[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


 
                EXAMINING THE DEPARTMENT OF ENERGY'S 
                     EXCESS URANIUM MANAGEMENT PLAN

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                              THE INTERIOR

                                 OF THE

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 22, 2015

                               __________

                           Serial No. 114-18

                               __________

Printed for the use of the Committee on Oversight and Government Reform


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform
                      
                                 __________
                                
                         U.S. GOVERNMENT PUBLISHING OFFICE
94-543 PDF                    WASHINGTON : 2015                         
                                            
________________________________________________________________________________________                      
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, 
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). 
E-mail, [email protected].  
                     
                     




                      
              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     JASON CHAFFETZ, Utah, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, Jr., Tennessee       CAROLYN B. MALONEY, New York
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
TIM WALBERG, Michigan                    Columbia
JUSTIN AMASH, Michigan               WM. LACY CLAY, Missouri
PAUL A. GOSAR, Arizona               STEPHEN F. LYNCH, Massachusetts
SCOTT DesJARLAIS, Tennessee          JIM COOPER, Tennessee
TREY GOWDY, South Carolina           GERALD E. CONNOLLY, Virginia
BLAKE FARENTHOLD, Texas              MATT CARTWRIGHT, Pennsylvania
CYNTHIA M. LUMMIS, Wyoming           TAMMY DUCKWORTH, Illinois
THOMAS MASSIE, Kentucky              ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina         BRENDA L. LAWRENCE, Michigan
RON DeSANTIS, Florida                TED LIEU, California
MICK MULVANEY, South Carolina        BONNIE WATSON COLEMAN, New Jersey
KEN BUCK, Colorado                   STACEY E. PLASKETT, Virgin Islands
MARK WALKER, North Carolina          MARK DeSAULNIER, California
ROD BLUM, Iowa                       BRENDAN F. BOYLE, Pennsylvania
JODY B. HICE, Georgia                PETER WELCH, Vermont
STEVE RUSSELL, Oklahoma              MICHELLE LUJAN GRISHAM, New Mexico
EARL L. ``BUDDY'' CARTER, Georgia
GLENN GROTHMAN, Wisconsin
WILL HURD, Texas
GARY J. PALMER, Alabama

                    Sean McLaughlin, Staff Director
                 David Rapallo, Minority Staff Director
          Bill McGrath, Staff Director, Interior Subcommittee
                        Melissa Beaumont, Clerk

                      Subcommittee on the Interior

                  Cynthia M. Lummis, Wyoming, Chairman
Paul A. Gosar, Arizona               Brenda L. Lawrence, Michigan, 
Blake Farenthold, Texas                  Ranking Member
Ken Buck, Colorado, Vice Chair       Matt Cartwright, Pennsylvania
Steve Russell, Oklahoma              Stacey E. Plaskett, Virgin Islands
Gary J. Palmer, Alabama              Jim Cooper
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 22, 2015...................................     1

                               WITNESSES

Mr. John Kotek, Principal Deputy Assistant Secretary, Office of 
  Nuclear Energy, U.S. Department of Energy
    Oral Statement...............................................     3
    Written Statement............................................     5
Mr. David Trimble, Director, Natural Resources and Environment, 
  U.S. Government Accountability Office
    Oral Statement...............................................    10
    Written Statement............................................    12
Mr. Scott Melbye, Executive Vice President, Uranium Energy 
  Corporation
    Oral Statement...............................................    31
    Written Statement............................................    33

                                APPENDIX

ERI Slides, submitted by Ms. Lawrence............................    52
Testimony of Mr. Frank Hahne, Uranium Barter, Manager Flvor-B&W 
  Portsmouth LLC, submitted by Mrs. Lummis.......................    57
Energy Resources International Market Analysis Reports, submitted 
  by Mrs. Lummis.................................................    74


  EXAMINING THE DEPARTMENT OF ENERGY'S EXCESS URANIUM MANAGEMENT PLAN

                              ----------                              


                       Wednesday, April 22, 2015,

                  House of Representatives,
                      Subcommittee on the Interior,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:12 a.m. in 
room 2154, Rayburn House Office Building, the Honorable Cynthia 
Lummis [chairwoman of the subcommittee], presiding.
    Present: Representatives Lummis, Buck, Farenthold, Palmer, 
Gosar, Russell, Lawrence, Plaskett and Cummings.
    Ms. Lummis. Without objection, the Chair is authorized to 
declare a recess at any time.
    Good morning and welcome to today's hearing of the 
Subcommittee on Interior of the Oversight and Government Reform 
Committee.
    Our purpose today is to examine the Department of Energy's 
management of the U.S. excess uranium inventories. This is 
uranium, of varying grades, owned by the Federal Government 
that has been declared surplus to the national security needs 
of the United States. This uranium has significant value. 
Selling it generates revenue for the Federal Government and 
displaces uranium produced by private industry in the 
marketplace.
    The Department of Energy's management of this uranium has 
prompted questions by the domestic uranium industry as well as 
the Government Accountability Office, a non-partisan agency 
that investigates how the Federal Government spends taxpayer 
dollars.
    The GAO found that the Department of Energy failed to 
consistently value uranium that transferred to third parties in 
exchange for other services. The GAO found that other transfers 
violated the miscellaneous receipts statute which requires 
government officials who receive money on the government's 
behalf to deposit those funds with the Treasury, except where 
otherwise provided by law.
    By not depositing an amount equal to the value of the 
uranium into the Treasury, DOE has inappropriately circumvented 
the power of the purse granted to Congress under the 
Constitution.
    Further, the GAO found that the Department of Energy's 
studies to assess the market impact of proposed uranium 
transfers is required by the USEC Privatization Act of 1996 
failed to show quality assurance guidance to provide detail 
about the data, methodology and assumptions made in studies and 
has had other shortcomings.
    This raised questions about the validity of the conclusion 
that the proposed transfers would have no adverse material 
impact on domestic uranium industries. The domestic uranium 
industry plays an important role in ensuring America is not 
completely dependent on foreign sources of energy, particularly 
in the area of uranium where we actually import about 90 
percent of the uranium that we use here, completely unnecessary 
to do so.
    While I note that the DOE is in the process of revising its 
procedures to determine the market impact on proposed transfers 
of excess uranium, it is important to discuss previous problems 
to ensure they are not repeated.
    Today, we will hear from the GAO to discuss their reports. 
We will also hear from the Department of Energy to learn more 
about their management of excess uranium and their response to 
the GAO. Finally, we will hear from a representative of the 
domestic uranium industry to discuss how these transfers have 
affected the industry.
    A representative of the Fluor-B&W Portsmouth, the DOE 
contractor for cleanup at the Portsmouth Gaseous Diffusion 
Plant in Piketon, Ohio, was invited to the hearing to discuss 
the importance of the cleanup that some of the transfers have 
funded but was unable to attend.
    I look forward to hearing the panel discuss ways the excess 
uranium management can be improved to eliminate legal concerns 
and ensure the best value for the taxpayer while not disrupting 
the domestic uranium industry and continue to meet DOE's 
obligation to clean up its legacy sites.
    With that, I would like to thank the witnesses in advance 
for your testimony.
    I now recognize Mrs. Lawrence, the Ranking Member of the 
Subcommittee on the Interior, for her opening statement.
    Mrs. Lawrence. Thank you, Madam Chairwoman. I want to thank 
you for holding this hearing today and also want to thank our 
witnesses for their testimony today.
    One of the core missions of this committee is to oversee 
the proper stewardship of government assets. Today, we will be 
focusing our attention on an important asset, uranium, managed 
by the Department of Energy.
    It is important that the Department of Energy will be able 
to sell and swap uranium in order to support objectives of the 
agency. Selling uranium to nuclear power plants and swapping 
uranium in exchange for environmental cleanup activities are 
both necessary uses of the excess uranium.
    However, the agency must be careful that all of its uranium 
transactions are carried out in accordance with the law. I am 
pleased that the GAO and the department are both here to help 
us understand more about the laws pertaining to past and future 
uranium transfers.
    If the Congress needs to resolve different interpretations 
of the law now is the time to let us know so we can begin that 
process. It is also critical that we maintain a robust domestic 
uranium industry which is particularly important to the States 
of Wyoming and Utah where the bulk of our uranium is mined.
    The department's decisions must be backed by sound market 
studies on whether any particular sale or transfer would be a 
negative impact on our domestic uranium industry.
    Let us all keep an open mind--I will--to the testimony that 
will be offered today and the information.
    Thank you, Madam Chair.
    Ms. Lummis. I thank the Ranking Member.
    I will hold open the record for five legislative days for 
any member who would like to submit a written statement.
    We will now recognize our panel of witnesses. I am pleased 
to welcome Mr. John Kotek, Principal Deputy Assistant 
Secretary, Office of Nuclear Energy, U.S. Department of Energy; 
Mr. David Trimble, Director, Natural Resources and Environment, 
U.S. Government Accountability Office; and Mr. Scott Melbye, 
Executive Vice President at Uranium Energy Corp. Welcome all.
    Pursuant to this committee rules: all witnesses will be 
sworn before they testify. Please rise and raise your right 
hand.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    [Witnesses respond in the affirmative.]
    Ms. Lummis. In order to allow time for discussion, please 
limit your testimony to 5 minutes even if your entire written 
testimony is longer. It will be made part of the record.
    I would first recognize Mr. John Kotek. Thank you so much 
for being here.

