TITLE: B-307137, Department of Energy--December 2004 Agreement with the United   States Enrichment Corporation, July 12, 2006
BNUMBER: B-307137
DATE: July 12, 2006
**********************************************************************************************************************
B-307137, Department of Energy--December 2004 Agreement with the United   States Enrichment Corporation, July 12, 2006

   B-307137

   July 12, 2006

   The Honorable Pete V. Domenici
   Chairman, Committee on Energy

   and Natural Resources
   United States Senate

   Subject: Department of Energy--December 2004 Agreement with the United
   States Enrichment Corporation

   Dear Mr. Chairman:

   This responds to the Committee's request for a legal opinion regarding
   what has been referred to as a "barter arrangement" between the Department
   of Energy (DOE) and the United States Enrichment Corporation (USEC) under
   a December 10, 2004 Agreement.[1] As agreed with your staff, this letter
   addresses two principal legal issues: (1) whether DOE had authority to
   enter into the December 2004 Agreement; and (2) whether DOE had authority
   to use proceeds from USEC's sale of DOE uranium under the Agreement.

   As discussed below, on the first issue, we conclude that DOE was
   authorized to enter into the December 2004 Agreement by section
   3112(b)(2)(D) of the USEC Privatization Act of 1996, 42 U.S.C. sect.
   2297h-10(b)(2)(D). As required by that provision, DOE sold and received
   payment for Russian-origin uranium to be consumed by domestic end users,
   and DOE's failure to act within statutory deadlines did not terminate its
   authority. On the second issue, we conclude that DOE's actions violated
   the requirements of 31 U.S.C. sect. 3302(b), the miscellaneous receipts
   statute. When DOE directed USEC to receive, retain, and use proceeds from
   the sale of government-owned uranium to compensate USEC for expenses it
   incurred on behalf of the department, DOE improperly augmented its
   appropriations by $62 million. To resolve its improper use of sales
   proceeds, DOE should either seek and obtain congressional ratification of
   its use of the proceeds or adjust its accounts by transferring $62 million
   from its appropriation to the miscellaneous receipts of the Treasury. If
   DOE lacks sufficient budget authority to cover the adjustment, it should
   report a violation of the Antideficiency Act[2] in accordance with 31
   U.S.C. sect. 1351.[3]

   BACKGROUND

   The Energy  Policy Act of 1992 created USEC as a wholly owned government
   corporation to perform all uranium enrichment services for commercial
   purposes in the United States, services that DOE had previously
   provided.[4] Between 1993 and 1998, in preparation for USEC's eventual
   conversion to a private corporation, DOE transferred a total of
   approximately 45,000 metric tons of uranium (MTU) to USEC to help sustain
   it as a viable private enterprise. See 42 U.S.C. sect. 2297h-2(b); GAO,
   Nuclear Nonproliferation: Implications of the U.S. Purchase of Russian
   Highly Enriched Uranium, GAO-01-148 (Washington, D.C.: Dec. 15, 2000),
   at 34. The USEC Privatization Act of 1996 provided for sale of USEC to the
   private sector, and this process was completed in July 1998.[5]

   In early 2001, USEC notified DOE that up to 9,550 MTU that DOE had
   transferred to it was potentially contaminated with technetium[6] and
   claimed that DOE was liable for damages arising from this transfer.[7] To
   resolve its claim, USEC asked DOE to replace USEC's contaminated uranium
   with uncontaminated, or "clean," uranium. Id. DOE did not admit liability
   but for a variety of reasons entered into a series of agreements with USEC
   starting in June 2002.[8] The agreements provided that DOE would either
   replace the contaminated uranium with clean uranium or compensate USEC in
   some way for decontaminating the uranium; in return, USEC would "release
   the United States from any and all liability and claims" with respect to a
   pro rata portion of the contaminated uranium.[9] The agreements also
   contained provisions helping to ensure continuation of a U.S. domestic
   uranium enrichment capability and deployment of an advanced uranium
   enrichment technology.[10]

   In the June 2002 Agreement, DOE compensated USEC for decontaminating some
   of the uranium by taking title to and assuming responsibility for some of
   USEC's stockpile of depleted uranium waste, which would reduce USEC's
   eventual disposal costs.[11] In a 2004 Work Authorization, DOE compensated
   USEC for decontaminating additional transferred uranium by paying an
   estimated $31 million from DOE's appropriations.[12] In an October 2004
   Agreement, DOE agreed to exchange clean DOE-owned uranium for contaminated
   USEC uranium.[13]

   Finally, in December 2004, DOE and USEC entered into the agreement at
   issue here, Memorandum of Agreement for the Continued Operation of the
   Portsmouth S&T Facilities for the Processing of Affected Inventory in
   Fiscal Year 2005 and Thereafter, Dec. 10, 2004 (December 2004 Agreement).
   Like most of the previous agreements, the December 2004 Agreement
   specified that USEC would decontaminate the contaminated uranium
   transferred to it by DOE and that USEC would release DOE from liability
   for the previous contaminated transfers. Id., sect. 1.2(c), at 4. Unlike
   the other agreements, the December 2004 Agreement provided that USEC also
   would decontaminate DOE-owned uranium. DOE agreed to compensate USEC for
   these services by transferring to it "marketable assets [clean uranium]
   that are not necessary for national security needs from DOE's former
   uranium program." Id., at 1. USEC was required to sell the uranium on the
   commercial market, deposit the proceeds into private investment accounts,
   and use the proceeds to cover "allowable costs" that it incurred in
   decontaminating the uranium. Id., at 3; sect. 2.1, at 6; sect. 6.2, at 8.
   If the initial uranium sales did not yield enough proceeds to cover USEC's
   allowable costs, DOE agreed to transfer more clean uranium for USEC to
   sell. Id., sect. 7.2(c), at 9. If any uranium sale proceeds remained
   unspent at the end of the agreement, after USEC's allowable costs were
   reimbursed, those were required to be "returned" to DOE within 30 days.
   Id., sect. 6.2, at 8.

