as the government receives 
one penny more in revenue than it costs to re-enrich the 
uranium, the contract would be deemed ``economically viable'' 
and the Secretary of Energy would have no discretion not to 
accept it.
    Third, DOE has a number of options for managing its tails, 
as well as its excess enriched uranium. Another option, for 
example, would be to sell the tails to the highest bidder, 
which would avoid the costs of enrichment. This legislation 
charges forward with a highly prescriptive plan without giving 
DOE the authority to implement the best strategies for 
maximizing taxpayer value.
    The legislation purports to raise money for the Uranium 
Enrichment Decontamination and Decommissioning Fund, also known 
as the D&D Fund. The D&D Fund is used to clean up contamination 
from years of uranium enrichment activities in Kentucky, Ohio, 
and Tennessee. Adequately funding these cleanup efforts is 
important, but because of the flaws in the bill, it is not at 
all clear that the fund will receive any significant funding 
under this legislation.
    Moreover, responsibility for contributions needs to be 
apportioned fairly, with both the government and the utilities 
that purchased uranium paying their fair share. There is an 
estimated shortfall of more than $11 billion between the 
projected cleanup costs and authorized funding for the D&D 
Fund. Congress should reinstate the requirement that industry 
contribute to the D&D Fund.
    Finally, even though the uranium tails have become a 
valuable resource in recent years, re-enriching them with old 
technology may not be the best approach.
    Experts agree that the gaseous diffusion process, which was 
developed in World War II, is extremely inefficient and has 
high production costs. Gas centrifuge technology, which is 
currently being deployed in the U.S., uses about 5 percent of 
the electricity that is consumed by the gaseous diffusion 
technology used in Paducah. Using this more efficient 
technology for enriching the tails may generate more resources 
for the D&D Fund than using the old technology.
    I hope we will be able to examine some of these issues 
today. I understand the chairman intends to mark up his 
legislation the day after tomorrow. That gives us a short 
period of time to refine this legislation. I hope the chairman 
will work with us to make this legislation a good deal for 
taxpayers.
    I thank the witnesses for appearing today, and I look 
forward to their testimony.
    Mr. Whitfield. Thank you very much, Mr. Waxman.
    Before I introduce Senator McConnell, I would like everyone 
to look at this. These are some of the canisters--each one of 
them weighs 14 tons--at Paducah, Kentucky; and the earliest 
ones have been there for 60 years. This has been an issue for 
60 years on the best way and how do we clean up this material.
    With that, at this time it is my pleasure to introduce our 
first witness. As I said, it is Senator Mitch McConnell, senior 
Senator of Kentucky and Republican Leader of the U.S. Senate, 
who has introduced similar legislation on the Senate side.
    So, Senator McConnell, welcome. We appreciate your taking 
time to be with us this afternoon, and you are recognized for 
your opening statement.

STATEMENT OF THE HON. MITCH MCCONNELL, A UNITED STATES SENATOR 
               FROM THE COMMONWEALTH OF KENTUCKY

    Mr. McConnell. Thank you very much, Mr. Chairman, 
Congressman Rush, and members of the subcommittee. I appreciate 
the opportunity to be here to talk about an issue that 
Congressman Whitfield and I have been dealing with for a long 
time. In fact, throughout my time in the Senate, this facility 
and its related issues have dominated a big part of my career 
and I know Congressman Whitfield's as well.
    Where we are is we know this facility is going to be closed 
down. It has been located, as Congressman Whitfield said, along 
the Ohio River for nearly 60 years. It has enriched uranium for 
use in America's defense and commercial nuclear reactors. 
Today, Paducah is home to the only domestic facility enriching 
uranium, making it a critical component of our Nation's energy 
security.
    The story of uranium enrichment in Paducah begins in 1950, 
when the site was selected for the construction of a new 
gaseous diffusion plant. For many years, uranium was enriched 
to support our national security and then to support our energy 
needs. However, after decades of work, it was revealed that 
many of these employees were exposed to deadly toxins. The 
Department of Energy failed to put certain protections in place 
for these workers, and it was up to Congress to set them right.
    I wish I could say that the Department of Energy has been 
quick to recognize its shortcomings over the years and then 
move swiftly to correct them. The sad fact is they have not, 
regardless of which party controlled the Department. As a 
result, Chairman Whitfield and I have frequently been forced to 
step in and challenge the bureaucracy to live up to the law.
    In the late 1990s, we learned about the dangers Paducah's 
workforce had been exposed to, and we adopted a law to make 
sure that the workers were compensated for their injuries. 
Early last decade, DOE had to be forced--literally forced 
against its will--to implement an effective worker health 
screening program for workers at Paducah, Portsmouth, and Oak 
Ridge, Tennessee.
    Time and time again, DOE shortchanged cleanup efforts at 
the site, requiring Congress to find resources elsewhere to 
make up for their shortcomings. When DOE dragged its feet in 
implementing a law to convert uranium waste at the site, I 
helped secure passage of legislation to require groundbreaking 
on a site by a date certain--in other words, literally make 
them open the project by a date certain. Even after passing two 
laws mandating action, DOE's efforts were still plagued with 
countless bureaucratic delays and disputes.
    And 4 years ago, we asked the Department what its plans 
were for depleted uranium tails, the subject of this hearing 
here today; and here we are today again, 4 years later, asking 
why the Department does not have a plan that includes Paducah.
    I don't want to sound like a broken record, but you can see 
why Congress' patience has worn a little thin while waiting for 
the Department to step up to do the responsible thing when it 
comes to these enrichment facilities. At this point, the 
Department has forfeited the benefit of the doubt.
    The Department of Energy is in possession of 40,000 
cylinders--the chairman just showed us a picture of it--in 
Paducah and 20,000 cylinders in Portsmouth containing roughly 
700,000 metric tons of depleted uranium hexafluoride from 
former enrichment operations. The substances, more commonly 
known as tails, sitting in these cylinders, exposed to the 
elements, poses a myriad of health, safety, and environmental 
risks. Paducah has the capacity to convert this toxic substance 
into a more stable form for disposition, and that will be 
necessary at some point.
    We can keep kicking the can down the road, but this is 
going to be necessary at some point.
    However, it has also the capacity to re-enrich some of this 
material into marketable uranium, which could then be sold to 
benefit the taxpayers. I would ask those present here today to 
consider this scenario: You have materials right in your own 
backyard, you have facilities to turn it into a sought-after 
product worth at least $1 billion, maybe more, and a workforce 
trained and ready to do the work. Do you use that asset in a 
way that saves jobs, or do you let the Department slowly 
dispose of all of this valuable material and in the meantime 
1,200 people collect unemployment? I know which option sounds 
like the common-sense solution to me.
    As the chairman well knows, the unemployment rate in 
Kentucky is 10 percent, worse than the national unemployment 
rate of 9.1. There are 1,200 jobs that would be immediately 
eliminated by the plant closure. But that's not all. Hundreds 
of additional jobs in the area would be cut by a shuttered 
Paducah plant, potentially impacting the entire economy of far 
western Kentucky. I would hate to see in this current time of 
fiscal crisis and serious unemployment a missed opportunity for 
the government to keep people employed and reduce the deficit 
at the same time. Keep people employed and reduce the deficit 
at the same time. What is a better outcome than that?
    I know these people. I have seen how hard they work. They 
are obviously concerned with their own employment, but they 
also want to help the country. Let's allow them to do that. At 
a time of fiscal crisis and double-digit unemployment, a plan 
to re-enrich these tails helps employ people and reduce our 
deficit. It has been a long time I have heard anything out of 
Washington that makes as much sense as that.
    Everyone knows Kentucky is a coal State, which we are, but 
we are also a nuclear State. Paducah is a community that 
enthusiastically supports nuclear energy. Allowing the Paducah 
plant to close in 2012 and waiting years for the Department of 
Energy to address what to do with the existing depleted 
uranium, I believe, is both shortsighted and irresponsible.
    So let me be very clear. We are not asking for a government 
intervention; we are asking that the government live up to its 
responsibilities and properly utilize inventory and facilities 
it already owns, in the best interest of the taxpayers.
    So I come here today not just as the Republican Leader of 
the Senate but as a concerned American. When it comes to 
nuclear energy, we have seen this administration abandon plans 
and millions in taxpayer dollars before without much 
consideration of the consequences. Take for example its 
unwillingness to follow through on the nuclear storage site 
Yucca Mountain, paralyzing further nuclear energy production in 
this country. We cannot let the Department turn its back on 
these facilities, these workers, or these communities again.
    So that is why I am grateful to you, Mr. Chairman, for 
crafting the Energy and Revenue Enrichment Act to give the 
Department of Energy the flexibility it needs to temporarily 
re-enrich tails at Paducah and Portsmouth. I am happy to be the 
sponsor of that bill in the Senate, along with my colleague 
Rand Paul; and it is my hope that we can work with our 
counterparts in the House and Senate to find a fiscally 
responsible solution.
    I want to thank you very much, Mr. Chairman, for the 
opportunity to be here and commend you once again for your 
extraordinary leadership on this subject. I don't know where we 
would be on this issue without Congressman Whitfield. So I 
thank you for what you have done, and let's continue to work on 
it together and see if we can get a solution not only for 
Kentucky but for the Nation. Thanks so much.
    [The prepared statement of Senator McConnell follows:]




    
    Mr. Whitfield. Senator McConnell, thank you very much. I 
know that you have a commitment at 2:00, but we do appreciate 
you coming over and giving your opening statement. I look 
forward to working with you on this legislation.
    At this time, I would like to call up the witnesses for the 
second panel. We have Mr. Gene Aloise, with the Government 
Accountability Office, Director of Natural Resources and 
Environment; and we have the Honorable Daniel B. Poneman, who 
is the Deputy Secretary at the U.S. Department of Energy.
    Gentlemen, we appreciate both of you being here today us 
today. We look forward to your testimony and thoughts on this 
issue.
    Mr. Aloise, we will start with you.