                       WITNESS STATEMENTS

                    STATEMENT OF JOHN KOTEK

    Mr. Kotek. Thank you, Chairman Lummis, Ranking Member 
Lawrence and members of the committee. I appreciate the 
opportunity to be here today to discuss the Department of 
Energy's management of its excess uranium.
    I do have a longer written statement for the record.
    Currently, I serve as the Principal Deputy Assistant 
Secretary in DOE's Office of Nuclear Energy where I am 
responsible for helping to advance nuclear power to meet our 
Nation's energy needs. I took this position about 3 months ago 
but earlier in my career, I served in a number of roles in DOE 
within the Department of Energy's National Lab system at 
Argonne National Lab West in Idaho right over the border from 
Wyoming.
    I later served as Deputy Manager of the department's Idaho 
Operations Office where I was responsible for Federal 
management of the Idaho National Lab.
    More recently, I had the honor of serving as Staff Director 
to the blue ribbon Commission on America's Nuclear Future which 
recommended a strategy for managing nuclear waste in the United 
States.
    When I am not serving in Washington, I still make my home 
in Idaho with my wife and three kids.
    As a legacy of the department's activities, DOE has an 
inventory of uranium that exceeds its expected needs. This 
uranium comes from various sources, including governmental 
weapons programs from its own former enrichment activities and 
from inventories of Russian origin natural uranium.
    This excess uranium has value to taxpayers. Among the chief 
uses in recent years, DOE barters excess uranium to fund work 
under crucial DOE programs--the environmental cleanup of the 
gaseous diffusion plant at Portsmouth, Ohio and the down 
blending of highly enriched uranium to eliminate excess weapon 
grade uranium, which occurs in Erwin, Tennessee.
    The department manages its excess uranium inventory in 
accordance with the Atomic Energy Act of 1954 and other 
applicable laws. Specifically, the Atomic Energy Act authorizes 
DOE to transfer special nuclear material and source material.
    However, the USEC Privatization Act places certain 
limitations on DOE's authority to transfer uranium from its 
excess uranium inventory. Before certain uranium transactions, 
the Secretary of Energy must determine that the sale of uranium 
will not have an adverse material impact on the domestic 
uranium mining, conversion or enrichment industries.
    In terms of our current work, the department plans to issue 
a new secretarial determination covering continued transfers of 
uranium for cleanup services in Ohio and for down blending of 
highly enrichment uranium in Tennessee.
    To inform its deliberations, the department is engaged in 
two rounds of public comment seeking input from the public and 
from the industry about the effects of continued uranium 
transfers on the domestic uranium industries and 
recommendations about factors it should consider in assessing 
whether a given set of transfers would have an adverse material 
impact on the domestic uranium industry.
    The most recent comment period closed on April 6. We 
appreciate the comments we received from the range of uranium 
industries and from others, as well as from the recipients of 
bartered uranium.
    DOE's staff is still reviewing comments and preparing 
recommendations for the Secretary so I will be limited in what 
I can say on issues that are presently being addressed in our 
pending proceedings. However, I can speak to the process we 
have recently undertaken to solicit public comment.
    In conclusion, Madam Chairman, I would like to emphasize 
that the department understands the importance of the uranium 
industry in many communities. DOE remains committed to managing 
its uranium inventories in compliance with all statutory 
requirements and in a manner that is consistent with and 
supportive of a healthy, domestic nuclear industry.
    Thank you again for the opportunity to testify.
    [Prepared Statement of Mr. Kotek follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Ms. Lummis. Thank you, Mr. Kotek.
    Mr. Trimble, we would like to hear from you.