   The clean uranium that DOE agreed to transfer to USEC was deemed
   Russian-origin uranium under section 3112(b)(1) of the USEC Privatization
   Act. December 2004 Agreement, sect. 4.2, at 7. The Agreement also
   acknowledged that if the transferred uranium were sold for consumption by
   domestic end users, it would be subject the use restrictions in section
   3112(b)(2)(D) of the act. Id.

   Twelve days after DOE signed the December 2004 Agreement, it approved
   USEC's marketing strategy for sale of 900 MTU of DOE clean uranium. In its
   approval memorandum, DOE stated that the December 2004 Agreement "has in
   effect made USEC the department's sales agent for" the uranium.[14] From
   December 2004 to November 2005, DOE transferred about 900 MTU to USEC
   under the Agreement, and USEC sold this uranium to four buyers for a total
   of $62 million for eventual consumption by domestic end users. GAO-06-723,
   at 18.

   In November 2005, in section 314 of DOE's appropriations act for fiscal
   year 2006, Congress expressly authorized DOE, notwithstanding any other
   provision of law, including section 3112 of the USEC Privatization Act and
   the miscellaneous receipts statute, 31 U.S.C. sect. 3302(b), "to barter,
   transfer or sell uranium . . . and to use any proceeds . . . to remediate
   uranium inventories" held by DOE. Energy and Water Development
   Appropriations Act, 2006, Pub. L. No. 109-103, sect. 314, 119 Stat. 2247,
   2281 (Nov. 19, 2005). In view of the terms of section 314, this opinion
   considers only DOE's authority to enter into and implement the December
   2004 Agreement prior to enactment of section 314 (November 19, 2005).

   ANALYSIS

   I. DOE's Authority to Transfer the Uranium to USEC under the December 2004
   Agreement

   DOE relies on section 3112(b)(2)(D) of the USEC Privatization Act as
   authority for the December 2004 Agreement. In support of its position, DOE
   provided us with a draft memorandum entitled Sales of Uranium Hexafluoride
   Pursuant to Section 3112(b) of the United States Enrichment Corporation
   Privatization Act, 42 U.S.C. 2297h-10, dated "4/18/03 + 4/24/03" (2003 DOE
   Memo), addressing DOE's authority under section 3112(b)(2)(D). DOE told us
   that this 2003 memorandum represents the department's current legal
   position on its authority for the December 2004 Agreement. Telephone
   Conference Call with Mary H. Egger, Deputy General Counsel, and Susan F.
   Beard, Assistant General Counsel, DOE, and Susan D. Sawtelle, Associate
   General Counsel, GAO, and others, May 5, 2006. See also 2006 DOE Letter,
   Attachment at 2-3.[15]

   Section 3112(b)(2) authorizes DOE sales of Russian-origin uranium and
   provides that DOE "shall sell, and receive payment for" this category of
   uranium within 7 years of enactment, that is, no later than April 26,
   2003. In addition, for sales of such uranium for consumption by "end users
   in the United States," section 3112(b)(2)(D) provides that DOE "shall"
   sell the uranium even earlier--"in calendar year 2001"--and once the
   uranium is sold, its consumption is restricted both by date (not before
   January 1, 2002) and amount (no more than 3 million pounds per year). Id.
   DOE acknowledges that its transactions under the December 2004 Agreement
   did not meet the 2001 or 2003 deadlines in section 3112(b)(2).

   A. DOE's Sale and Receipt of Payment for Its Uranium

   DOE maintains that its transfer of uranium to USEC under the December 2004
   Agreement constituted the requisite "sale" under section 3112(b)(2)(D),
   and that USEC's release of its liability claims against DOE, together with
   its decontamination of DOE's uranium, constituted the requisite "payment."
   2006 DOE Letter, Attachment at 6; 2003 DOE Memo, at 7-9.

   We agree that DOE ultimately sold and received payment for the uranium,
   but not that it was a sale to USEC. Instead, the December 2004 Agreement
   established USEC as DOE's sales agent for sales of the uranium to other
   entities. The extent of control that DOE retained over the uranium it
   transferred to USEC under the Agreement does not support DOE's
   characterization of the transfer as a sale to USEC.

   While the Agreement provided that DOE would "transfer to USEC title to and
   possession of" clean uranium belonging to the United States, December 2004
   Agreement, sect. 2.2, at 7, USEC had no discretion over use of the
   uranium. The Agreement required that USEC sell the uranium on terms and
   conditions detailed in a DOE-approved marketing strategy using "its good
   faith efforts to obtain the best possible price given market conditions at
   the time of the sale." Id., sect. 4.1, at 7. The Agreement required USEC
   to "notify [DOE] as each contract for sale . . . is executed and the
   agreed contract price." Id., sect. 6.3, at 8. It also required USEC to
   "report the proceeds from sales . . . to [DOE] within 10 days of the date
   on which USEC receives payment." Id., sect. 6.5, at 8. DOE received copies
   of all of USEC's sales contracts with the commercial buyers and copies of
   wire transfers, so that the department could verify USEC's receipt of
   funds from the buyers. See GAO-06-723, at 20. Under a separate security
   agreement required by the December 2004 Agreement, USEC was required to
   segregate sales proceeds in an account separate from USEC's other funds,
   and USEC could not apply those proceeds to cover expenses without first
   obtaining DOE's approval. Security Agreement between U.S. Department of
   Energy and USEC, Feb. 2, 2005, sect. 4.6, at 4. DOE retained a security
   interest in the uranium, USEC's contracts for sale of the uranium, USEC's
   accounts receivable for the uranium, and the proceeds from USEC's sale of
   the uranium. Id., sect. 2.1, at 2-3.

   The December 2004 Agreement also restricted the uses to which USEC could
   apply the sale proceeds--they could be used only to compensate USEC for
   allowable costs. December 2004 Agreement, sect. 6.2, at 8. "Allowable
   costs" were defined as the "direct, indirect, and plant overhead costs"
   that USEC incurred in operating its facilities for processing "Affected
   Inventory," which included both USEC-owned and DOE-owned contaminated
   uranium. Id., at 1; sect. 2.1,  at 6. DOE officials explained that USEC
   was required to apply the sale proceeds first to the costs of
   decontaminating USEC-owned uranium and then to the costs of
   decontaminating DOE-owned uranium.[16] Telephone Conference Calls with
   Mary H. Egger, Deputy General Counsel, and Susan F. Beard, Assistant
   General Counsel, DOE, and Susan A. Poling, Managing Associate General
   Counsel, and Susan D. Sawtelle, Associate General Counsel, GAO, and
   others, May 8 and 9, 2006 (Conference Calls of May 8 and 9). Any equipment
   and materials purchased with the sale proceeds would become the property
   of DOE. Id., art. 12, at 15. Finally, the December 2004 Agreement provided
   that if excess sales proceeds remained after all activities were
   completed, the remaining proceeds "shall be returned to DOE within
   30 days." Id., sect. 6.2, at 8.