 STATEMENTS OF GENE ALOISE, DIRECTOR OF NATURAL RESOURCES AND 
    ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE; AND THE 
HONORABLE DANIEL B. PONEMAN, DEPUTY SECRETARY, U.S. DEPARTMENT 
                           OF ENERGY

                    STATEMENT OF GENE ALOISE

    Mr. Aloise. Mr. Chairman, ranking member, and members of 
the subcommittee, I am pleased to be here today to discuss 
DOE's options for its supply of depleted uranium, also known as 
tails.
    As you know, since the 1940s, the government has been 
processing natural uranium into enriched uranium, which 
increases the concentration of the isotope uranium 235, making 
the material useful in nuclear weapons or power reactors. The 
production of enriched uranium over many decades has resulted 
in about 700,000 metric tons of leftover tails which are now 
stored at uranium enrichment plants in Portsmouth, Ohio, and 
Paducah, Kentucky.
    Although the tails have historically been considered a 
waste product, increases in uranium prices may give DOE options 
to use some of the tails in ways that could provide revenue to 
the government. DOE's potential options include selling the 
tails as is, re-enriching them, or storing them indefinitely. 
While in our view DOE's legal authority to sell the tails as is 
is doubtful, DOE has the authority to carry out the re-
enrichment and storage options.
    According to DOE's comprehensive uranium management plan, 
DOE stated that it would consider selling the tails or re-
enriching them. However, to date, DOE has not done so and 
apparently has no current plans to sell or re-enrich this 
material.
    At current uranium prices, we estimate DOE's tails to have 
a net value of $4.2 billion. However, we would have to 
emphasize that this estimate is very sensitive to changing 
uranium prices, which recently have been volatile, as well as 
the availability of enrichment capacity.
    Our estimate assumes the May, 2011, published uranium price 
of $160 per kilogram of natural uranium in the form of uranium 
hexafluoride and $153 per separative work unit, the standard 
measure of uranium enrichment services. Our estimate also 
assumes the capacity to re-enrich the higher concentration 
tails and subtracts the cost of the enrichment services. It 
also takes into account the cost savings DOE would realize from 
the reduction in the amount of tails that needed conversion to 
a more stable form for storage as well as the cost of 
stabilizing any residual tails.
    Based on 2010 total U.S. Demand for uranium, the total 
amount of natural uranium produced as a resulted of enriching 
the tails would be enough to supply all of the U.S. demand for 
about 3-and-a-half years.
    Importantly, a sharp rise or fall in prices could greatly 
affect the value of the tails. For example, our March, 2008, 
report estimated that the tails had a net value of $7.6 
billion. Prices for uranium have since fallen, resulting in the 
now-lower estimate of the value of the tails. Furthermore, 
there is no consensus among industry whether uranium prices 
will rise or fall in the future or the magnitude of any future 
price changes. Also, the introduction of additional uranium 
onto the market by the sale of large quantities of DOE's 
depleted natural or enriched uranium could lead to lower 
prices.
    To help minimize the negative effects of DOE's sales on 
domestic uranium producers, DOE has limited its sales to no 
more than 10 percent of the domestic demand for uranium 
annually. However, this limit lengthens the time necessary to 
market DOE's uranium, increasing the time DOE is exposed to 
swings in the price of uranium. Also, the enrichment capacity 
for re-enriching tails may be limited, and the cost of 
enrichment services are uncertain.
    Uncertainty about the future of uranium prices and the cost 
of availability of enrichment services makes it difficult to 
place a precise value on DOE's tails. As a result, it is 
possible that DOE could receive significantly more or less than 
the $4.2 billion we estimate the tails are currently worth.
    In conclusion, Mr. Chairman, as was the case when we 
reported in March, 2008, the U.S. Government has an opportunity 
to gain some benefit from the material that once was considered 
a liability. However, it is unclear to us whether DOE can act 
quickly enough to changing market conditions to achieve the 
greatest possible value from its uranium inventories.
    Mr. Chairman, that concludes my statement; and I would be 
happy to respond to any questions you or members of the 
subcommittee may have.
    [The prepared statement of Mr. Aloise follows:]




    Mr. Whitfield. Thank you very much, Mr. Aloise.
    At this time, I would like to recognize Mr. Poneman from 
the Department of Energy. You are recognized for 5 minutes.

          STATEMENT OF THE HONORABLE DANIEL B. PONEMAN

    Mr. Poneman. Thank you, Mr. Chairman. Thank you, Ranking 
Member Rush and distinguished members of the committee. I 
appreciate this opportunity to appear before you to comment on 
the Energy and Revenue Enrichment Act of 2011 and to provide 
information on the management and disposition of the Department 
of Energy's depleted uranium.
    The Department holds a significant inventory of uranium in 
various forms, including highly enriched uranium, low enriched 
uranium, natural uranium, and depleted uranium hexafluoride, 
all of which must be actively managed. The majority of this 
inventory is depleted uranium the Department plans to process 
and dispose of as waste.
    The uranium equivalent contained in the remaining inventory 
corresponds to almost 3 years of supply requirements for U.S. 
Nuclear power plants. This uranium has both monetary value and 
can help achieve vital departmental missions in maintaining our 
domestic nuclear fuel infrastructure. Much of the inventory 
requires further processing before it would be suitable for 
commercial use.
    The Department's depleted uranium hexafluoride came from 
the government's prior uranium enrichment activities. This 
material would require additional processing.
    The portion of this material with higher assay levels that 
is potentially marketable in its current form is subject to the 
market price of uranium. This uranium could constitute at least 
10 percent of DOE's total inventory of depleted uranium 
hexafluoride.
    The Department has broad authority under the Atomic Energy 
Act to sell, transfer, dispose of, or utilize its inventories 
of uranium. The Department must act consistently with other 
relevant statutory provisions, including section 3112 of the 
USEC Privatization Act. Section 3112 imposes limitations on 
certain transactions, including the sale and transfer of 
uranium to certain domestic users. Under this section, the 
Secretary of Energy must determine that a proposed sale or 
transfer of uranium ``will not have an adverse material impact 
on the domestic uranium mining conversion or enrichment 
industry.''
    The Department believes that introducing departmental 
inventories to the domestic market in amounts of no more than 
10 percent of the average annual domestic demand would not have 
an adverse material impact on domestic uranium industries. The 
10 percent guideline is in fact one of industry's own 
recommendations regarding DOE's uranium management. However, we 
anticipate that in a given year the Department may introduce 
less than that amount into the domestic market and in some 
years more for certain special purposes. Regardless of whether 
a transfer is above or below 10 percent, covered transactions 
must comply with section 3112.
    Within the Department, the Offices of Nuclear Energy, 
Environmental Management, and the National Nuclear Security 
Administration are collectively responsible for uranium 
inventories. These offices coordinate transactions that are 
planned or under current or future consideration for 
disposition of DOE's uranium.
    They also developed the Department's excess uranium 
inventory management plan, which provides a strategy for the 
sale or other disposition of this uranium. The Department is 
committed that its management of excess uranium inventories, 
one, complies with all legal requirements; two, maintains 
sufficient uranium inventories at all times; and, three, 
supports a strong domestic nuclear industry.
    DOE has established priorities for the transfer of uranium 
through 2013. This March, Secretary Chu announced DOE's 
determination and market impact analysis authorizing uranium 
transfers to fund accelerated cleanup activities at the 
Portsmouth site in Piketon, Ohio. The determination found that 
the proposed transfers will not have an adverse impact on the 
domestic uranium industry. The total proposed transfers through 
2013 are approximately 2,000 metric tons of uranium per year, 
or about 10 percent of the U.S. reactor demand.
    We understand that H.R. 2054 seeks to enrich the 
Department's high assay depleted uranium hexafluoride to a 
usable form of uranium, funding the enrichment through the sale 
of the enriched material, assuming title to and responsibility 
for disposition of depleted uranium or a transfer of a portion 
of the enriched material in exchange for enrichment services. 
The amount of funding needed to enrich depleted uranium tails 
is significant and not currently within the overall priorities 
for the Department as supported by the President's budget. As 
acknowledged in the legislation, transfers of uranium for 
enrichment might lead to a volume in excess of our annual 
guideline of no more than 10 percent of uranium requirements at 
domestic commercial reactors.
    We also believe certain provisions of the bill, while well-
intentioned, may complicate the Department's ability to meet 
its own missions. One of our objectives is to maintain 
sufficient uranium inventories at all times to meet the 
Department's current and foreseeable needs. Specifically, by 
funding enrichment services through the transfer of the 
enriched uranium, the bill might impair our ability to meet 
mission priorities such as national defense programs requiring 
domestic origin uranium. Also, several sections of the bill 
appear to grant the Department authorities it already has. The 
appearance of grants of authorities in H.R. 2054 could lead to 
confusion over the Department's existing authorities.
    In conclusion, in considering the management and 
disposition of the Department's uranium inventory, including 
enriching high assay depleted uranium tails, a variety of 
factors need careful assessment.
    Thank you for the opportunity to testify. I look forward to 
answering any questions you have.
    [The prepared statement of Mr. Poneman follows:]