                   STATEMENT OF DAVID TRIMBLE


    Mr. Trimble. Chairman Lummis, Ranking Member Lawrence and 
members of the subcommittee, my testimony today discusses our 
observations on DOE's management of its excess uranium 
inventory.
    My observations are drawn from GAO's work since 2006 in 
which we have identified four key issues: one, DOE's 
elimination of a guideline limiting its uranium sales and 
transfers; two, DOE's efforts to insure the quality of its 
uranium market impact studies; three, legal concerns related to 
DOE's transfers of uranium; and four, DOE's stewardship of the 
government's uranium resources.
    In 2013, DOE announced that it would no longer use a 10 
percent guideline to limit its uranium sales and transfers. 
While DOE established the guideline in 2008 after soliciting 
input from industry, DOE did not consult with industry before 
deciding to abandon the guideline.
    Industry officials told us that the elimination of the 
guideline will diminish the transparency and predictability of 
DOE's future transfers affecting an already depressed market.
    In our report, we recommended that DOE obtain industry 
input on the amount of DOE uranium transfers the market can 
absorb annually and assess whether it needs to reinstitute a 
guideline.
    Second, our 2014 report found that DOE did not take steps 
to assess the technical quality of its 2012 and 2013 market 
impact studies. Such quality control efforts are called for in 
the contract with the vendor as well as DOE's own quality 
assurance guidelines.
    These studies were used by the Secretary of Energy to 
conclude that DOE's transfers would not have an adverse impact 
on the domestic uranium market as required by the USEC 
Privatization Act.
    DOE officials told us they did not conduct an assessment of 
the technical quality of the studies nor did they request 
additional information requested from the contractor about 
their methodology. DOE Stated they contracted for this work 
since they did not have the technical capability to do the work 
themselves and further, they wanted the contractor studies to 
be independent.
    Third, we have repeatedly noted legal concerns related to 
certain DOE transfers of uranium. In 2006 and 2011, we found 
that DOE violated the miscellaneous receipts statute when it 
did not deposit the proceeds from uranium sales into the 
Treasury.
    Specifically, DOE provided uranium to USEC for sale to a 
third party and allowed USEC to keep the proceeds as payment 
for a new cleanup contract. Such actions undercut Congress' 
authority to appropriate funds.
    In addition, DOE transferred uranium without obtaining a 
Presidential determination that the material was no longer 
needed for national security purposes. Notably, just 1 year 
earlier, DOE had acquired the same material for national 
security purposes.
    Finally, we have noted that DOE likely does not have 
authority to sell or transfer depleted uranium and have 
suggested that Congress clarify DOE's authority in this area.
    Fourth, regarding DOE's stewardship of the government's 
uranium resources, DOE has not established guidance on how 
depleted uranium tails should be valued. Specifically, if DOE 
does sell such material despite its apparent lack of authority 
to do so, it must at least charge a fair price for it as the 
Atomic Energy Act requires.
    For example, in 2012, DOE developed multiple estimates for 
the same transfer with values ranging from 0 to $300 million. 
In this case, DOE decided to not charge anything for the tails 
reasoning that they had no value since the tails could be 
considered an environmental liability.
    However, the tails were transferred for an economic 
purpose, to be re-enriched in lieu of natural uranium. Further, 
in a prior transaction, DOE charged a fee for tails that were 
transferred for re-enrichment and in 2013, DOE entered 
negotiations with another company for the sale of a portion of 
its tails inventory. DOE disagreed with our recommendation that 
it develop guidance for valuing tails.
    We believe that until DOE develops such guidance, it cannot 
ensure the government will be reasonably compensated for any 
future tails transfers.
    In closing, let me note that uranium is both an important 
national security asset and a commodity with economic value. 
Consequently, the government's inventory of uranium represents 
a valuable asset that DOE must effectively and responsibly 
manage.
    To do this, DOE must ensure that disposition decisions 
fully consider national security needs, provide the Nation's 
taxpayers with value for these assets and ensure that transfers 
do not adversely impact the domestic uranium industry.
    Although DOE has disagreed with many of our 
recommendations, we are encouraged by some recent steps DOE has 
taken to increase transparency by seeking public input on its 
proposed uranium transfers.
    However, we continue to believe that DOE needs to take 
additional steps to ensure that it conducts future transfers in 
a more transparent manner, consistent with law and that such 
transfers benefit taxpayers while not harming the uranium 
industry.
    Thank you. I would be happy to answer questions.
    [Prepared Statement of Mr. Trimble follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Ms. Lummis. Thank you, Mr. Trimble.
    Mr. Melbye, you are now recognized for 5 minutes.