   We cannot reconcile these contract terms and practices with DOE's
   assertion that it sold the uranium to USEC. USEC had no choice in whether
   to sell the uranium, or in how to go about it. The agreement required sale
   and required DOE to approve the marketing plan. The relationship between
   the two parties was more like a principal-agent relationship. The
   principal instructed the agent, USEC, in the sale, the placement of
   proceeds in a separate account, the allowable uses of proceeds, and
   allowable costs. We find it far more reasonable to conclude that the
   December 2004 Agreement accomplished not the sale of uranium to USEC, but
   rather the designation of USEC as DOE's sales and marketing agent. DOE
   itself, 12 days after signing the December 2004 Agreement, identified USEC
   as DOE's sales agent for the uranium transferred pursuant to the
   Agreement, not the purchaser of the uranium. See Gunter Memorandum.

   As the United States Customs Court has observed, "the decisive
   consideration which distinguishes a principal-agent relationship from a
   buyer-seller relationship is the right of the principal to control the
   conduct of the agent with respect to the matters entrusted to him." Dorf
   International v. United States, 291 F. Supp. 690, 694 (Cust. Ct. 1968)
   (importer had little discretion in sale of machine; because importer's
   province was to find customers for exporter, importer was exporter's
   selling agent). In Dorf, the court advised that "[w]hich of these
   relationships exists is to be determined by the substance of the
   transaction," and that "[n]o single factor is determinative; rather the
   relationship is to be ascertained by an overall view of the entire
   situation. . . ." Id. See also Pier 1 Imports, Inc. v. United States,
   708 F. Supp. 351, 356 (Ct. of Intl Trade 1989); G.J. Parkhill v. United
   States, 385 F. Supp. 204, 207 (N.D. Tex. 1974); Lorraine T. Fink v.
   Commissioner of Internal Revenue, T.C. Memo 1982-284 (May 24, 1982);
   1 Williston on Sales, sect. 2:1, at 19-21 (5^th ed. 2005); 1 Mechem on the
   Law of Agency, sections 44-48, at 28-32 (2^nd ed. 1914) ("The essence of
   agency to sell is the delivery of the goods to a person who is to sell
   them . . . as the property of the principal, who remains the owner of the
   goods and who therefore has the right to control the sale, to fix the
   price and terms, to recall the goods, and to demand and receive their
   proceeds when sold, less the agent's commission.") (Emphasis in
   original.).

   While the December 2004 Agreement obligated DOE to transfer "title to and
   possession of" the uranium to USEC, the terms of the Agreement together
   with its collateral security agreement demonstrate that the purpose of the
   transfer actually was to facilitate the sale of the uranium to other
   commercial entities by USEC on behalf of DOE. It is common for selling
   agents to be given title and possession to property in order to effect a
   sale on behalf of the principal. Restatement (Second) of Agency sect. 14N
   (1958) (independent contractor agents "also fall within the category of
   trustees, as in the case of a selling agent who has been given title to
   the subject matter . . . [and] there is an agency [relationship] if in the
   transaction which they undertake they act for the benefit of another and
   subject to his control"). The terms of the December 2004 Agreement and the
   security agreement show that DOE retained control over the use and
   disposition of both the uranium and the proceeds from its sale. Despite
   the recitation in the December 2004 Agreement transferring title and
   possession to USEC, the security interests that DOE retained in its
   security agreement served to protect DOE's title to the uranium and the
   sales proceeds. DOE actually parted with no incidents of ownership.

   Between December 2004 and November 2005 (when Congress passed section
   314), USEC sold the uranium to four different buyers for a total of $62
   million. GAO-06-723, at 18. USEC, acting as DOE's sales agent, received
   payment from the four buyers on behalf of DOE. While we disagree with
   DOE's assertion that it sold the uranium to USEC, we conclude that DOE,
   using USEC as its agent, sold the uranium and received payment, satisfying
   the requirements of section 3112(b)(2)(D).

   B. DOE's Failure to Meet Statutory Deadlines

   As noted above, section 3112(b)(2) provided that DOE "shall" sell and
   receive payment for its Russian-origin uranium no later than April 26,
   2003, and section 3112(b)(2)(D) provided that sale of this uranium for
   consumption by domestic end users "shall" occur in calendar year 2001.
   Thus, the next issue is whether DOE's authority under section 3112(b) had
   expired before it entered into the December 2004 Agreement. Although
   arguably the word "shall" in these provisions could be construed as a
   mandatory command that terminated DOE's authority when it missed the
   deadlines, rendering the December 2004 Agreement unauthorized under that
   section,[17] DOE asserts that the deadlines were only hortatory and did
   not affect its authority. Conference Calls of May 8 and 9.

   DOE relies on Barnhart v. Peabody Coal Co., 537 U.S. 149 (2003), and
   related cases. See 2003 DOE Memo, at 5-6. Barnhart involved a requirement
   under the Coal Industry Retiree Health Benefit Act of 1992 (Coal Act) that
   the Social Security Administration (SSA) "shall, before October 1, 1993,"
   make an assignment of every coal industry retiree to a particular coal
   industry operator when that was possible. Assignment required the operator
   to pay annual premiums to fund retiree health benefits. When
   identification of an operator was not possible, the Coal Act contained a
   fallback provision under which benefits for "unassigned" retirees would be
   paid primarily by publicly funded plans. SSA failed to make thousands of
   assignments by the deadline, in many cases missing the date by several
   years, and coal industry operators who received late assignments sued SSA,
   arguing that its assignment authority had expired.