    Mr. Whitfield. Thank you, Mr. Poneman, for your testimony 
and taking the time to be here.
    When I listened to Mr. Waxman's opening statement, he 
almost convinced me to oppose this legislation. But when you 
look into the depth of this legislation and the real 
accomplishment of this legislation, it is very clear that this 
is an answer to a significant problem.
    Number one, it is not going to cost the government any 
money to implement this legislation. Number two, it is going to 
create revenue for the government. Number three, it is going to 
save 1,200 jobs. Number four, it is going to expedite the 
cleanup of the canisters, some of which have been there for 60 
years.
    Now, I understand the requirement to certify that we are 
not going to damage the uranium mining industry; and that 10 
percent ceiling that you referred to, that is not in statute 
per se, is it? That is a judgment that the Department made; is 
that correct?
    Mr. Poneman. Mr. Chairman, that is a guideline that is our 
interpretation of the statute. You are correct.
    Mr. Whitfield. Right. It is in the statute that you have to 
certify it won't be damaging to the uranium industry?
    Mr. Poneman. Right.
    Mr. Whitfield. And you all have determined that you can 
sell up to 10 percent of the annual need without doing that.
    And I would just say to you that this legislation is a 
pilot project, and we simply raise it from 10 to 15 for that 
period of time.
    Another point that you touched on was your concern about 
providing sufficient supplies for the national defense. You and 
I know that the only other place that is enriching any uranium 
in America is in New Mexico, and it is not fully in business 
yet, is it? Aren't they still undergoing trials?
    Mr. Poneman. I think they are operating, sir. But it is a 
different plant with different ownership and different legal 
regime.
    Mr. Whitfield. Well, a centrifuge, for one thing.
    But when you look at the practical aspects of this, as we 
said, these things are 14-ton canisters. And if you start 
transporting them around the country, and they are contaminated 
to a degree--we know that because of recent reports--and the 
site at Paducah is already contaminated, correct?
    Mr. Poneman. Yes, sir.
    Mr. Whitfield. So, number one, moving 14-ton canisters 
around the country, say to New Mexico, would be quite costly, 
wouldn't it, to transport them?
    Mr. Poneman. There clearly is a cost, Mr. Chairman, 
associated with the transport of the canisters.
    Mr. Whitfield. And it would certainly contaminate that 
facility out there, I am assuming. What is your opinion on 
that?
    Mr. Poneman. In other words, if you were to, Mr. Chairman, 
take the contaminated gas out of the canisters and inject it 
into some cascade, presumably something would have to be done 
with the contaminants you have taken out or, indeed, I suppose 
it could taint or otherwise deposit on the centrifuge rotors.
    Mr. Whitfield. Yes. The bottom line is this: Yes, we could 
take those additional steps. It would certainly cost a lot of 
additional money. And I would think that the Department of 
Energy would welcome this legislation, to be truthful about it, 
because it helps solve your problem and it helps solve our 
problem. It provides revenue. You and I know that there is a 
shortage of funds for the Decontamination and Decommissioning 
Fund. In fact, it is my understanding there is about $4 billion 
in the fund right now; and in order to clean it up completely, 
my understanding is it would be like $29 billion; is that 
correct?
    Mr. Poneman. The full, sum total I couldn't tell you with 
specificity, but we are short.
    Mr. Whitfield. But it is more money than we have?
    Mr. Poneman. It is much more than we have. That is true, 
sir.
    Mr. Whitfield. And at least this legislation would provide 
additional funding for that fund?
    Mr. Poneman. Yes.
    Mr. Whitfield. We know it could be done safely at Paducah. 
There is no question about that. The training and equipment is 
there, and there is no problem with it.
    So I understand the Department of Energy's concerns, but I 
hope as we move forward with this we can keep our dialogue 
open, because it seems to me that we are trying to accomplish 
the goals that we have set for ourselves and DOE has set for 
itself.
    Mr. Poneman. Thank you, Mr. Chairman.
    If I may comment, there is much in what you say with which 
we wholeheartedly agree. I always find on tough issues it is 
always good to start with some first principles.
    One of the first things you said, Mr. Chairman, was we have 
invested in this tremendous asset all throughout the Cold War. 
Indeed, Senator McConnell said the same thing when he sat 
before you. It is in our interest, it is our right and our 
obligation to optimize the value of that resource in which we 
have invested as a Nation. So I think the only question is the 
prudent way in which to do that.
    I want to acknowledge Ranking Member Rush. I think this is 
something we can do in a bipartisan manner. Frankly, I know of 
few issues more than the nuclear issue on which we can so join.
    So, really, Mr. Chairman, I think it comes down to how do 
we prudently do this, given all of the facts we have lying 
before us. We have this material: 60,000 of these cylinders; 
40,000 in Paducah; 20,000 in Piketon, Ohio. And then the 
question presented is, now that uranium prices have reached a 
level that they didn't use to attain at which one can 
contemplate doing this, how do we do this in a manner that 
optimizes the value of that material to the American taxpayer?
    So we have to take into account, A, the market--and, as Mr. 
Aloise noted, the market is a volatile thing, going up and 
down--and, B, we do have to be sensitive not only because the 
statute requires us under the USEC Privatization Act, but 
because it would not optimize the value to the American people 
if we were to dump all of this material at the same time 
because it would crash the market. Then you wouldn't get the 
value you are looking for. So we have to be measured in how we 
put this into the market.
    Mr. Whitfield. That is why we put a 15 percent limit on it.
    Mr. Poneman. That is why we have to be measured in how we 
put it.
    And we also have to take into account the cost associated. 
See, up until now, we have been putting natural uranium which 
has a market out into the market. That has a value, and people 
just purchase it.
    This, in order to gain the value, you have to get the assay 
back up to the natural uranium of 0.7 percent, so there is 
going to be a cost associated with that. How much the taxpayer 
gets is going to depend on netting out the revenue received 
from the cost to generate the valuable product.
    So I think, Mr. Chairman, in short, the sentiments--
clearly, the objectives you articulate--the national defense, 
the environmental protection, promoting jobs, and promoting the 
restart of the American industry--these are ones that we 
strongly agree with; and we would be very open to working with 
you on a dialogue to figure out a way to optimize these 
interests.
    Mr. Whitfield. Thank you.
    Mr. Rush, you are recognized for 5 minutes.
    Mr. Rush. Thank you, Mr. Chairman.
    Mr. Poneman, in your opinion, DOE's opinion, how many 
companies have the capacity and the capability to re-enrich 
these tails as this legislation calls for?
    Mr. Poneman. Well, Ranking Member, there are currently two 
operating facilities. We have, of course, the Paducah gaseous 
diffusion plant, and there is the facility in New Mexico that 
the chairman referred to. There is a third facility in Idaho 
that is behind that is in the process of--it has gotten a loan 
guarantee, and they are going to be building that one as well. 
But those would be the facilities in the United States that 
would have the capability to enrich uranium.
    Mr. Rush. This is an issue that there should be some 
bipartisanship on, that we can agree on, these nuclear matters. 
I want to see these uranium tails disposed of, and I want to 
see the American people gain something from the sale of them, 
if they are to be sold.
    But my concern right now is there is no significant 
bipartisanship. There is bipartisanship that exists here, but 
it seems like we are rushing to get this done and we are trying 
to direct DOE, force DOE to do something that may not be in the 
interest of the American taxpayer in the long run.
    You mentioned the fact that there would be some costs in 
terms of taking these tails and bringing them up to the level 
and cost of natural uranium; is that correct?
    Mr. Poneman. Yes, sir.
    Mr. Rush. Do you think if, in fact, there is one of these 
companies that deals with this and if they were successful in 
terms of getting an agreement with the DOE that they should 
share some of the cost for bringing these tails up to where 
they are marketable?
    Mr. Poneman. Mr. Ranking Member, I would say, since the 
material has a value, the American way, if I may say, to make 
sure that the American taxpayer gets the best value for that 
investment is to have it out to bid. And then whoever has the 
least cost production would be able to offer the best price to 
the Department of Energy. That would be how I recommend this go 
forward.
    Mr. Rush. So you are saying this should be competitively 
bid?
    Mr. Poneman. I would say, if it were competitively bid, you 
would have a better chance of getting maximum taxpayer value 
from it.
    Mr. Rush. All right. And the absence of a competitive 
bidding process would have what kind of results, as far as you 
are concerned? If this bill were to go forward and become law 
without a provision for competitive bidding, what would be the 
results for DOE and the American taxpayer?
    Mr. Poneman. Let me just say, sir, that there are a number 