                    STATEMENT OF SCOTT MELBYE

    Mr. Melbye. Thank you. Good morning, Chairwoman Lummis, 
Ranking Member Lawrence and members of the subcommittee.
    My name is Scott Melbye. I am Executive Vice President of 
Uranium Energy Corporation.
    I am proud to be a second generation U.S. uranium miner, my 
father having discovered and developed uranium deposits in 
Wyoming's Powder River Basin and the Colorado plateau of the 
western United States.
    I have worked in the uranium industry now for more than 
three decades, including senior roles at Cameco and Uranium 
One. I also previously served as President of the Uranium 
Producers of America.
    While I remain firmly optimistic in the potential of U.S. 
uranium production, we are facing the most challenging market 
conditions in my career, with market prices having fallen below 
the level of all but the most competitive production cost 
operations.
    My company, Uranium Energy Corporation, based in Corpus 
Christi, Texas, has gone through what has become an all too 
familiar development. We, like other U.S. uranium producers, 
were incentivized by market conditions in 2009 and 2010 to 
startup or expand uranium operations.
    In South Texas, we brought on the first new mine there in 
many years, employing as many as 85 people in 2012. Today, 
however, we are idling operations, ceasing new well field 
development, and cutting back our staff to 39 employees.
    We recognize the department's transfers are not solely 
responsible for the current market conditions. However they 
have made the situation decidedly worse. All of us in the 
mining industry understand and regularly deal with normal, 
healthy competition and the ups and downs that are inherent in 
our cyclical business.
    However, what the DOE is doing in this market defies normal 
business logic. At a time when producers in the United States, 
and elsewhere, are reducing production, shutting in mines and 
canceling new projects, the Federal Government has 
substantially increased its sales volumes and become our 
largest competition.
    For context, the department sold nearly twice as much 
uranium in 2014 as the entire domestic industry produced. Under 
the volumes announced in the May 2014 Secretarial 
Determination, the Federal uranium transfers account for more 
than 100 percent of the global uncommitted utility demand for 
2015, meaning there is no room for the domestic producers to 
compete.
    The UPA is not opposed to DOE leveraging America's uranium 
assets. However, the disposition of the uranium inventory 
should be predictable, transparent, and done in a way which 
minimizes the impact on our industry and secures the highest 
value for taxpayers.
    As you know, under the USEC Privatization Act, before 
making any uranium transfer, the department must certify the 
transfer ``will not have an adverse material impact on the 
domestic uranium mining, conversion, or enrichment 
industries.'' The department also has a legal obligation to 
ensure taxpayers receive fair value for this asset.
    UPA maintains the department's recent actions, including 
the May 2014 Secretarial Determination, fail to meet its legal 
obligations under the USEC Privatization Act.
    When prices crashed following Fukushima, domestic producers 
throttled back operations. DOE's response was the exact 
opposite. As uranium prices dropped, DOE pushed more material 
into a market that was already oversupplied.
    UPA recently commissioned a market report from Trade Tech, 
a leading market industry analyst, to look at the impact of the 
department's uranium transfers. Trade Tech found transfers of 
DOE material outweighed other supply developments due to 
Fukushima in the short-term.
    In addition, Trade Tech concluded if DOE does not reduce 
the amount of material entering the market, the transfers will 
influence the fates of uranium producers, both existing and in 
development, through its impact on prevailing prices and 
producer margins.
    Let me briefly outline UPA's recommendations regarding 
steps the department could take to reduce the impact of future 
transfers on the domestic industry.
    1 would be to reinstate an annual cap on transfers. In 
2008, the uranium industry, utilities, and the department 
reached consensus on a plan to limit annual transfers to 10 
percent of domestic utility requirements, about 5 million 
pounds per year.
    Unfortunately, the department quickly abandoned the cap and 
has dramatically increased the amount of material entering the 
market. UPA recommends reinstating a cap of 5 million pounds 
per year that includes all categories of DOE material and would 
be phased-in over 5 years.
    2 would be to reform how material enters the market. The 
manner in which DOE moves the material into the market, 
primarily through the spot market or near-term contracts, is 
nearly as damaging to our industry as the amount of material 
being transferred.
    UPA encourages the department to work with the domestic 
converter uranium producers to minimize the impact of 
government material coming into the market, as was done under 
the Megatons to Megawatts Agreement.
    Uranium producers, with a vested interest, can feed the 
material into long-term contracts, which will ease some of the 
pressure in the short-term when the market is oversupplied.
    3 would be to subject future Secretarial Determinations to 
full notice and comment before they are finalized with greater 
transparency and oversight on DOE actions.
    Thank you again for the opportunity to testify at today's 
hearing. I would be pleased to take your questions.
    [Prepared Statement of Mr. Melbye follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    
    Ms. Lummis. Thank you, Mr. Melbye, you were spot on with 
your 5 minutes.
    Gentlemen, we will now begin questions. I would actually 
like to recognize the Ranking Member first.
    Mrs. Lawrence. Thank you, Madam Chair.
    The testimony is clear that the uranium market is currently 
facing depressed conditions. However, the department is 
increasing the amount it transfers into the market.
    Mr. Kotek, why has DOE elected to transfer its uranium now 
rather than waiting for the market prices to rebound? Can you 
please respond?
    Mr. Kotek. Thank you for the question.
    Of course the department has to make a determination about 
the impact that such transfers would have on the industry. The 
Secretary of Energy considers a variety of factors when making 
such determinations and of course is very interested in 
ensuring that we both protect a robust domestic nuclear 
industry, including the uranium industry while also meeting our 
other obligations for cleanup and non-proliferation.
    What I will say going forward is that the department has 
certainly heard the concerns expressed by this committee, the 
industry and others and is trying to engage in a process going 
forward that will address some of the concerns that have been 
raised here today, particularly regarding the transparency and 
the opportunity for comment.
    As you may know, we issued a notice late last fall 
requesting an initial input from the industry. We more recently 
provided an opportunity for industry to provide feedback on 
further information, a compilation of comments we received and 
some other analyses so that we understand fully both the views 
of market conditions and the opinions of participants in the 
industry on other issues so that going forward we have provided 
the types of opportunities for transparency and input that 
participants in this marketplace are looking for.
    Mrs. Lawrence. Does the DOE monitor real time market 
conditions to maximize the value that it is obtaining or the 
value of the uranium for the government? I am asking because 
shouldn't it be the objective of DOE to prevent depressing the 
market after marketing a transfer?
    Can you delve into what have been the steps for you to have 
a real price value? You are gathering this information but what 
have you done to ensure we are not depressing the market?
    Mr. Kotek. As mentioned this morning, we conduct regular 
analysis that look at the amount of material or a range of the 
amount of material that can go into the marketplace and get an 
industry expert organization to help us understand what impacts 
particular ranges of transactions could have.
    We are, of course, very mindful of the value of the asset 
that we hold in terms of this uranium. We try to structure our 
transactions in a way that best serves the interests of the 
taxpayers and our programs.
    When actually structuring the transactions, we peg the 
value of the uranium to be transferred on market indices and 
publicly available at the time, so we try to ensure that the 
taxpayers are, in fact, getting the best value for that 
resource.
    As you may know, in accordance with the law, we also 
provide a 30-day advance notification to Congress on the 
amounts, the value and the timing of the uranium transfers that 
we will engage in for both the cleanup and for the non-
proliferation programs.
    Mrs. Lawrence. It is my understanding that the DOE enters 
into long term contracts for the environmental cleanup of the 
gaseous diffusion plant in Portsmouth, Ohio and for the down 
blending of weapons grade uranium in Erwin, Tennessee, is that 
correct?