   The Supreme Court ruled in Barnhart that SSA's authority to make
   assignments did not expire on October 1, 1993. The Court noted that SSA's
   task to make thousands of assignments by the deadline was a "substantial"
   one subject to factors beyond SSA's control, and it was "reluctan[t] `to
   conclude that every failure of an agency to observe a procedural
   requirement voids subsequent agency action, especially when important
   public rights are at stake.'" Barnhart, 537 U.S. at 158, quoting Brock v.
   Pierce  County, 476 U.S. 253, 260 (1986). "We have summed it up this way,"
   the Barnhart Court stated: "`if a statute does not specify a consequence
   for noncompliance with statutory timing provisions, the federal courts
   will not in the ordinary course impose [a] coercive sanction'" of
   terminating the agency's authority to act. Id. at 159, quoting United
   States v. James Daniel Good Real Property, 510 U.S. 43, 63 (1993). "[A]
   statute directing official action needs more than a mandatory `shall'
   before the grant of power can sensibly be read to expire when the job is
   supposed to be done," the Barnhart Court ruled, with the "more" to be
   found in the statute's structure, purpose, or legislative history.
   Barnhart, 537 U.S. at 161.

   Based on the absence of an explicit statutory consequence for
   noncompliance with the deadlines and the lack of intent to terminate SSA's
   authority in the structure, purpose, or legislative history of the Coal
   Act, the Court held that SSA's authority was not time-limited. The fact
   that the deadline was located within the same subsection as the
   Commissioner's authority to act did not indicate the agency's authority
   was co-terminous with the deadline. The Court rejected this as a
   formalistic rule that would "thwart the statute's object" of having
   private companies pay for most of the retiree benefits, because under the
   fallback provision that allegedly applied if SSA's authority were read as
   time-limited, benefits would largely be paid by the public. Barnhart, 537
   U.S. at 159. The Court also observed that because the Coal Act was passed
   6 years after its holding in Brock v. Pierce County, above,  Congress was
   presumed to have known in drafting the statute that "we do not readily
   infer congressional intent to limit an agency's power to get a mandatory
   job done merely from a specification to act by a certain time. See United
   States v. Wells, 519 U.S. 482, 495 . . . (1997)." Id. at 160. In sum, the
   Court declared that to ensure fulfillment of Congress's objective to hold
   private employers, not the public fisc, responsible for retiree benefits,
   the deadline should be read "as a spur to prompt action, not as a bar to
   tardy completion" of SSA's duties. Id. at 172.

   As in Barnhart, section 3112(b)(2) of the USEC Privatization Act provided
   that DOE "shall" sell its Russian-origin uranium by 2001 or 2003, but
   specified no consequence for failure to do so. As DOE notes, the statute
   did not condition the department's authority by use of terms such as
   "unless" or "until." 2003 DOE Memo at 6. Thus under Barnhart, the
   deadlines in section 3112(b) are to be read as targets rather than
   jurisdictional mandates unless the Privatization Act's structure, purpose,
   or history reveals a contrary legislative intent.

   We find no such contrary intent. Section 3112 contains a non-time-limited
   provision authorizing DOE sale and transfer of uranium at any
   time--section 3112(d)--which arguably indicates that DOE's section 3112(b)
   authority was time-limited. Under this argument, even if DOE missed the
   deadlines in section 3112(b), it could still sell its Russian-origin
   uranium under the fallback provision of section 3112(d). However, we agree
   with DOE that as in Barnhart, there is no indication that Congress
   intended section 3112(d) as a fallback to section 3112(b).[18]

   Section 3112, entitled "Uranium transfers and sales," directs DOE how to
   carry out virtually every step of the disposition of both Russian-origin
   and other uranium in DOE's inventory--from the allowable timing of sales
   and transfers, to the permissible recipients and uses, to the maximum
   volumes, and even to end user consumption rates--with different sections
   governing different categories of uranium. Section 3112(b) specifically
   authorizes DOE to sell Russian-origin uranium, setting detailed timetables
   and quantity limits on the sale of this category of uranium. Section
   3112(d), by comparison, authorizes DOE's sale and transfer of uranium from
   its "stockpile" (an undefined term) at any time subject to certain
   conditions. Under the basic tenet of statutory construction that the more
   specific statute takes precedence, see, e.g., Preiser v. Rodriguez, 411
   U.S. 475, 489-90 (1973), this structure suggests that sales of
   Russian-origin uranium are governed solely by section 3112(b). The text of
   section 3112(d) also supports this interpretation. Section 3112(d)(1)
   authorizes DOE sales "in addition to the transfers and sales authorized
   under subsections (c) and (e)"--omitting reference to Russian-origin
   uranium sales authorized under subsection (b)--and section 3112(d)(2)
   specifically excludes section 3112(b) sales from the conditions of section
   3112(d).

   The legislative history of the USEC Privatization Act lends further
   support to the interpretation that section 3112(d) was not intended as a
   fallback to section 3112(b). Congress believed that one of the biggest
   impediments to privatizing USEC was investor concern about the potential
   adverse impacts of an agreement known as the Russian HEU Agreement.[19]
   The concern was that under this agreement, inexpensive Russian-origin
   uranium would flood the U.S. market, depressing prices for domestic
   uranium producers, threatening job security for domestic uranium
   enrichment industry workers, and making USEC's enrichment and marketing
   services less competitive.[20] Congress therefore carved out section
   3112(b) as a separate, specific authority for sale of Russian-origin
   uranium, imposing restrictions on its sale to minimize adverse impacts on
   the domestic market, while still meeting U.S. obligations under the HEU
   Agreement to buy the material from Russia.