of factors that one may wish to take into account.
    I think the chairman is referring to the fact that the only 
unencumbered indigenous facility we have is Paducah. So there 
are, if you will, certain noneconomic factors that come into 
play. But if you are looking at a straight economic analysis, 
the optimal value to the U.S. taxpayer I think would come from 
a competitive bid.
    Mr. Rush. I yield back, Mr. Chairman.
    Mr. Whitfield. I might just say that, in this legislation, 
we say, enter into a contract that the Secretary finds 
economically viable. So it is not like we are directing you to 
enter into a contract. It has to be economically viable. I 
would just say that the concern we have is contamination is a 
serious issue and the transportation costs are serious as far 
as being competitive.
    At this time, I recognize the gentleman from Oregon, Mr. 
Walden, for 5 minutes.
    Mr. Walden. Thank you very much, Mr. Chairman.
    I am curious about these canisters, if I can use your chart 
here. I can see them up close. It looks like they are rusting. 
Is that something we ought to be concerned about, Mr. Poneman?
    Mr. Poneman. I do believe--and my eyesight is not that 
good, sir, but I do believe the condition of the canisters is 
absolutely something that we need to be very mindful of and 
that they need to be continually monitored to be sure there is 
no risk.
    Mr. Walden. As I look at that, I think of my own region, 
Hanford, which the Department of Energy has had jurisdiction 
over; and I heard echoes of that as I listened to Senator 
McConnell talk about what DOE has done over decades there, 
including we have Hanford, obviously, right next to the 
Columbia River. There is really bad stuff buried in tanks that 
leak, and I know DOE's involvement in cleanup activities there 
will probably go on for your lifetime and mine, and beyond 
that--and hopefully successfully, and sooner rather than later.
    I am just curious. We have also got the chem-demil facility 
just across the river in my district for all of the chemical 
weapons storage. We are going through that on a regular time 
basis. Is one of the issues here you don't have or you have 
unclear authority to move forward on reprocessing this? I am 
trying to understand the GAO report and finding.
    Mr. Poneman. There is, if I understand it correctly, 
Congressman, a difference of view. The United States Department 
of Energy believes that under the Atomic Energy Authority Act 
of 1954, as amended, we have adequate legal authority to use 
and dispose of that material. Mr. Aloise noted two actions he 
thought that we had authority for. Our general counsel tells me 
we have authority to do all three, including the option that 
GAO has concerns about. So I do think we have the authority.
    But if I may, sir, because I think you raise a very 
important problem, I have spent a lot of time out at Hanford. I 
have seen that beautiful Columbia River, and we are responsible 
for the 53 million gallons of tank waste out there. And we are 
trying our best so it is finished in our lifetime, sir. But we 
take this--it is not only a legal responsibility. It is a moral 
responsibility.
    I feel the same way about the material at Paducah. You 
know, these people invested in creating the materials that 
defended us all throughout the Cold War. So I think we owe it 
to them to be responsible in stewarding that asset.
    Mr. Walden. I do, too.
    Obviously, there are people who have gone before both of us 
who didn't hold quite that same opinion, or chose to look the 
other way. We have got the down-winder issue. You have got the 
leaking tanks. You have gotten not always a straight story from 
the Federal Government when it has come to Hanford.
    So I guess I look at this and say: How long does this sit 
here? What is its condition as we go forward? I tie the two 
because the chem-demil facility, we were concerned about 
degradation of those canisters. I realize they are not this. 
They were a chemical weapon. But the mustard gas and DX and 
other things there, it seems like we ought to get after this.
    Mr. Aloise, talk to me about your report in terms of the 
conflict here in authorities.
    Mr. Aloise. Well, Congressman, there are basically three 
avenues DOE can go. They can sell the tails as is, they can re-
enrich them and sell them, or they can store them. It is our 
view that they don't have the necessary authority to sell the 
tails as is. We are basing that on our read of the USEC 
Privatization Act.
    Mr. Walden. If I may interrupt you for a second, this is 
where you and DOE disagree. You think you have the authority. 
You think they don't.
    Mr. Aloise. Right. It would be a very simple fix for the 
Congress to----
    Mr. Walden. And this bill does that?
    Mr. Aloise. No. But we recommended in the past that 
Congress consider adding the words ``depleted uranium'' either 
to amending the USEC Privatization Act or some other piece of 
legislation to give DOE that authority.
    But, as Mr. Poneman said, DOE believes they have that 
authority.
    Mr. Walden. OK. And what other conflicts do you see here 
that hold them up from doing this?
    Mr. Aloise. It is just a policy call at this point.
    Mr. Poneman. I would just add, Congressman, since I think 
it is directly apposite to your comment, precisely because we 
look at those vast fields of tanks, we have built in both 
Paducah and near Portsmouth what we call these DUF6 conversion 
facilities. And, up until recently, we thought we were going to 
disposition all of those canisters as waste. It is indeed one 
of the things that we have done to say, now that we have some 
value that is inherent in those canisters, we shouldn't just 
disposition all of it; we should look to see if we can get some 
value for the taxpayers.
    Mr. Walden. Understood. So when you talk about disposition 
of waste, I assume that means storage? This reprocessing idea?
    Mr. Poneman. What I am referring to is uranium hexafluoride 
is a very corrosive gas, sir; and, therefore, we want to turn 
it into a much more stable oxide form. That is the process that 
would happen in these so-called DUF conversion facilities.
    Mr. Walden. My time has expired. Thank you, gentlemen, for 
your testimony; and thank you, Mr. Chairman.
    Mr. Whitfield. Mr. Walden did raise one issue I would like 
to follow up on. The GAO said that it costs, just for the 
Paducah plant, like $4 million a year just to maintain the 
canisters.
    Mr. Rush. Mr. Chairman, I must object right now to the 
procedure. Mr. Waxman is here waiting.
    Mr. Whitfield. Sorry. I just got so carried away.
    Mr. Waxman. Mr. Chairman, I ask unanimous consent you may 
be given a minute.
    Mr. Whitfield. Thank you very much.
    I just want to know, is that $4 million annual cost correct 
or not?
    Mr. Poneman. Actually, sir, overall, at Paducah, we are 
spending on the order of $140 million per year on the 
activities that we are doing out there. I don't know where the 
exact figure of $4 million comes from.
    Mr. Whitfield. Thank you.
    I recognize the gentleman from California for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman.
    I am concerned about whether this bill gets the best deal 
for taxpayers. The bill requires DOE to enter into a contract 
with a company that has experience operating an enrichment 
plant under authorization of the Nuclear Regulatory Commission. 
Section 2 of the bill then defines an enrichment plant as a 
uranium enrichment plant owned by the Department of Energy. Mr. 
Aloise, can you tell me which enrichment facility would 
qualify? Is it just this one enrichment facility at Paducah 
that would qualify?
    Mr. Aloise. There is only one that runs a DOE facility.
    Mr. Waxman. So it would uniquely benefit USEC. That is why 
I said in my opening statement that it would be helpful if USEC 
had been here to testify. If USEC were here, we could examine 
how they see themselves fitting into this legislation. 
Unfortunately, they refused to testify.
    The bill directs DOE to enter into a contract that is 
economically viable. Those are the terms, economically viable. 
But section 3(a)(3) of the bill states that a contract shall be 
considered economically viable if ``the costs to the U.S. of 
the re-enrichment are less than therevenue anticipated from the 
sale of the re-enriched uranium.''
    Mr. Poneman, if USEC proposed enriching the uranium tails 
at a cost which was one penny less than the revenue expected 
from the sale of the re-enriched uranium, would the contract be 
economically viable under this bill?
    Mr. Poneman. Congressman, I was reading this language last 
night; and I concur that 3(a)(3), a one penny delta, would 
constitute viability. But, I must say, sir, that it seems to be 
somewhat inconsistent with some of the other language in the 
bill, so I was trying to reconcile it. But that clause 
certainly reads that way, sir.
    Mr. Waxman. If this bill were to become law, would DOE have 
the option of refusing to enter into a contract that met this 
definition of economic viability, even though it provided so 
little return to the taxpayer?
    Mr. Poneman. This is where I was struggling. I am a 
recovering lawyer, sir, but I don't practice law at the moment. 
There is other language that talks about this.
    Mr. Waxman. We won't hold that against you. It is a problem 
shared by others.
    Mr. Poneman. Thank you. In 3(a)(1), it says Secretary shall 
seeks to maximize the financial return to the Federal 
Government in negotiating the terms of such contract. I was 
trying to reconcile how to read that term in the context of 
3(a)(3), and I was having some trouble, sir.
    Mr. Waxman. So it doesn't appear this is giving DOE 
discretion. It sounds likes they are being mandated.