    Mr. Kotek. We have contracts for both of those activities, 
yes.
    Mrs. Lawrence. Are those contracts funded by the transfer 
of uranium in exchange for the cleanup services?
    Mr. Kotek. Thank you for the question.
    As part of fulfilling or obligations under those contracts, 
there is uranium bartered to cover some of the services 
provided under each contract. There are also appropriations 
that cover I think in both cases the majority--certainly the 
cleanup contract for the majority of the activity.
    Mrs. Lawrence. When these transfers happen or are bartered, 
do you use the market value at that current time for the 
uranium that you are bartering?
    Mr. Kotek. That is my understanding. I will confess, the 
cleanup program and the non-proliferation programs are outside 
of my program area but that is my understanding. If that is 
incorrect, we will correct it as a followup.
    Mrs. Lawrence. I yield my time.
    Ms. Lummis. The gentlelady's time has expired.
    The Chair now recognizes herself for 5 minutes.
    Mr. Trimble, I want to start by asking what is the 
miscellaneous receipts statute?
    Mr. Trimble. I am not a lawyer so I would ask to take a 
formal response for the record but the general principle is if 
there is money coming in to the government, money should be 
deposited to the Treasury so that it basically protects 
Congress' authority and control over the purse.
    Congress appropriates money. It has that authority. If you 
didn't respect that, an agency could take in money and then 
decide how to spend that money itself. It essentially prevents 
the circumvention of the appropriations process.
    Ms. Lummis. Between 2009 and 2011, DOE made seven transfers 
of excess uranium to pay for cleanup services at a DOE 
enrichment facility, is that correct?
    Mr. Trimble. That is correct.
    Ms. Lummis. Did that activity violate the miscellaneous 
receipts statute?
    Mr. Trimble. That was our finding in our 2011 report, yes.
    Ms. Lummis. Mr. Kotek, the Department of Energy has 
contracted with Energy Resources International to conduct 
market impact analysis of proposed transfers of excess uranium.
    Prior to 2014, the analysis reached a determination that 
there would be no adverse material impact on the domestic 
uranium industry. It explicitly Stated that conclusion. In 
2014, however, the ERI analysis did not make a determination of 
market impact. Can you tell me why that is?
    Mr. Kotek. Thank you, Madam Chairman.
    First of all, I should point out, with the fact that the 
2014 process is subject to litigation, there is a limit to what 
I can say.
    We did provide comment on the 2014 ERI draft as we always 
do. Our comments conveyed this is ultimately the Secretary's 
decision. The statute leaves it up to the Secretary to make 
that determination.
    [Slide.]
    Ms. Lummis. I would like to show you some slides because we 
requested from ERI documents regarding the process that is used 
in its market impact analysis.
    [Slide.]
    Ms. Lummis. The first slide I am showing you shows the 2010 
ERI market assessment. As you can see in the highlighted 
language that is blocked off on the right, it finds no adverse 
material impact. That is the 2010 report.
    Now you go to the next slide which is the 2013 ERI market 
assessment. It also finds no adverse material impact. There are 
2010 and 2013.
    [Slide.]
    Ms. Lummis. Now let us go to the 2014 draft ERI market 
assessment. It notes, in a departure from previous years, that 
ERI can no longer make a definitive statement of no adverse 
material impact.
    [Slide.]
    Ms. Lummis. Now go to slide four, please. This slide shows 
the final 2014 ERI market assessment. It clearly States that 
ERI makes no conclusion regarding an adverse material impact 
which seems to be a departure from their draft.
    [Slide.]
    Ms. Lummis. Let me ask you to put up one more slide, 
please. This fifth slide shows DOE's comments in response to 
the 2014 draft assessment. In it, comments from DOE suggest 
that it is not the place of ERI to determine if the transfers 
would constitute an adverse material impact.
    It appears that at one point, the fact that ERI was 
concluding there was no adverse material impact was OK but then 
when they decided, we cannot say that anymore, that was when 
DOE intervened and said, oops that is a Secretarial 
determination. Do you know who made those comments?
    Mr. Kotek. I am afraid I do not. Having been with DOE for 
less than 3 months in this position, I am afraid I do not have 
the history.
    Ms. Lummis. I appreciate the situation you are in but we 
still thank you for being here today.
    I do want to understand why when the contract provider 
determined there was no adverse material impact, that was 
accepted, but when they hit the point where they said we cannot 
say that anymore, all of a sudden DOE says, oh, well, that is 
not yours to say.
    Thank you, Mr. Kotek and Mr. Trimble.
    My time having expired, I will return to the normal order 
of things and yield to Mr. Russell of Oklahoma for 5 minutes--
the gentleman from Texas, Mr. Farenthold.
    Mr. Farenthold. Thank you, Madam Chairman.
    Mr. Melbye, as a constituent, welcome to Washington.
    I would like to ask Mr. Kotek a couple of questions. Is 
there any disagreement that DOE transfers are depressing 
uranium prices? You all are not disputing that, are you?
    Mr. Kotek. As you see in our analyses, we certainly look at 
the situation in the marketplace and have an evaluation done of 
the potential impacts of transfers into the marketplace. Those 
show some movement in prices certainly.
    Mr. Farenthold. I am little concerned you are also using 
the uranium to basically barter. If I sold my office furniture 
to pay for a junket to China, I would be in a little bit of 
trouble. Did you all not see this coming?
    Mr. Kotek. My understanding is this practice has been 
undertaken for some number of years.
    Mr. Farenthold. I am a little concerned about it. That may 
be something the overall committee needs to be looking at 
governmentwide.
    I see Congress has really kind of damaged our ability to 
govern by surrendering some of the power of the purse. It is 
probably a bigger issue beyond this hearing.
    I would like to go to Mr. Melbye for a second. You and your 
family have been in the uranium business for a long time. There 
was some talk about the uranium being sold in the spot market.
    Where is there a spot market for uranium? My understanding 
is there are very limited uses for uranium. Obviously, you have 
depleted uranium that is not a subject here that has some uses 
but radioactive uranium--medical, nuclear energy and bombs--am 
I missing something?
    Mr. Melbye. In the commercial nuclear energy industry, the 
uranium is used for production of electricity, so the spot 
market for uranium is composed of electric utility companies 
buying requirements for their nuclear power plants.
    Mr. Farenthold. Do they normally buy on a long term 
contract or do they just go out?
    Mr. Melbye. That is an important point. These are big 
investments in nuclear power plants and to fuel these reactors, 
utilities generally cover their requirements well in advance of 
the actual need.
    The actual unfilled uranium requirements that fall into the 
spot market being utilities needing to buy to fuel their 
reactors are quite low. Hence, the focus of DOE uranium 
dispositions in the spot and near term market has a 
disproportionate impact on prices.
    Mr. Farenthold. I guess that goes both ways though. You all 
probably do not sell that much into the spot market. I guess 
where I am going with this is where can you guys come together 
and make this work? It seems like you tried but now it is all 
in court. Is there another starting point we can get to?
    Mr. Melbye. There certainly is, Mr. Farenthold. Really, the 
solution that will provide the greatest benefit to the taxpayer 
and have the least impact on industry really can be found in a 
compromise solution.
    The way the current barter program is working, it is really 
kind of a senseless and self perpetuating, downward spiral 
where the more uranium the DOE sells, the more it impacts 
price. The more it impacts uranium price, the more uranium they 
have to sell.
    This was even something that was acknowledged by the Ohio 
congressional delegation as a challenge faced by the Portsmouth 
cleanup. Really, the solution is to have these measured caps, 
predictable limits on the inventory sales and involve domestic 
industries as much as possible.
    Mr. Farenthold. Let me ask you one more question because I 
am very limited on time.
    The DOE has reported that domestic uranium production was 
up 5 percent in 2014 compared to 2013. Given your remarks about 
the State of the industry, I was surprised to see an uptick in 
production. Again, you also have Fukushima and a potential 
decrease in demand. What is the story behind that?
    Mr. Melbye. Mr. Farenthold, that is an excellent question. 
I am glad you asked it.
    The mining business, not just uranium mining, has very long 
lead times in terms of permitting, licensing, and development 
of mines. A lot of the investment decisions that were made 
particularly in the U.S., I think most of the major U.S. 
uranium producers made investment decisions in the 2009-2010 