   The same legislative history indicates that Congress intended the section
   3112(b) deadlines "as a spur to . . . action, not as a bar to tardy
   completion" of DOE's obligation to sell Russian-origin uranium. Barnhart,
   537 U.S. at 172. The fact that Congress's overarching objective was to
   minimize the impact of large amounts of Russian-origin uranium coming into
   the U.S. market suggests Congress wanted to provide DOE with flexibility
   to sell at the optimum time for U.S. interests.[21] This likely would mean
   that the section 3112(b)(2) deadlines were intended as targets, not as
   jurisdictional mandates. The legislative history suggests another reason
   why Congress would provide deadline flexibility--because, as in Barnhart,
   the tasks DOE had been assigned were substantial, complex, and subject to
   factors beyond DOE's control.[22] Although the legislative history is
   silent about why Congress imposed deadlines at all under these
   circumstances, we, like the Barnhart Court, are reluctant to "infer
   congressional intent to limit an agency's power to get a mandatory job
   done merely from a specification to act by a certain time." Id. at 160. In
   sum, we conclude that DOE's authority to sell uranium under the December
   2004 Agreement was not time-limited by its failure to meet the deadlines
   in section 3112(b)(2). DOE therefore was authorized to enter into the
   December 2004 Agreement.[23]

   II. DOE's Authority to Use Proceeds from USEC's Sales of the Uranium

   The second issue is whether DOE had authority to use the proceeds of
   USEC's sale of DOE uranium pursuant to the December 2004 Agreement. Under
   the miscellaneous receipts statute, 31 U.S.C. sect. 3302(b), "an official
   or agent of the Government receiving money for the Government from any
   source shall deposit the money in the Treasury as soon as practicable
   without deduction for any charge or claim." 31 U.S.C. sect. 3302(b). See,
   e.g., B-302825, Dec. 22, 2004 (Office of Federal Housing Enterprise
   Oversight (OFHEO) may not retain money collected from third party
   litigants for copying costs). To retain and use money without statutory
   authority would improperly augment the amount of an agency's
   appropriations and would permit the agency to extend its reach beyond the
   operating level that it could achieve otherwise. See, e.g., B-306860, Feb.
   28, 2006; 23 Comp. Gen. 694 (1944); 9 Comp. Dec. 174 (1902). See also,
   e.g.,  13 Op. Off. Legal Counsel 188, 189 (1989); 12 Op. Off. Legal
   Counsel 233, 233-34 (1988).

   As noted above, DOE asserts that with the December 2004 Agreement, the
   Department sold uranium to USEC but not for cash. Conference Calls of May
   8 and 9; 2006 DOE Letter, Attachment at 1. DOE officials conceded that at
   the time of the Agreement, the department had no authority to retain
   proceeds from its sales of uranium, and that if USEC had paid cash for the
   uranium, DOE would have been required to deposit the proceeds into the
   miscellaneous receipts of the Treasury. Conference Calls of May 8 and 9.
   According to DOE officials, USEC, instead of paying cash in consideration
   for DOE's sale of uranium, agreed to (1) release any claims of liability
   for the decontaminated uranium that DOE had transferred to USEC under
   previous agreements, and (2) decontaminate DOE-owned uranium. Id. DOE
   argues that because it received no money in this transaction, it did not
   violate the miscellaneous receipts statute. 2006 DOE Letter, Attachment at
   6. We disagree.

   As discussed above,  the terms of the December 2004 Agreement, as well as
   DOE's actions in implementing the Agreement, do not support the
   department's characterization of the transfer of uranium as a sale to
   USEC. DOE itself characterized USEC as its sales agent, not its buyer.
   Gunter Memorandum. By transferring uranium to USEC for sale and permitting
   USEC to use sales proceeds to defray its costs of decontaminating the
   uranium that DOE had transferred to it pursuant to earlier agreements, DOE
   received from USEC a release from any claims of liability that USEC might
   have against the department for transferring contaminated uranium. We, of
   course, have no objection to DOE transferring clean uranium to resolve its
   dispute with USEC. Public policy dictates in favor of the government
   addressing its disputes. 71 Comp. Gen. 340, 341 (1992). See also Cannon
   Construction Co., Inc. v. United States, 319 F.2d 173, 178-79 (Ct. Cl.
   1963); B-306860, Feb. 28, 2006 (OFHEO could use an enforcement settlement
   agreement to require regulated entity to format electronic documents to
   enable OFHEO to pursue charges against the entity's former officers); 
   B-237742, Mar. 14, 1990 (Army may use settlement agreements to resolve
   claims by contractors). A transfer of uranium in these circumstances and
   for this purpose would relate back to the original transfers (between 1993
   and 1998) and, like those transfers, is authorized by the Privatization
   Act. See 42 U.S.C. sect. 2297h-2(b).

   That, however, is not what happened here. With the December 2004
   Agreement, DOE initiated a stream of revenue (the sales proceeds) that DOE
   used to cover the costs of decontaminating both the USEC-owned and
   DOE-owned contaminated uranium. This is problematic. It is well understood
   that in the absence of statutory authority, "what cannot be done directly
   cannot be done indirectly." E.g., B-303927, June 7, 2005. An agency that
   lacks the authority to retain and use amounts that it receives directly
   cannot circumvent its lack of authority by engaging a contractor or, as
   here, a sales agent, to indirectly receive, retain, and use the funds.
   B-306663, Jan. 4, 2006.

   In similar circumstances both GAO and the courts have recognized that a
   contractor constructively receiving money for an agency is not free of the
   requirement of the miscellaneous receipts statute that funds received for
   the use of the United States be deposited in the Treasury just as if they
   had been received directly by the agency. See, e.g., Scheduled Airlines
   Traffic Offices, Inc. v. Department of Defense, 87 F.3d 1356, 1361-63
   (D.C. Cir. 1996) (Defense Department cannot require payment to morale fund
   of a portion of concession fees derived from unofficial travel); Motor
   Coach Industries, Inc. v. Dole, 725 F.2d 958, 968 (4^th Cir. 1984)
   (Federal Aviation Administration (FAA) cannot hold in a trust fund amounts
   paid by airlines to defray FAA's cost of acquiring new shuttle buses for
   Dulles Airport);  B-300826, Mar. 3, 2005 (National Institutes of Health
   (NIH) could not authorize its contractor to charge a fee to cover the
   costs of a formal conference that NIH hosted); B-265727, July 19, 1996
   (Securities and Exchange Commission may not reduce its obligation of
   appropriated funds resulting from a lease, and correspondingly increase
   its available appropriations, by subleasing space and arranging for the
   sublessee to make its payments directly to the landlord).