    Mr. Poneman. Our concern is precisely that. Something that 
has been granted to the Department as a discretionary power 
that we have to maximize the taxpayer return would perhaps be 
inadvertently curtailed by this.
    Mr. Waxman. Mr. Aloise, what safeguards do you see in this 
bill which would prevent USEC from overcharging DOE for the 
enrichment services?
    Mr. Aloise. We would hope that if this bill got passed DOE 
would implement it in a manner that would benefit the 
government much more than we have just discussed here.
    Mr. Waxman. Well, USEC is a publicly traded company. It is 
obligated to its shareholders to maximize its profits. USEC 
will have no reason to do anything other than to charge the 
maximum possible price. That would be good for its investors, 
but it won't be good for the D&D Fund, the contaminated sites 
in Ohio, Kentucky, and Tennessee, or workers who engage in 
contamination cleanup.
    It seems to me that forcing the DOE to enter into a 
contract under statutory language that prevents the Department 
from having sufficient leverage to negotiate a fair contract 
will not adequately protect the American taxpayers.
    This bill is being touted as a way to fund the Uranium 
Decontamination and Decommissioning Fund and provide money to 
clean up the enrichment sites. The Energy Policy Act authorized 
contributions of $7.2 billion to clean up enrichment sites, and 
liability was apportioned between the government and the 
utilities that purchased uranium. In 2007, DOE said there was a 
difference of $11.9 billion between the projected cost of 
cleanup and funds authorized by the Energy Policy Act. Mr. 
Poneman, is there still such a huge discrepancy between the 
amount of available resources and the amount of resources 
needed to clean up these enrichment sites?
    Mr. Poneman. Congressman, I can't give it to the penny, but 
there is still a significant shortfall, yes. That is why we 
have sought in the President's budget to renew the collection 
of those D&D contributions from the utilities.
    Mr. Waxman. Has the administration proposed reinstating the 
industry contribution to the D&D Fund?
    Mr. Poneman. Yes, sir.
    Mr. Waxman. The fund is clearly underfunded. Congress has 
to take steps to make sure the environmental mess created by 
these enrichment sites is cleaned up. However, this bill does 
not guarantee that any money would be raised for the D&D funds. 
The people of Paducah and Piketon and Oak Ridge need assurances 
that their communities will be made whole. We need to provide 
for real funding for the D&D Fund, and it just makes sense that 
the utilities that benefited from enrichment activities pay 
their fair share.
    I appreciate this opportunity to ask you questions. We may 
have additional questions. Either I will submit them in writing 
or, if the chairman permits and I am available, we will do a 
second round.
    Mr. Whitfield. Thank you, Mr. Waxman.
    It is time to recognize the gentleman from West Virginia, 
Mr. McKinley, for 5 minutes of questions.
    Mr. McKinley. Thank you, Mr. Chairman.
    To the GAO, this report has just come out; is that correct?
    Mr. Aloise. The testimony today, issued today.
    Mr. McKinley. If you had any second thoughts, 
reconsideration, now that you finalized your report that would 
change your opinion about the revenue--potential revenue that 
could come in?
    Mr. Aloise. No, sir.
    Mr. McKinley. No, sir? OK.
    Then to Mr. Poneman, please. You have had a chance, I 
suppose--have you read the report yet?
    Mr. Poneman. The one from today?
    Mr. McKinley. Yes.
    Mr. Poneman. No, sir, I have not.
    Mr. McKinley. From what you have heard in the testimony, do 
you have any disagreement with it?
    Mr. Poneman. Just, Congressman, the one that I mentioned, 
which is that we believe that already under the 1954 Atomic 
Energy Act we possessed all authority we need within the 
Department to disposition this material.
    Mr. McKinley. I guess the focus I am on is more as a 
revenue.
    Mr. Poneman. Oh----
    Mr. McKinley. What I am referencing is that this thing 
could generate 3 to 7 billion dollars.
    Mr. Poneman. Actually, our assessments are different from 
that. I have to caveat that sir, because it is something that 
depends on a market that is constantly changing. But I think 
the numbers we have were on the order of 830 million----
    Mr. McKinley. Could you provide us then with some of your 
own--so we could compare the two with your analysis between 
that. If could you do that for us, please.
    Mr. Poneman. I am happy to. It would have to be caveated by 
the market uncertainties and also by the cost of production of 
the separative work needed to get----
    Mr. McKinley. Thank you.
    What I heard earlier in the testimony was some of those 
cylinders have been there as much as 60 years, certainly before 
your time and my time on it. What is your plan?
    It seems like around here we criticize each other, the 
other side of the aisle, they are back across this side. Anyone 
puts a plan out; everyone shoots it down. So here's a plan that 
raises revenue for the Federal Government 3 to 4 to 7 billion 
dollars.
    Mr. Poneman. Right.
    Mr. McKinley. It protects 1,200 jobs, and it gets rid of a 
problem at a site where the degradation of the tanks and gets 
rid of some of the problems, the environmental issues, but you 
sound like you are opposed to this bill.
    Mr. Poneman. Oh, sir, I did not mean to convey that. I said 
that I thought that the sentiments of the bill and the 
optimization of the value to the taxpayer are laudable things 
and objectives and all things that could be supported and the 
environmental protection and so forth we are strongly 
supportive.
    Mr. McKinley. You are supportive of this legislation?
    Mr. Poneman. No, I said we are supportive of the purposes 
of----
    Mr. McKinley. What is your plan then?
    Mr. Poneman. Our plan is to make sure that, number one, we 
continue to fulfill our mission to defend the Nation in terms 
of preserving the tritium and so forth that we need----
    Mr. McKinley. In concrete, not abstract. Here is a concrete 
plan to do something to generate revenue and protect jobs and 
clean up a site, and I want to know what is your concrete plan 
now to do that.
    Mr. Poneman. Our concrete plan is to produce the tritium we 
need for the deterrent out of the material that we have already 
offered to exchange in the 2,000 tons that we are now putting 
into the market. The balance of that material is going into the 
existing obligations to decommission and decontamination----
    Mr. McKinley. Could you speak in the mic just a little bit 
better for me? I am having a hard time hearing you.
    Mr. Poneman. Sorry.
    First is the national security requirement. Second is the 
D&D obligations we have at Portsmouth. Then, with respect to 
the cylinders there in Paducah, we have a plan both to 
disposition that which does not have market value in the DUF6 
conversion facility, and we are willing to work with the 
committee to find out a way to optimize the value to the 
taxpayer of the cylinders that have market value.
    Mr. McKinley. If we followed that plan--seemed pretty 
general still--how many of the cylinders would be gone from 
Paducah and Portsmouth?
    Mr. Poneman. Oh, we need to look at the market, look at the 
cost of producing the separative work.
    Mr. McKinley. A year from now they could all still be there 
or 2 years they could all still be there, correct?
    Mr. Poneman. This is something, Congressman, that----
    Mr. McKinley. And we wouldn't have the jobs associated with 
it. I am just sorry. It sounds like we study things to death 
here instead of doing something. It seems to me more that we 
have made perfect the enemy of good.
    Mr. Poneman. Congressman, we have statutory obligations we 
need to fulfill, and we need to make sure that we are doing the 
right thing by the taxpayer. Now if it costs $150 million to 
produce separative work that will give you $151 million worth 
of benefit, you have not done really what you need to do. So 
that is why we are trying to work with the committee, with the 
other House of Congress, with all the stakeholders to find out 
how to get the best value for the taxpayer. It is very 
practical, and we feel the fierce urgency of now. We are not 
trying to be anything other than very focused and concrete 
about this.
    Mr. McKinley. Thank you. I look forward to getting the 
information from you.
    Mr. Poneman. Thank you, sir.
    Mr. Whitfield. Well, I think that culminates the questions 
for this panel.
    I would say this, Mr. Poneman, I know DOE has been working 
on this issue for a long, long time. The GAO even talks about a 
March, 2008, report, so forth. And I do take you at your word 
that you all are interested in solving this issue. And we have 
an opportunity to solve it. So, hopefully, we could have some 
additional discussions about this. Because I do think it is 
imperative that we--not only are we talking about disposing of 
this material and creating revenue for the government, we are 
talking about saving 1,200 jobs.
    So, with that, this panel is dismissed; and we will call up 
the second panel. Thank you all very much--I mean, the third 
panel.
    On the third panel, we have Mr. Jim Key, who is Vice 
President of the United Steelworkers Union Local 550; and we 
have Mr. Herman Potter, who is the President of the United 
Steelworkers Local 689.
    So, Mr. Key and Mr. Potter, thank you very much for joining 
us this afternoon. We appreciate your coming into Washington 
for the purpose of testifying.
    And at this time, Mr. Potter, I would recognize you for 5 
minutes for the purpose of making an opening statement; and if 
you would be sure to touch the button so that your microphone 
is on. Thank you.