timeframe and only now in 2013-2014 have seen production top 
out.
    I can assure you that the amount of exploration drilling, 
drilling contractors in south Texas will tell you that the well 
field development has absolutely ceased. In Wyoming, it is the 
same story. The production levels we are going to see in 2015 
and 2016 are certainly going to follow on the lack of 
investment. It is just the lag time to ramp up.
    Mr. Farenthold. Maybe the government will get some more 
money for their uranium, but again, not good for your industry.
    I see my time has expired. Thank you very much, Madam 
Chairman.
    Ms. Lummis. I thank the gentleman and apologize to the 
gentlelady from the Virgin Islands. I should have recognized 
her next. The gentlelady is recognized for 5 minutes.
    Ms. Plaskett. Thank you, Madam Chair.
    Good morning, gentlemen.
    I wanted to go back to the slides the Chairperson had us 
looking at earlier today. Chairman, did you put these into the 
record as yet? I did not hear you ask for unanimous consent.
    Ms. Lummis. I ask for unanimous consent that they be placed 
in the record. Without objection, so ordered.
    Ms. Plaskett. Thank you.
    Would you please bring up the draft 2014 market analysis 
slide that was shown to you, if that is possible? Thank you.
    [Slide.]
    Ms. Plaskett. The sentence ``Given the current weak State 
of the markets and the impact described in this report, ERI can 
no longer make such a definitive statement'' is highlighted.
    Then when I look several sentences down, I see the sentence 
``Based on the analysis contained in the study, it is not clear 
that a reduction in DOE inventory releases would cause the 
overall market conditions to change enough to make a 
significant difference in the health and status of the domestic 
industry.''
    The gentlewoman from Wyoming would appear to show that 
there was some bias that DOE had put into this report but I 
note that neither of these sentences, which are contradictory 
sentences in the draft report, were in the final market 
analysis report.
    If you pull up the final market analysis, that same 
context, you will see both of those sentences have been removed 
which seems to me to negate each of those sentences being 
contradictory conclusions and both of the sentences being 
edited out, I do not believe the final slide proves any bias or 
predetermined conclusions motivated by the edits since if they 
were contradictory and they were both removed, that seems to be 
pretty even handed and not to bring the scale one way or the 
other.
    I have other questions that I wanted to address this 
morning related to the uranium industry.
    One of the legal requirements for transferring excessive 
uranium is that the Secretary must make a determination that 
the transfers would not have a material adverse impact on the 
domestic mining conversion or enrichment industries.
    Mr. Kotek, for transfers in 2012 and 2013, the Secretary's 
decisions were based on market studies by Energy Resources 
International that concluded no adverse impacts were proposed 
for sales, am I correct? Is that right?
    Mr. Kotek. Yes.
    Ms. Plaskett. However, according to GAO's testimony, DOE 
did not take steps outlined in its contracts or departmental 
quality assurance guidelines to assess the technical quality of 
these studies. Mr. Trimble, can you explain that?
    Mr. Trimble. Yes, I can. Our 2014 report looked at these 
studies and had similar findings to what we had in 2011 which 
really addressed the conclusiveness. We questioned whether the 
reports' sort of definitive conclusions could be reached given 
the information we had.
    Specifically in the 2014 report, we noted there was limited 
information in the studies on their methodology, their 
assumptions or their data sources. We noted that the 
completeness of the data was in question.
    Specifically, they were using general industry information 
which was fine but they were reaching very specific information 
with sort of general, sort of top level data which we thought 
was a bit too much.
    They assumed no cumulative effect or impact of transfers 
over time. They sort of looked at each transfer in isolation of 
the prior transfer.
    Ms. Plaskett. Let us give Mr. Kotek a chance. What is your 
department's response to the GAO's finding?
    Mr. Kotek. Thank you for the question.
    We have, of course, a detailed response to the GAO's 
findings that can actually be found at the back of the GAO 
report.
    Ms. Plaskett. Just give me a high level--what is your 
response?
    Mr. Kotek. The department took issue with several of the 
findings from the GAO report. With respect to the ERI report, 
one of the things we are trying to do going forward is provide 
more transparency and more opportunities for input to our 
process.
    For instance, fairly recently, we published in the Federal 
Register a document providing some of the analysis that has 
been prepared for us. We have made the ERI report broadly 
available so that people can provide us with input where they 
think the report might be off the mark.
    Ms. Plaskett. What steps are you taking to mitigate the 
negative market impacts that resulted from that when you used 
that study for the 2014 transfers?
    Mr. Kotek. Thank you for the question.
    The 2014 process is all subject to litigation, so I am 
limited in what I can say about that. What I can say is that 
going forward, we have heard the concern about lack of 
transparency and lack of opportunity for input.
    We are trying something we have not done before in terms of 
the number of opportunities for providing for input. We have 
been very pleased with the number of responses and the quality 
of responses we have received.
    Those will be factored into the new determination that is 
issued and it should be fairly soon. Frankly, we will adjust 
the process going forward as we see how the situation unfolds.
    Ms. Plaskett. Thank you.
    Thank you, Madam Chairman, for the time.
    Ms. Lummis. Thank you. The gentlelady yields back.
    The Chair recognizes the gentleman from Arizona, Mr. Gosar.
    Dr. Gosar. Thank you, Madam Chairman.
    Mr. Kotek, do you understand market forces?
    Mr. Kotek. I have only been on the job now X amount of 
time.
    Dr. Gosar. But do you really understand market forces? I am 
going to give you an example.
    Do you understand the rare earth issue in the world--that 
we have China that manipulates them, they have a monopoly. What 
they actually do is they flood the market so it is 
inconceivable that actually a mining process can do it and make 
some type of a profit. Then they continue to raise it up to the 
point that people want to get back in and then they cut it back 
down?
    Mr. Kotek. Sir, I can actually claim some understanding of 
the rare earth issue. In a past life, I participated in some of 
the communications work around a proposed rare earth mine in 
the northeastern part of the great State of Wyoming in the Bear 
Lodge District, so yes.
    Thank you for calling attention to that issue. That is an 
important one.
    Dr. Gosar. Yes, it is manipulation of the marketplace. This 
is what I want to go back through. I know my colleague from 
Texas actually highlighted that.
    With the Fukushima accident and subsequent shuttering of 
the Japanese nuclear reactors, the price of uranium was dropped 
from $70 per pound down to $55. With the subsequent flooding of 
the market, we are down to $28 per pound and currently about 
$37 per pound.
    In my State of Arizona, there is now only one producer left 
operating in the whole State. This has stunted economics. This 
is an aspect of great job stability in rural Arizona. From my 
standpoint, when you manipulate the marketplace without looking 
at the consequences of it, it drives this marketplace very 
differently.
    Is your agency pro-mining?
    Mr. Kotek. Our agency supports a strong domestic mining 
industry and the uranium mining industry in particular.
    Dr. Gosar. What efforts have you taken to help streamline 
the rules and regulations in regard to mining?
    Mr. Kotek. That doesn't really fall into the purview of our 
agency, sir.
    Dr. Gosar. Well, but it has inferences on it because you 
want to promote it, right?
    Mr. Kotek. If I could take just a minute to describe some 
of the other things we are trying to do to promote a healthy 
domestic uranium industry broadly which has implications for 
the nuclear industry.
    Our organization, the Nuclear Energy Office, is principally 
an R&D organization. For example, it was our organization that 
helped lay the technical groundwork for the license extensions 
that allowed nuclear power plants in the U.S. to go from 40 
years of operation to 60 years.
    Dr. Gosar. That is fine and good. I understand but I have 
limited time here. I understand that aspect but it is a 
multilayered aspect. There are fuels in, diversified fuel out, 
applications so you want not just one aspect of delivery, 
right? You do not want spent fuels--new uranium and mining not 
only from Texas and Arizona, you want dynamic markets and 
diversified markets.
    How have you looked at that from that diversified market, 
how have you looked at it from the standpoint of the impact of 
flooding the marketplace with current mining? You know, people 