   DOE clearly had authority to decontaminate its own contaminated uranium
   using funds appropriated for that purpose. At the time of the December
   2004 Agreement, if DOE itself had sold its clean uranium, rather than
   transferring the uranium to USEC to carry out the same task, the
   department admits that it could not have legally retained the sales
   proceeds and applied them to pay its decontamination costs. Instead, DOE
   would have been required to deposit the sales proceeds into the
   miscellaneous receipts of the Treasury and to use DOE's appropriations to
   acquire decontamination services. With the December 2004 Agreement, DOE
   circumvented the miscellaneous receipts statute by its use of USEC as its
   sales agent and its direct control of the disposition of the sales
   proceeds. See B-287738, May 16, 2002 (because Maritime Administration had
   effective control of the disposition of amounts held in an escrow account,
   it had constructively received those amounts within the plain meaning of
   the miscellaneous receipts statute).

   DOE's acquisition of decontamination services for its own uranium  is
   conceptually indistinguishable from a Small Business Administration (SBA)
   contract that we addressed in 2004, B-300248, Jan. 15, 2004. In that case,
   SBA retained a contractor to help it perform regulatory reviews of lenders
   participating in its Preferred Lenders Program (PLP). SBA arranged to
   compensate its contractor by imposing fees on the PLP lenders and
   requiring the lenders to pay those fees directly to the contractor. SBA
   had no authority to retain and use those fees itself, nor could it allow
   its agent to do so. 31 U.S.C. sect. 3302(a) and (b) ("an official or agent
   of the United States Government . . . shall keep the money safe without .
   . . using it [and] shall deposit the money in the Treasury as soon as
   practicable without deduction for any charge or claim"). We observed that
   an agency receives money under the miscellaneous receipts statute if the
   receipts are to cover the expenses of the government or pay government
   obligations, B-300248, citing B-205901, May 19, 1982, and concluded that
   SBA could not compensate its contractor by requiring regulated lenders to
   pay the contractor's fees.

   Here, as in the SBA case, DOE arranged for an independent revenue stream
   not appropriated to it by Congress; had no authority to retain the
   proceeds of that revenue stream if received directly; and arranged for its
   agent, USEC, to receive the proceeds of the unauthorized revenue stream
   and to use those amounts to pay for expenses incurred on behalf of DOE. In
   our view, DOE's agent received "money for the government" but failed to
   deposit the money in the Treasury, and therefore, DOE violated the
   miscellaneous receipts statute and augmented its appropriations.

   In defense of this aspect of the December 2004 Agreement, DOE points to a
   1988 decision of this Office, 67 Comp. Gen. 510 (1988). See 2006 DOE
   Letter, Attachment at 6. The 1988 decision and other decisions in that
   line address in-kind replacement or repair of damaged government property,
   in lieu of a cash payment, by a tortfeasor. In the 1988 case, the Bureau
   of Alcohol, Tobacco and Firearms (ATF) asked if it could accept a
   replacement vehicle from a negligent third party, who had damaged an ATF
   vehicle beyond repair, without violating the miscellaneous receipts
   statute. We concluded that ATF could accept the replacement vehicle,
   "despite the fact that, had the tortfeasor paid the government . . ., the
   money would have to be deposited as miscellaneous receipts." 67 Comp. Gen.
   at 511.

   The 1988 decision and related decisions have no application here. These
   decisions address damage to government property resulting from tortious
   acts, clearly not the factual situation present here. The purpose of the
   ATF and related decisions is to facilitate the government, which has
   suffered damage, being made whole. To require an agency to insist on cash
   payable to the miscellaneous receipts account of the Treasury rather than
   replacement or repair would not serve the public interest. Again, that is
   not the situation here. The purpose of the December 2004 Agreement was not
   to remedy a tortious act against government property, but to settle
   claims, to acquire decontamination of DOE-owned uranium, and to identify a
   source of funds to pay for that service.[24]

   As noted above, in November 2005, Congress enacted in DOE's appropriations
   for fiscal year 2006 a provision that expressly authorizes the department
   to "barter, transfer or sell uranium . . . and to use any proceeds,
   without fiscal year limitation, to remediate uranium inventories" held by
   DOE, notwithstanding any other provision of federal law, including section
   3112 of the USEC Privatization Act and the miscellaneous receipts statute.
   Pub. L. No. 109-103, sect. 314. Thus, at least for fiscal year 2006,
   section 314 permits DOE, through an agent like USEC, to sell
   government-owned uranium and to use the proceeds to compensate USEC for
   decontaminating DOE's uranium.

   We are aware that USEC is the only American vendor currently offering
   domestic commercial uranium enrichment services, and that all of the
   agreements DOE negotiated to address USEC's claims have included language
   reflecting the department's desire that USEC continue as a viable entity.
   Our objection here is with DOE's improper augmentation of its
   appropriations.

   Because DOE's fiscal year 2005 "Departmental Administration" appropriation
   was available for the purpose of decontaminating its uranium,[25] to
   remedy its violation of the miscellaneous receipts statute, DOE should
   adjust its accounts by transferring $62 million from this appropriation to
   the miscellaneous receipts of the Treasury.[26] If DOE finds that it lacks
   sufficient budget authority to cover the adjustment, it should report a
   violation of the Antideficiency Act in accordance with 31 U.S.C. sect.
   1351. In the alternative, DOE may wish to seek and obtain congressional
   ratification of its use of the $62 million.

   CONCLUSION

   DOE was authorized under section 3112(b)(2)(D) of the USEC Privatization
   Act to transfer uranium to USEC under the December 2004 Agreement, as an
   interim step in USEC's sale of such uranium, on the department's behalf,
   for consumption by domestic end users. However, prior to the enactment of
   section 314 of DOE's fiscal year 2006 appropriations act, the department
   used uranium sales proceeds (and earnings on those proceeds) in violation
   of the miscellaneous receipts statute, 31 U.S.C. sect. 3302(b), which
   resulted in DOE unlawfully augmenting its appropriations. To resolve its
   improper use of the sales proceeds, DOE should either seek and obtain
   congressional ratification of its use of the proceeds or adjust its
   accounts.