STATEMENTS OF HERMAN R. POTTER, PRESIDENT, UNITED STEELWORKERS 
LOCAL 689; AND JIM H. KEY, VICE PRESIDENT, UNITED STEELWORKERS 
                        UNION LOCAL 550

                 STATEMENT OF HERMAN R. POTTER

    Mr. Potter. Thank you.
    I would like to thank the chairman and the committee 
members for the opportunity to come before you to testify on 
behalf of my constituency and also to support my colleagues 
from the Paducah, Kentucky, site. I also would like to 
acknowledge our Ohio delegation, which has always proven to be 
very helpful with issues related to the Piketon site in 
Southern Ohio and specifically those issues that deal with the 
enrichment site; and we encourage them to support this 
legislation and respond to this positively.
    Mr. Chairman, I am going to kind of deviate a little bit 
from some of my details in my written testimony just because it 
is kind of redundant to what was mentioned before as far as 
some of the details and issues that went on the site. But I do 
want to identify some concerns that we have and some issues 
that we support.
    My name is Herman Potter. I am the President of the United 
Steelworkers Local 689 at the Department of Energy Uranium 
Enrichment Site in Piketon, Ohio. I represent approximately 850 
members that are involved in the environmental remediation, 
surveillance, maintenance, infrastructure, and also the 
depleted uranium conversion activities at the site.
    Also, our local actually intends to eventually be the 
workforce at the American centrifuge project at the site, since 
our members were at the original--they actually operated the 
original uranium enrichment site that was closed down in the 
early 1980s. With multiple contractors and multiple jobs at the 
site, we actually have people working there that actually 
extend out in the whole region, including northeast Kentucky 
and also West Virginia. And even though I work at the Ohio 
site, I am actually a resident of Kentucky myself.
    We know that the Members of Congress have debated the 
possibility of enacting this legislation to direct the re-
enrichment of tails material since the uranium market had 
determined there is value when at one time it did not exist.
    The value of the material due to the market change has 
provided us an opportunity for this re-enrichment to take 
place, eventually returning that monetary value back to the 
Department of Energy and allowing them to easily meet, or more 
easily meet, their obligations to the workforce and the 
communities where these DOE sites exist.
    We believe that legislation is now warranted. The DOE has 
demonstrated inactivity as an agency in the implementation of 
this re-enrichment program due to the fear from foreign 
influence to uranium producers associations and other 
organizations. We respectfully request that you fully endorse 
the House Bill 2054 authored and introduced by Congressman Ed 
Whitfield for successful passage of the House by concurrent 
support by you and your colleagues in the U.S. Senate.
    We are concerned about some issues. One is the timing of 
the Russian 123 agreement with the United States Enrichment 
Corporation. We are concerned about that this possibly would 
allow USEC to change their mission from being an uranium 
enricher to uranium broker, which would negatively impact the 
intended operation of the gaseous centrifuge plant in Piketon, 
Ohio.
    The agreement would also eliminate any re-enrichment 
program, negatively impact the enrichment at the Paducah site, 
and eliminate the return of millions of dollars back to the DOE 
to fulfill their obligations.
    Currently, we think more than $100 million per year can be 
realized with introduction and implementation of the pilot 
tails re-enrichment program. I would submit that the returns 
from this program be clearly identified and monitored to be 
used to fulfill the DOE's commitments and obligations. In so 
doing, things such as the complete funding of the retirement 
and benefits programs provided for those working at the Paducah 
and Piketon sites.
    Currently, at the Piketon site itself, the DOE is deviating 
from the intent of the Congress by eliminating their 
obligations through manipulation and abuse of the Federal 
procurement process and reinterpretation of the law. The intent 
is clearly to fulfill a policy of reduced post-retirement 
health care and pension obligations. The legislation would 
provide the funding that would eliminate that financial 
justification.
    An additional concern needs to be addressed regarding the 
operation of the two DUF6 plants at Paducah and Piketon. The 
impact that this proposed legislation may have on the projected 
time of operation has been expressed. It is our belief that the 
number of re-enrichable DUF6 cylinders is limited in number and 
clearly not the full inventory of depleted cylinders. 
Considering the percentage of depleted uranium 238 to the 
desired uranium 235, the negative impact would be minimal and 
have little effect on the life span of the DUF6 plants. 
However, strict guidance and oversight over the DOE to ensure 
that the re-enriched material be returned to the site of 
origination would ensure any anxiety created regarding the 
reduction of plant life expectancy at the DUF6 plants.
    We have concerns that the absence of establishing this as a 
sole-source contract is not in the proposed legislation. The 
fact that URENCO and AREVA are interested in the refeed 
heightens our concerns that the additional costs of 
transportation of the depleted tails cylinders from Paducah and 
Piketon to either of the re-enrichment sites would not 
considered.
    Although we have historically had concerns about USEC's 
reliability and DOE's adequate oversight, we are confident that 
the strict guidelines and criteria would be put in place to 
ensure that these commitments and obligations are honored.
    The Department of Energy has a unique opportunity to 
convert a stockpile of depleted uranium tails from its former 
enrichment plant operations into a commercially valuable 
product that can be sold to generate new revenue for the 
Federal Government. At the same time, this program would extend 
operations at the sole remaining U.S. gaseous diffusion plant, 
providing time for the U.S. Enrichment industry to transition 
to the advanced gas centrifuge technology.
    The proposed program requires no additional appropriations, 
and it is completely self-funded. In fact, it would reduce the 
pressure to eliminate the commitments that this government 
expects the Department of Energy to follow.
    The sale of re-enriched material proposed in this 
legislation would generate approximately $500 million. The 
total net value of the tails has been calculated to be as much 
as $4 billion.
    And the congressman mentioned earlier about a concrete 
plan. Well, our site has a true grassroots, concrete plan for 
this funding.
    We think these revenues should be used to provide full and 
complete funding for the retirement and health benefits at the 
Paducah and Piketon sites.
    We think it should support the continued decommissioning 
and decontamination activities at the site, which would include 
reducing the contaminated barrel area footprint in preparation 
for reindustrialization of the site.
    We think it should be used for reindustrialization of the 
Paducah and Portsmouth sites, which would include the 
supplemental funding of a plant--recycled metal plant at the 
Piketon site, which would reduce associated costs with waste 
removal and establish a specific source of materials to be used 
in construction and development at future nuclear sites. And 
attached to the documentation we have a letter describing that 
initiative and detail.
    Mr. Whitfield. Mr. Potter, if you would conclude your 
remarks, because you are already over about 3-and-a-half 
minutes.
    Mr. Potter. Oh, I'm sorry.
    Also, we think we should support training and education for 
a rapidly depleting nuclear workforce and support advanced 
energy part initiatives.
    In my conclusion, I just want to say that our constituency 
does not want this funding to be used for deficit reduction. We 
want to use these funds to fulfill the commitments made by the 
Department of Energy and the expected intent of our government 
to honor commitments and obligations to the aging workforce 
while concurrently creating an environment conducive to 
encourage site and workforce development. And I apologize----
    [The prepared statement of Mr. Potter follows:]




    Mr. Whitfield. It is OK. Thank you.
    Mr. Key, you are recognized for 5 minutes for your opening 
statement.