have to stay in business and have to make a profit. By flooding 
the marketplace, you have actually taken away the application. 
In my State, we are down to one and they are holding on by a 
thread.
    Mr. Kotek. Thank you, sir, for that concern. That is 
something we have heard broadly from the industry, particularly 
as it pertained to the 2014 determination and the 2013 
management plan.
    That is why we are engaged in a process this year that is 
designed to provide more input into the Secretary's 
determination process prior to his making that determination.
    Dr. Gosar. I keep coming back to this. The highest grade of 
uranium is found in my district and found in my State and 
southern Utah. Yet, we have had this predilection in regard to 
eliminating that type of mining. We have not seen a cohesive 
aspect of support for that mining aspect.
    Mr. Melbye, have you seen that? You are very well aware of 
the Breccia Pipes up in northern Arizona and southern Utah. We 
are down to one mine that is barely holding on. We have an 
Administration continuing on with this advancement of 
potentially extending the Antiquities Act even further on this 
application.
    Do you see DOE actually engaging you in an active aspect of 
having a diversified mining application to help with this?
    Mr. Melbye. Thank you, Mr. Gosar.
    It is ironic that the Administration does support nuclear 
energy as a way to provide energy security to the United States 
and have an impact on carbon emissions, yet it seems like our 
biggest competitor in a very difficult market condition.
    U.S. uranium producers we can compete with any other 
producers in the world. We have advantages and environmentally 
clean operations. We are in safe and peaceful jurisdictions 
with strong regulation.
    Utilities want to buy from us but if we cannot get over the 
head winds that we are facing from DOE and dumping material 
into our markets, we just cannot really fulfill our potential.
    Dr. Gosar. Your story is very unique because it is one of 
the cleanest mining processes around. Mitigation, I have taken 
numerous people up to the northern rim of the Grand Canyon and 
people cannot even find it. In fact, it may even help 
percolation of water into subsurface areas in a cleaner 
fashion. I want to compliment you on that.
    I do not envy you the problems because the Administration 
obviously does not understand market factors.
    Ms. Lummis. The gentleman's time has expired. Thank you.
    Unless there is an objection, we will move to round two and 
unless there is objection, we will return to the regular order. 
Do you object to returning to the regular order?
    Mrs. Lawrence. No objection.
    Ms. Lummis. Thank you. In round two, I will recognize 
myself for 5 minutes.
    Mr. Trimble, your May 2014 report identified legal concerns 
with another series of transfers undertaken by DOE. How did the 
DOE value the materials they were transferring?
    Mr. Trimble. In our report, we looked at a series of 
transactions. The key finding regarding value was there was 
inconsistent practice at DOE in terms of how it valued tails. 
In my opening statement, I made reference to one transaction, 
which was a large transaction, ultimately I believe DOE saw 
benefit or cited benefits over $700 million in this 
transaction.
    Internally, they estimated the value to be zero or $300 
million. Ultimately, they chose zero for the transaction even 
though it was being transferred for the purpose of re-
enrichment, so it had economic value.
    The problem we cite in the report is simply that there is 
no internal guidance or policy governing how such decisions are 
to be made. That leads to inconsistent applications. Prior 
transfers going back several years, they had set a price for 
similar transactions for a similar purpose and they also 
entered negotiations for the disposition of some of its tails 
for re-enrichment, again, suggesting there is value and the 
price should be set.
    Moreover, under the law, both the Atomic Energy Act as well 
as the USEC Privatization Act, they are required to set a price 
to obtain a fair value for the commodity. By setting the price 
to zero, they were not consistent with that law.
    Ms. Lummis. Mr. Kotek, does the department review the 
contracts between Fluor and Trexus that outline how the uranium 
transferred by DOE to Fluor will be sold into the market and at 
what price?
    Mr. Kotek. My understanding is that is an arms-length 
arrangement. We do not get involved in the specifics. Again, 
that falls into a different program office. If I have that 
wrong, I will be corrected here shortly.
    Ms. Lummis. OK. If not, how does DOE ensure that these 
transfers are receiving fair value and not resulting in an 
adverse material impact on the domestic industry?
    Mr. Kotek. My understanding is that when we are engaged in 
our bartering arrangement with the cleanup contractor, that is 
when we have to ensure we get the fair value. We ensure that 
takes place at that transaction.
    Ms. Lummis. You do ensure that takes place. How do you 
ensure that takes place?
    Mr. Kotek. My understanding is that is based on an 
evaluation of the market conditions and prices at the time.
    Ms. Lummis. Mr. Melbye, following up on that, you indicated 
in your testimony that DOE may not be securing the highest 
value for the government's uranium assets. Can you explain that 
statement?
    Mr. Melbye. In this regard, meaning the domestic industry 
and the taxpayers, are completely aligned in getting the 
highest value for those government assets I think by limiting 
the amount that DOE puts into the market particularly in 
periods of market weakness.
    The value of the uranium that they do sell is going to be 
at a higher price, so that goes to the measured predictable and 
limited caps. Also, I think if you involve the domestic 
industry, meaning the converter and the United States and the 
uranium producers, no one has more of a vested interest to 
ensure that the uranium does not have an adverse impact on our 
markets.
    I think our ability to put it into portfolios of long term 
contracts--we do not mean spot or near term, forward carried 
trades the commodity traders are adept at doing--we are talking 
about the market that uranium producers sell to electric 
utilities over five to 8 year agreements at higher prices.
    We think that would certainly lift all the boats in this 
issue and get higher value for the taxpayer and less adverse 
impact on the industry.
    Ms. Lummis. Mr. Trimble, how can we be sure the taxpayer is 
being reasonably compensated for all this?
    Mr. Trimble. Sort of following up the recommendations from 
our 2014 report, I think there are two things that jump to 
mind. One is we have recommended and believe that DOE should 
establish guidance and internal policies on how such transfers 
will be valued and priced so there is clarity as to how that 
process is carried out and there is transparency regarding how 
those prices will be set.
    Second is we talked a bit about the market impact studies. 
The second part of this is that we have recommended DOE follow 
its own guidelines to ensure the quality of those studies. When 
it contracted out with the vendor for these market impact 
studies, it did not take steps to verify the quality of those 
studies as called for by its own guidance.
    We think, at a minimum, those steps should be taken to flag 
early any problems with that analysis.
    Ms. Lummis. I thank the gentlemen.
    The Chair now recognizes the Ranking Member, Mrs. Lawrence, 
for 5 minutes.
    Mrs. Lawrence. Mr. Trimble, according to your testimony, 
the Department of Energy published the excess uranium inventory 
management plan based on your agency's recommendation back in 
2008, correct?
    Mr. Trimble. That is correct.
    Mrs. Lawrence. Was that recommendation based on a GAO 
finding that the department needed transparency in planning the 
use of excess uranium? Could you explain?
    Mr. Trimble. Our work in this area goes back at least as 
far as 2006, so we were flagging several of these issues back 
then and identified the need for the department to come up with 
a plan. The department had been working on something so we 
recommended that they complete that and develop a comprehensive 
plan.
    We also recommended that they clarify the legal authority 
as I highlighted in my statement.
    Mrs. Lawrence. Mr. Kotek, the management plan established 
the guideline that it would cap its uranium at 10 percent of 
industry needs, is that correct? In 2008, the plan established 
that.
    Mr. Kotek. That was not a cap, that was a guideline.
    Mrs. Lawrence. It was a guideline, so you did not perceive 
it as a cap?
    Mr. Kotek. That is my understanding, yes.
    Mrs. Lawrence. The department has never operated that there 
was an established cap. Did you adhere to the guideline?
    Mr. Kotek. The guideline, I believe was adhered to, yes, in 
the first several years of the transactions.
    Mrs. Lawrence. Currently, what is the amount or the cap 
that you are using or is there a cap or a guideline existing 
now?
    Mr. Kotek. There is not one now. The 2013 Uranium 
Management Plan made clear the department was moving away from 
the 10 percent but was continuing to, of course, meets its 
obligation that the Secretary assess the situation and make a 