   If there are questions concerning these matters, please contact Susan A.
   Poling, Managing Associate General Counsel, at (202) 512-2667, or Susan D.
   Sawtelle, Associate General Counsel, at (202) 512-6417. Assistant General
   Counsels Thomas H. Armstrong and Doreen S. Feldman, Senior Attorney Neill
   Martin-Rolsky, Senior Staff Attorney Omari Norman, and Senior Analyst Ryan
   T. Coles also made key contributions to this opinion.

   Sincerely yours,

   Gary L. Kepplinger
   General Counsel
   B-307137

   DIGESTS

   1. Section 3112(b) of the USEC Privatization Act of 1996, Pub. L.
   No. 104-134, 110 Stat. 1321-335, 1321-344 (Apr. 26, 1996), 42 U.S.C. sect.
   2297h-10(b), authorized the Department of Energy (DOE) to transfer to the
   United States Enrichment Corporation (USEC) Russian-origin uranium so that
   USEC could sell the uranium on DOE's behalf for consumption by domestic
   end users, as provided for in a December 2004 agreement between DOE and
   USEC.

   2. DOE violated 31 U.S.C. sect. 3302(b), the miscellaneous receipts
   statute, and augmented its appropriations when it authorized USEC to hold,
   invest, and use the proceeds from public sales of government-owned uranium
   to compensate USEC for costs it incurred in decontaminating uranium on
   behalf of DOE, prior to enactment in November 2005 of specific statutory
   authority exempting the proceeds of those uranium sales from the
   miscellaneous receipts statute.

   ------------------------

   [1] On June 16, 2006, GAO reported to the Committee concerning our review
   of certain management issues regarding this Agreement in U.S. Enrichment
   Corporation Privatization: USEC's Delays in Providing Data Hinder DOE's
   Oversight of the Uranium Decontamination Agreement, GAO-06-723
   (Washington, D.C.: June 16, 2006).

   [2] The Antideficiency Act prohibits making or authorizing expenditures or
   obligations that exceed available budget authority. 31 U.S.C. sect. 1341.

   [3] Consistent with our regular practice, we requested DOE's legal views
   on these issues. Letter from Susan A. Poling, Managing Associate General
   Counsel, GAO, to David R. Hill, General Counsel, DOE, Feb. 9, 2006. On
   May 2, 2006, the Department replied. Letter from Eric J. Fygi, Deputy
   General Counsel, DOE, to Susan A. Poling, Managing Associate General
   Counsel, GAO, May 2, 2006 (2006 DOE Letter). We obtained further
   information, clarification, and documents in telephone conversations,
   e-mail, and fax communications with DOE staff between May 5 and June 6, in
   addition to documents DOE provided to GAO in connection with the 2006 GAO
   report (GAO-06-723).

   [4] See Energy Policy Act of 1992, Pub. L. No. 102-486, title IX,
   sect. 901, 106 Stat. 2776, 2924 (Oct. 24, 1992), 42 U.S.C. sections 2297a,
   2297b-2; GAO-06-723, at 1-2.

   [5] See USEC Privatization Act of 1996, Pub. L. No. 104-134, sections
   3103-3106, 110 Stat. 1321-335, 1321-336 to -338, 42 U.S.C. sections
   2297h-1 to 2297h-4; GAO-06-723, at 2.

   [6] Technetium is a radioactive metal created as a by-product of nuclear
   fission. Commercial specifications for nuclear fuel severely limit the
   amount of technetium that may be contained in uranium fuel, and the
   contamination discovered by USEC exceeded those limits. GAO-06-723, at 9.

   [7] Memorandum from Dennis J. Scott, Assistant General Counsel, USEC, to
   Matt Urie, Attorney-Advisor, DOE, Contaminated Uranium Inventory, Jan. 3,
   2001.

   [8] See, e.g., Agreement between the U.S. Department of Energy and USEC,
   Inc., June 17, 2002 (June 2002 Agreement), pt. B, at 12 ("Without any
   admission of liability, [DOE] agrees to replace any out-of-specification
   uranium . . . transferred by [DOE] to USEC.").

   [9] See, e.g., June 2002 Agreement pt. A, para. (a), at 12; Letter Work
   Authorization, Apr. 7, 2004 (2004 Work Authorization), sect. 1.3.2, at 3;
   Memorandum of Understanding Effectuating the Transfer of Natural Uranium
   Hexaflouride for Affected Inventory, Oct. 22, 2004 (October 2004
   Agreement), at 1.

   [10] See, e.g., June 2002 Agreement art. 2, at 1, and art. 3, at 7.

   [11] June 2002 Agreement pt. B, at 12.

   [12] 2004 Work Authorization, sect. 4.1, at 5.

   [13] October 2004 Agreement, sections 1.3, 1.4, at 3.

   [14] Memorandum from Linda L. Gunter, Associate Director, Office of
   Nuclear Fuel Supply Security, DOE, to William E. Murphy, Manager,
   Portsmouth Paducah Project Office, DOE, Approval of USEC's Marketing
   Strategy For the Sale of 900 Metric Tons of Uranium (MTU) in Response to
   Article 4 of the Memorandum of Agreement for Continued Operation of the
   Shipping and Transfer facilities in FY 2005 and beyond, Dec. 22, 2004
   (Gunter Memorandum).

   [15] DOE also asserts that certain general authorities under the Atomic
   Energy Act are "in harmony with the results achieved from" the December
   2004 Agreement or "likely also would have" or "might well" have authorized
   the Agreement. See 2006 DOE Letter, Attachment at 1-3, citing Atomic
   Energy Act sections 3(d), 63, 66, 161(g), 42 U.S.C. sections 2013(d),
   2093, 2096, 2201(g). See also Memorandum for David K. Garman, DOE Acting
   Under Secretary for Energy, Science and Environment, from Paul M. Golan,
   DOE Acting Assistant Secretary for Environmental Management, Action:
   Approve the transfer of programmatic responsibility to the Office of
   Environmental Management for implementation of a barter agreement with
   USEC for Continued Operation of the Portsmouth Shipping and Transfer (S&T)
   Facilities to Process USEC and DOE contaminated inventories of uranium
   hexafluoride (UF6) (Sept. 30, 2004) (citing same authorities). Because we
   find that the December 2004 Agreement was authorized by section
   3112(b)(2)(D) of the USEC Privatization Act, we do not address whether
   these or other statutes may have provided additional authority.