                    STATEMENT OF JIM H. KEY

    Mr. Key. Thank you, sir.
    Before I begin, please allow me to take an opportunity to 
thank you, Chairman, Ranking Member Rush, and commend members 
for conducting this hearing today and allowing me to come and 
testify on this unique opportunity to clean up waste, preserve 
jobs, and actually make money for the government.
    Mr. Chairman and distinguished committee members, I am Jim 
Key, the Vice President of the United Steelworkers Local 550 at 
the Paducah Gaseous Diffusion Plant in Paducah, Kentucky. There 
are approximately 850,000 active members of the United 
Steelworkers International Union, and we are North America's 
largest industrial union. I represent approximately 1,000 
members who are involved in uranium enrichment, environmental 
remediation, infrastructure, and depleted uranium conversion 
activities at the Paducah site, which houses our Nation's last 
U.S. Government-owned, operating uranium facility.
    I do not come before you today solely as the representative 
of the union hourly workers but also as a representative for 
the non-union salaried workers at the facility, for the 
residents of the community of which I have been a part for the 
past 56 years, and the economic stability of the region as a 
whole. Twelve hundred workers are employed at the enrichment 
facility, which is scheduled to shut down after advanced 
technology comes on board.
    The wages of the workers at the facility turn over six to 
seven times within our regional community, providing over $50 
million annually for the economy, which has a direct effect on 
the viability of local businesses. Services and goods purchased 
by our combined workforce allow businesses to not only operate 
but also to thrive and provide the tax base of the community as 
a whole.
    Our region has recently been devastated by the shutdown of 
major industrial employers in the past 5 years. It started with 
the loss of the General Tire plant and has accelerated with the 
most recent announcement of the closing of the Goodyear Tire 
plant in Union City, Tennessee, very close to western Kentucky, 
where an additional 1,600 family and community supportive jobs 
will disappear at the end of 2011. I am sure in an era of high 
unemployment you can fully realize the impact of an additional 
loss of 1,200 highly skilled employees at the gaseous diffusion 
plant and the devastating rippling effect it would have on our 
regional area.
    In order to keep these 1,200 jobs in Paducah, many of us 
have been suggesting that the Department of Energy start a 
program to re-enrich the 62,000 depleted uranium tails 
cylinders stored at Paducah and Portsmouth. Until a few years 
ago, these cylinders were considered a waste byproduct of the 
enrichment process and an environmental liability to our 
government and our community.
    As a matter of history, Public Laws 105-204 and 107-206 
were championed by Senator Mitch McConnell and enacted by 
Congress to build facilities to convert these tails to a more 
stable substance, which proves these tails were then considered 
a liability to the government.
    DOE has a unique opportunity to re-enrich tails left over 
from the former enrichment plant operations into commercially 
valuable natural uranium that can be sold to generate new 
revenue for the Federal Government. At the same time, the 
program will be a significant factor in extending operations at 
the sole remaining plant in Paducah.
    The proposed program requires no appropriations. It is 
self-funded in that a portion of the natural uranium feed 
generated will be sold to pay for the enrichment. This program 
it remarkable in that it actually raises revenue for the 
Federal Government through the sale of the enriched uranium.
    This program would utilize all the resources of Paducah 
plant while it is still operational. Once the plant shuts down, 
re-enrichment tails become significantly more expensive for the 
government because of transportation costs and the benefit of 
the program is greatly reduced.
    This issue is critically important to the members of the 
United Steelworkers Local 550 in that it provides the best 
opportunity to extend our production jobs at the Paducah plant 
at a time when manufacturing employment is at record lows and 
the regional economy is still sputtering to recover from a 
nationwide recession, as shown in the latest jobs report.
    There is also good reason to believe that the loss of the 
second largest industrial customer will lead the Tennessee 
Valley Authority to act on its plan to begin closing its 
electrical power plant near the plant where I work, causing 
further job losses of good jobs in a region that desperately 
needs them.
    After hearing about such a productive program, I am sure 
you are asking yourself, why are we not implementing this 
program? To answer that, we actually think DOE could do this 
without legislation, but because of DOE inaction on this issue 
over the past several years I believe legislation is now 
warranted.
    While DOE currently has a self-imposed policy which only 
allows it to introduce enriched uranium into the market at 10 
percent of the domestic uranium demand, we believe that this 
quota is not conducive to allow domestic uranium enrichment 
processes and programs to reach their full potential and value. 
At current market value, a return of between 235 and 500 
million dollars per year can be realized with the 
implementation of the pilot tails re-enrichment program we were 
discussing today.
    Finally, there comes the issue of right and wrong. When the 
United States needed a reliable supply of enriched uranium for 
its weapons programs, it turned to Paducah and other nuclear 
sites around the country for help. They found strong 
communities and good people who were proud to assume that 
responsibility in spite of the hazards that came with it.
    For nearly 60 years, this community has been home to 
millions of tons of DOE's waste tails; and now that the tails 
are recognized to have value, Paducah, the region, and the 
plant employees should be the ones to benefit. To even consider 
shipping these tails away from Paducah to another facility is 
simply wrong.
    The highly trained sons and daughters of those original 
enrichment facility employees continue working hard to provide 
a safe operating facility at outstanding production levels, 
providing a reliable, vital service at the Paducah plant; and 
they deserve a chance to protect their jobs and the regional 
communities in which they live by re-enriching these tails.
    This is not a government handout, and it will not cost the 
government or taxpayers one cent. To the contrary, the 
government will make money. How many bills will you vote on 
this session that can make that claim? This is a case of the 
government making a sound policy and economic decision to 
utilize an important national resource for the benefit of the 
entire country.
    In closing, I ask you to fully endorse and support H.R. 
2054 offered and introduced by Chairman Whitfield for a 
successful passage in the House of Representatives and 
concurrent support by you with your counterparts and colleagues 
in the Senate.
    This concludes my opening statement. I will be happy to 
answer any questions the committee members might have.
    [The prepared statement of Mr. Key follows:]