determination that there was no adverse material impact on the 
uranium markets.
    Mrs. Lawrence. Do you know if the department consulted with 
the domestic industry representations in deciding how this 
uranium--you call it a guideline, some call it a cap--was there 
any interaction with the domestic market?
    Mr. Kotek. Having not been here then, I cannot speak to the 
specifics. I know there is regular interface between my 
organization and the department broadly and the uranium 
industry but certainly, the desire for more industry input is 
one of the things that has informed the process we are using 
this year with the 2015 Secretarial Determination.
    Mrs. Lawrence. Mr. Melbye, as far as you know, did the 
Energy Department seek industry input when it moved from what 
we are being told was not a cap but a guideline on the transfer 
and did it seek industry input when it significantly ramped up 
its uranium transfers into the market? Were you consulted?
    Mr. Melbye. Thank you, Ranking Member Lawrence.
    They did not consult us when they decided to ramp up. It 
was very troubling. It wasn't a couple years after they 
established the 2008 Inventory Management Plan. It was really 
less than 6 months after it was put in place.
    I will say that the industry was consulted in the formation 
of the so-called industry consensus which involved the Nuclear 
Energy Institute, the electricity companies and the domestic 
producers. That recommended--it was not a guideline, it was a 
cap on how much uranium DOE puts into the market.
    That is critically important when financial institutions or 
shareholders are looking to invest in our companies, that they 
know there is an upside limit to how much the government is 
going to impact our markets.
    Mrs. Lawrence. Mr. Kotek, you Stated DOE sought comment 
from the public about the effects of the continuous uranium 
transfers on domestic industries and recommendations about the 
factors it should consider in assessing whether to give these 
transfers and the adverse material impact.
    Was this request for comment part of the department's 
response to concerns that the management process is no longer 
transparent and what was the decision of DOE when we looked at 
the impact of not having a cap? It seems like you just sell now 
and there are no guidelines.
    Mr. Kotek. Thank you for the question.
    In the feedback we have received, first, to respond to your 
question about what we are doing in response to the expression 
of concern, yes, we have heard from the market participants. We 
understand their desire for more opportunity for input to the 
process and greater transparency. We are trying to achieve 
that.
    In response to the first round of comment that we received 
from industry, in March of this year, we published a list of 
six factors that we would intend to consider as a part of 
future determinations: market prices; realized prices for 
current operators; production and existing facilities; 
employment levels in the industry; changes in capital 
improvement plans and development for future facilities; and 
then, the long term viability and health of the industry.
    We published those for comment. We have received comment. 
While I have not read each of the comments we received back, my 
understanding from the response we have received back is that 
those factors seem to be a pretty good and thorough set of 
things for the Secretary to consider in making determinations 
going forward.
    Mrs. Lawrence. Madam Chair, I just want to say there are 
clearly two different experiences when it comes to input and 
responses to the industry and what the DOE is saying. I think 
that is a flag that this committee needs to really explore.
    Thank you.
    Ms. Lummis. The Ranking Member yields. The Chair now 
recognizes the gentleman from Texas for 5 minutes.
    Mr. Farenthold. Thank you very much. I am not going to use 
the entire 5 minutes.
    Mr. Melbye, I just want to make sure I heard right a second 
ago. You guys in the industry viewed the 10 percent as a cap, 
not a guideline, is that correct?
    Mr. Melbye. That is absolutely correct.
    Mr. Farenthold. You went to your bankers, you decided to 
buy equipment, you made leases, you went with business 
decisions based on what you believed were good faith 
representations by the government?
    Mr. Melbye. It is something that the investment community 
watches very closely. When they try to model our businesses and 
our industry, they need to know how much impact the government 
is going to have on our business.
    Mr. Farenthold. So it wasn't just you guys that thought it 
was a cap, your lenders and investors thought it was a cap too?
    Mr. Melbye. Correct, and the utilities and the NEI-led 
consensus.
    Mr. Farenthold. I just wanted to make sure that was clear 
in the record.
    I yield back. Thank you.
    Ms. Lummis. I thank the gentleman.
    I do have one more question. Does the Ranking Member have 
any more questions?
    Mrs. Lawrence. No, Madam Chair.
    Ms. Lummis. With your indulgence, I will ask my final 
question.
    Mr. Kotek, you said earlier that your contract with Fluor 
is an arms-length transaction, did I get that right?
    Mr. Kotek. My understanding, Madam Chairman, is that it is 
the contract between Fluor and I think it is Trexus. That is 
the arms-length relationship I was talking about.
    Ms. Lummis. I am going to ask once again, do you review the 
contract between Fluor and Trexus?
    Mr. Kotek. My understanding is no, Madam Chairman--
unfortunately, that is not in my program area in DOE, so I 
would like to offer to have folks get back to you with the 
specifics on that if I am incorrect.
    Ms. Lummis. That would be perfect. I would request that you 
respond in writing or have a colleague respond in writing to 
that specific question.
    Do you have an additional question?
    Mrs. Lawrence. Madam Chair, I really would like the agency 
to respond to the definition of a cap and a guideline. When we 
have the industry and lending industries clearly operating on a 
cap--it was removed and I would like clarification. Is there a 
guideline, as DOE calls it, or is there a perceived cap in that 
industry? I would really like clarification on that through the 
Chair.
    Ms. Lummis. Mr. Kotek, I believe the question is directed 
to you.
    Mr. Kotek. I am sorry, I thought that was a request to 
respond for the record.
    Ms. Lummis. Would you rather have the response in writing 
for the record?
    Mrs. Lawrence. Yes, I would rather have the response for 
the record.
    Ms. Lummis. Do you understand the question?
    Mr. Kotek. Yes. Thank you very much.
    Ms. Lummis. Thank you.
    Mr. Kotek. Just to reiterate, having not been here at the 
time, my understanding is that at least the folks on our side 
view the 10 percent number showing in the 2008 report as, 
again, a guideline, not a cap, that we could go higher or lower 
each year but certainly, we have heard a different perspective 
here. We would be happy to followup with you.
    Thank you very much.
    Ms. Lummis. Thank you, Mr. Kotek.
    The gentleman from Alabama, Mr. Palmer, has just arrived. 
Mr. Palmer, do you have any questions?
    Mr. Palmer. Nothing.
    Ms. Lummis. Thank you.
    There appearing to be no further questions, I want to thank 
the Ranking Member and others for being here today.
    Mr. Kotek, I want you to thank Secretary Moniz, on my 
behalf, for taking time when he was in Wyoming last summer, to 
meet with me and others regarding this issue.
    Would you please also pass along to him that this committee 
has document requests outstanding with the department, 
including those regarding Mr. Poneman. I would like to 
reiterate my request for those documents.
    Mr. Kotek. Thank you, Madam Chairman. I will be sure to 
pass that along.
    Ms. Lummis. Thank you.
    That being said, I think it is important that the committee 
conducts oversight of the workings of the Federal Government, 
not just to find problems, but to help identify solutions. In 
that regard, I want to thank all three of the gentlemen for 
being here today.
    In 2008, the DOE and domestic industry met and negotiated 
ways to ensure that both parties benefited from the transfer 
program. It is my hope that the Department of Energy can work 
with the domestic industry and those involved in cleanup to 
develop a way to ensure that excess uranium can be used to meet 
cleanup needs while ensuring a strong uranium industry in 
America that lessens our dependence on foreign sources of 
energy.
    I am sure that Congress would be interested in legislation 
that does so. I am hopeful that the Administration and industry 
can work toward those ends.
    I would like to thank our witnesses for taking time to 
appear before us today. Given the requests that we have 
submitted, we hope to hear from you soon in writing, Mr. Kotek.
    If there is no further business, without objection, the 
subcommittee is adjourned.
    [Whereupon, at 11:20 a.m., the subcommittee was adjourned.]

                                APPENDIX

                              ----------                              


               Material Submitted for the Hearing Record
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 

                                 [all]