   [16] USEC agreed to "waive any claim for fees" for these decontamination
   services. December 2004 Agreement, at 2. Instead, USEC was entitled to
   credit the "allowable direct, indirect, and plant overhead costs incurred"
   in decontaminating the uranium against the revenues derived from the
   uranium sales. Id. at 3; sect. 2.1, at 6.

   [17] Perhaps the most fundamental principle of statutory construction is
   that words in a statute must be given their ordinary or natural meaning
   whenever possible. See Walters v. Metropolitan Educational Enterprises,
   Inc., 519 U.S. 202, 207 (1997).

   [18] An interpretation that section 3112(d) applied as a fallback where
   DOE missed the section 3112(b)(2) deadlines would render the December 2004
   Agreement unauthorized. DOE staff told us that because the Department did
   not believe section 3112(d) applied, it took no action to meet the section
   3112(d) sale conditions.

   [19] See Agreement Concerning the Disposition of Highly Enriched Uranium
   Extracted from Nuclear Weapons, U.S.-R.F., Feb. 18, 1993. The United
   States signed the Russian HEU Agreement after breakup of the Soviet Union
   in order to provide financial aid to Russia and to keep weapons-grade
   uranium off the world market. The Agreement required highly enriched
   uranium (HEU) from Russian nuclear weapons to be "blended down," or
   diluted, into low-enriched uranium (LEU), and committed the United States,
   through its executive agent USEC, to purchase large amounts of the LEU
   over a 20-year period for sale to utilities as nuclear reactor fuel. See
   generally GAO-01-148; In re Uranium from Kazakhstan, USITC Inv. No.
   731-TA-539-A (U.S.I.T.C. July 1999).

   [20] See, e.g., S. Rep. No. 104-173, at 14 (1995) ("[T]he unrestricted
   entry into the market of new, low cost feed materials could significantly
   disrupt uranium markets and depress market prices."); USEC Privatization
   Act, Hearing on S. 755 Before the Senate Committee on Energy and Natural
   Resources, S. Hrg. No. 104-105, at 2 (June 13, 1995) (remarks of Chairman
   Murkowski) ("[W]e must . . . balance the interests of a very important
   national nonproliferation initiative, the U.S.-Russian Highly Enriched
   Uranium agreement. We must maintain the chance of a free market for
   uranium enrichment. We must maintain the health of the uranium mining
   industry, and we must ensure fairness to the workers of the enrichment
   plants in Kentucky and Ohio."); id. at 8 (statement of Sen. Ford) ("The
   biggest challenge . . . will be to find a solution to the Russian uranium
   problem. We want USEC to continue to buy uranium from Russia, but we must
   find a way for USEC to sell it into the market without putting Americans
   out of work.").

   [21] It was precisely because DOE was concerned about an already weak
   domestic market that it had not sold all of its Russian-origin uranium by
   the April 2003 statutory deadline. See 2003 DOE Memo, at 1-2. The same
   concern had prompted DOE to recommend to Congress, in 2000 and 2002, that
   it remove or modify this deadline. See DOE, Report to Congress on
   Maintenance of Viable Domestic Uranium, Conversion and Enrichment
   Industries (December 2000), at 22; DOE, Report on the Effect [that LEU]
   delivered under the Russian HEU Agreement has on the Domestic Uranium
   Mining, Conversion, and Enrichment Industries, and the Operation of the
   Gaseous Diffusion Plant (Dec. 31, 2002), at 8.

   [22] See, e.g., S. Hrg. No. 104-105, at 17 (statement of USEC President
   William H. Timbers) ("[S]ome have asked, `. . . [W]hy is this taking so
   long?' . . . [T]his is a difficult, complex, technically challenging
   program to implement. This is not just a commodity. We are not talking
   about orange juice futures . . . This has never been done before . . . We
   do not want to just [d]o it quickly, we want to do it right.").

   [23] Because DOE's position on its legal authority for the December 2004
   Agreement has been developed informally rather than through a formal
   rulemaking, adjudication, or other rigorous process, it is not entitled to
   substantial deference under Chevron U.S.A. v. Natural Resources Defense
   Council, 467 U.S. 837, 842-45 (1984). See United States v. Mead Corp., 533
   U.S. 218, 227-39 (2001). We nevertheless find DOE's position regarding the
   significance of the section 3112(b) deadlines to have the "power to
   persuade," and thus entitled to "respect" under Skidmore v. Swift & Co.,
   323 U.S. 134, 140 (1944), because of the validity of its reasoning. As
   with the regulatory framework considered in Mead, DOE's interpretations of
   the USEC Privatization Act pertain to a "highly detailed" statutory
   framework and it "can bring the benefit of specialized experience to bear
   on the subtle questions in this case." Mead, 533 U.S. at 235.

   [24] We also distinguish our recent decision, B-306860, Feb. 28, 2006. In
   that case, OFHEO, prosecuting the Federal Home Loan Mortgage Corporation
   (Freddie Mac), agreed to settle charges against Freddie Mac if Freddie Mac
   agreed to produce specified documents electronically formatted for OFHEO's
   use. Because the costs of formatting the documents were Freddie Mac's
   costs, not OFHEO's costs, Freddie Mac's payment of the costs did not
   constitute a de facto augmentation of OFHEO's appropriations. In the case
   at hand, the costs of decontaminating DOE-owned uranium are an obligation
   of the department (not USEC), and DOE's use of a source of funds not
   appropriated to it to defray those costs constitutes an augmentation of
   the department's appropriations.

   [25] Consolidated Appropriations Act, 2005, Pub. L. No. 108-447, 118 Stat.
   2809, 2952 (Dec. 8, 2004) ("For salaries and expenses of the Department of
   Energy necessary for departmental administration in carrying out the
   purposes of the Department of Energy Organization Act (42 U.S.C. 7101 et
   seq.)").

   [26] Between December 2004 and November 2005, USEC sold DOE's uranium for
   a total of $62 million and used the proceeds to cover the costs of
   decontaminating USEC-owned and DOE-owned uranium. GAO-06-723, at 18.