    Mr. Whitfield. Thank you, Mr. Key and Mr. Potter, for your 
testimony.
    So, Mr. Key, you support this legislation, correct?
    Mr. Key. That is correct.
    Mr. Whitfield. And, Mr. Potter, do you support this 
legislation?
    Mr. Potter. Yes, we do.
    Mr. Whitfield. Now, to be fair, critics of this legislation 
say the U.S. Government, whenever it enters into a contract, 
they have competitive bidding, which makes all the sense in the 
world. Because, normally, you have competitive bidding and you 
get a lower price. Would either one of you--I would ask one of 
you, or both of you, to explain from your perspective what it 
is about this legislation, while it does not have competitive 
bidding, what are the practical impacts, what are the practical 
problems if you had competitive bidding in this legislation?
    Mr. Key. The problem I have, Chairman, with any competitive 
bidding process is you have other enrichers that have foreign 
influence. If they were successful in winning that bid, there 
is nothing that would prevent them from loading these cylinders 
up and transporting them to Russia, to France, or to a European 
consortium and doing the enrichment process there, virtually 
leaving the 1,200 plus workers at Paducah without a job.
    Mr. Whitfield. And, in the United States--obviously, this 
can be done at Paducah. I assume it can be done in New Mexico, 
even though I still understand they are undergoing trials out 
there with their process. And the Idaho facility is not going 
to be built for years and years to come. So the reality is 
there are only two places in the U.S. that it is conceivable 
that it can be done; is that correct?
    Mr. Potter. Yes. Yes, that is our understanding.
    Mr. Whitfield. Now, we hear a lot about the contamination 
issue, that this material, transuranic, and other things, that 
it is contaminated and that the Paducah plant is already 
contaminated. Well, the New Mexico plant is not contaminated. 
So if you own the plant in New Mexico would you be excited 
about bidding to enrich these depleted tails?
    Mr. Key. If I was the owner of the New Mexico facility, I 
would not want this material to be introduced into my system, 
thereby transferring that contamination.
    I also think the New Mexico facility was built--their 
capacity that they have built that plant at is based upon the 
contracts that they already have out in the previous years. I 
don't think they have the capacity to enrich these fields.
    As far as the problem as has been spoken today by others of 
supposedly a sole-source contract and not going to competitive 
bid, as far as the profit margin that the enrichment may make, 
I think since enrichment would likely be at published 
commercial rates, the profit margin, as I understand it, are 
very minimal. The true value to the D&D Fund would come from 
the uranium generated in excess of what the enrichment costs 
the DOE will obtain when it is sold to the highest----
    Mr. Whitfield. So you are saying that USEC would be paid a 
fee for re-enriching the material; is that correct.
    Mr. Key. Yes. I believe their charge as well as any 
published rate that is currently there.
    Mr. Whitfield. And there is a commercial published rate on 
that, correct?
    Mr. Key. Yes, sir.
    Mr. Whitfield. And the Federal Government would sell the 
enriched uranium and from those profits money would go to the 
decontamination fund, correct?
    Mr. Key. That is correct, sir.
    Mr. Whitfield. Mr. Potter, did you want to have any comment 
on that?
    Mr. Potter. I think if we actually go outside, go to the 
bidding process, I am not very confident that that money would 
be funneled back into cleaning up the Portsmouth/Paducah site. 
That is where these cylinders are, and that is where they were 
generated. And I think there is some obligation to the 
workforce in the area and the community in the area to maintain 
the work and clean up those areas and reduce the footprints, 
use that money to reduce the contaminated barrel site 
footprints so they can reindustrialize.
    Mr. Whitfield. And in the U.S. there is only two places 
that it is conceivable that it could be done, correct?
    Mr. Potter. Yes.
    Mr. Whitfield. Now, just briefly, on the DUF6, your concern 
about the DUF6 facility is that if you utilized too many of 
these canisters for enrichment that you would jeopardize the 
DUF6 plan?
    Mr. Potter. Now let me clarify the point I was trying to 
make. The thing of it is that one of the criticisms that we 
have heard from a lot of people is that if you do this that it 
would reduce the life expectancy of the DUF6 plans.
    Mr. Whitfield. OK.
    Mr. Potter. Because we have worked in the areas and we 
understand the science associated with the enrichment process, 
we believe that there is still--we are talking about a minimal 
number of cylinders that would be generated to basically make 
the enrichment--the newly enriched material. You still have 
quite a number--in fact, mostly DUF6 material--that still would 
have to go through the DUF6 process.
    We think it would be fine. We don't think it would have any 
negative impact at all. We just think that if there would be 
some criteria established it may alleviate some angst that some 
of the community people have and some of the naysayers would 
have.
    Mr. Whitfield. My time has expired.
    Mr. Key, would you want to make a comment?
    Mr. Key. To you put it in perspective, if you will, Mr. 
Chairman, for every five cylinders of depleted tails that you 
would feed into the re-enrichment pilot program, you would 
still have three cylinders of depleted tails coming out on the 
depleted end stream, which would then be taken into the DUF6--
--
    Mr. Whitfield. OK.
    Mr. Key. I have also asked DOE and insinuated to them that 
those cylinders sitting in the yard have various levels of 
assay amounts. We need to take those that have the least amount 
of assay material to start feeding in DUF6 to save the rest for 
a re-enrichment program.
    Mr. Whitfield. Thank you.
    Mr. Rush, you are recognized for 5 minutes.
    Mr. Rush. Mr. Potter, do you trust USEC?
    Mr. Potter. My sense, sir, no. We feel like they have been 
unreliable in the past. That is why we are advocating putting 
some very strict guidelines on USEC to make sure that they 
follow the rules correctly.
    Mr. Rush. What about you, Mr. Key?Do you trust USEC?
    Mr. Key. I trust USEC today more than I did in their 
formative years under the Presidential appointee that they had 
operating as a CEO at that time, yes, sir.
    Mr. Rush. Mr. Key, do you think that USEC will live up to 
its obligations if this legislation will go forward without any 
restrictions, any competitive processing occurring? Do you 
think that USEC will live up to its word?
    Mr. Key. Yes, sir, I do.
    Mr. Rush. What about you, Mr. Potter?
    Mr. Potter. I think so.
    Mr. Rush. You indicated that you thought that USEC would 
change its mission if this legislation was enacted. How fearful 
are you that USEC would change its mission to becoming a broker 
if this legislation was enacted?
    Mr. Potter. I am pretty confident that we can establish 
direction and guidelines to make sure that they could not do 
that type of activity.
    Mr. Rush. How would you do that? How would you do that?
    Mr. Potter. I would hope that our Congress, somebody much 
better--more than I am--could actually establish those 
criteria.
    Mr. Rush. So you think that this legislation is not 
protective in a more profound and absolute way of the 1,200 
workers, that the 1,200 workers, if we pass this legislation as 
written, that you would be left at the mercy of USEC without 
any way of blending or amending or in any way changing their 
relationship with the 1,200 workers and your union?
    Mr. Potter. I think that there is some guidelines that 
could be established to prevent them----
    Mr. Rush. Who will establish the guidelines?
    Mr. Potter. Congress. I would think Congress could do this.
    Mr. Rush. Are you suggesting that this legislation should 
see through the possibility that USEC would take this 
legislation if it became law and just run away and do what they 
wanted to do, become whatever they wanted to become, and leave 
1,200 workers that we are all concerned about, leave them 
standing still and suffering as a result without pensions?
    Mr. Key. No, sir. Ranking Member Rush, I do not expect USEC 
to take this legislation in the form that it is written and run 
away with the proceeds and not provide the obligation that this 
legislation directs to keep the Paducah plant and 1,200 
employees employed. I do not think that they would do that.
    Mr. Rush. Do you agree with that, Mr. Potter?
    Mr. Potter. Yes. That was some of the concerns that has 
been brought to us, and we are confident that that would not 
happen.
    Mr. Rush. If there are only two domestic companies that 
have the capacity and the capability to bid on the contract and 
USEC is the best company to complete this bid, wouldn't it make 
more sense to include competitive bidding language so that 
everything is fair and transparent and that your union would be 
in a better position to negotiate with USEC around the issues 
that you hold near and dear?
    Mr. Key. Well----
    Mr. Rush. Such as----
    Mr. Key. In response, Ranking Member Rush, last year we 
completed a contract negotiation with USEC for the next 6 years 
on a contractual obligation between the union and the company. 
Again, I expressed my concerns with a competitive bid and 
without any guidelines that would prevent those with foreign 
interests to be able to bid and possibly successfully win that 
bid and then transport those cylinders out of our Nation to re-
enrich, thereby taking away the money that this program can 
create for the Federal Government while also keeping workers 
employed.
    Mr. Rush. Well, don't you think that it is within the power 
of the Members of Congress to ensure that your experience is 
not realized, that if there is a foreign company that bid or 
even successfully bid that their commission restrictions placed 
on that company in terms of--that would help your workers 
maintain--we are all for protecting American jobs.
    Mr. Key. Right.
    Mr. Rush. I want to protect American jobs. I want your 
1,200 workers to keep their jobs, keep their pension, and for 
us to repay the extraordinary contribution that they made, to 
pay them for that. All right. I am for that.
    Mr. Key. Thank you.
    Mr. Rush. And I want to protect that. But I don't want to 
just give one company the sole authority to deal with this 
significant problem that we are faced with as a Nation and then 
for that company to renege on the American workers and on the 
community right now. And I think the best way to deal with that 
is to make sure there are some provisions in this law such as 
competitive bidding, all right, that will help your workers and 
help your community and to keep resolution of this issue in the 
hands of the American workers and not foreign workers. That is 
my concern. And I think we can get that through American--
through competitive bidding, a competitive bidding process.
    Right now, without that provision, we are just giving USEC 
the authority, mandating that the Department of Energy contract 
with USEC, and we are hoping and praying that USEC continues to 
be or turns out to be good guys and that they will keep their 
word. I don't think we should go into this with that kind of 
frame of mind. That is not good negotiating, as far as I am 
concerned. And I admire labor for their ability to negotiate 
strongly and to protect the American worker.
    I yield back.
    Mr. Whitfield. Did you all want to make a comment?
    Mr. Key. No. I agree with a lot of what the ranking member 
said. Some of the funds in excess of what this program can 
bring, a payment to the D&D fund, any excess value can go to 
the reindustrialization of both Paducah enforcement sites.
    I don't need to sit here and have a discussion concerning 
the loss of manufacturing in this country in the last 10 to 12 
years, and we as a Nation cannot continue to rely on service 
sector jobs to pay off our national deficit and reduce our debt 
and become a rich Nation again. We must invest--reinvest in the 
reindustrialization of our manufacturing sector. This is a 
clear example, this pilot program, of doing that.
    Mr. Whitfield. Mr. McKinley, you are recognized for 5 
minutes.
    Mr. McKinley. Thank you, Mr. Chairman.
    Can either of you give us an example of the exposure that 
the men in the community have by having these canisters expose 
the elements like that? What are the health hazards that we are 
facing?
    Mr. Key. --that occurs on these canisters is put in place 
to check the wall thickness of the cylinders themselves because 
of the elements they are exposed to. And we have in the past 
had some of these walls to break through and create an HF cloud 
in reaction to the moisture of the material and try to 
encapsulate that and capture it. That is why we S&M--
surveillance and maintenance--of those, test the wall 
thickness. But we have had those occasions where we have had to 
repair the cylinders on site to reduce any exposure, not only 
to the workers but also out to the community.
    Mr. McKinley. You both heard the testimony from the DOE. We 
have talked about and I really admire the fact that you are so 
passionate to protect those 1,200 jobs in all facilities. But 
we have a plan before us to protect the 1,200 jobs, we have a 
plan that is going to raise money for however it is to be 
spent, and we have a way to clean up an environmental problem. 
They want to continue to study it. Am I missing something? What 
did you hear that would put you at odds with the DOE?
    Mr. Potter. I kind of get the impression that they do study 
quite a bit. They study a lot. We need to start making 
decisions to clean up these sites. There is some opportunities 
here that we could actually do things in a reasonable, 
practical way as far as reducing the waste at the site.
    At the Portsmouth site, we can't move on with 
reindustrialization until we can get rid of some of these low-
waste material--low-RAD-waste material areas; and that is only 
going to help out. So that is why we had kind of a grassroots 
plan to go in there and maybe dig up some of these old sites, 
recycle some of the metal. That is a practical way to look at 
things. Even if you don't do anything with the metal, you are 
actually preparing it for future use and you are saving on the 
waste, that you have to ship it off and bury it somewhere else.
    Mr. McKinley. I am trying to understand why do you think 
the DOE wants to continue to study it and not to protect the 
1,200 jobs and not to raise the money and not to clean up the 
site? What do you think their problem is?
    Mr. Potter. Personally, I think it is fear to make the 
decision, fear of making the wrong decision.
    Mr. McKinley. Do you agree?
    Mr. Key. To answer you, Congressman, I really don't know 
what their plan is. It has been related here this morning, or 
this afternoon, we had this same hearing in 2008. They had a 
plan to forward, and here we are in 2011 and nothing has been 
done.
    There is a couple comments in the Deputy Secretary's 
testimony that I will agree with, to support the maintenance of 
a strong domestic nuclear industry while also supporting the 
skilled jobs for American workers. I will agree with his 
testimony on that. That is my intent and my desire out of the 
legislation that the chairman has introduced.
    Mr. McKinley. Thank you. I yield back the balance of my 
time.
    Mr. Whitfield. Thank you, Mr. McKinley.
    Do you have anything else?
    Well, I want to thank Mr. Potter and Mr. Key for being with 
us today and for your testimony. We look forward to working 
with you as we attempt to move forward with this legislation.
    So, with that, we will conclude today's hearing; and we 
will have the record will remain open for 10 days for 
additional material to be submitted, members to ask additional 
questions.
    And with that, thank you very much for being with us.
    [Whereupon, at 3:21 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]





                                 
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