Uranium Enrichment: Decontamination and Decommissioning Fund Is  
Insufficient to Cover Cleanup Costs (02-JUL-04, GAO-04-692).	 
                                                                 
Decontaminating and decommissioning the nation's uranium	 
enrichment plants, which are contaminated with hazardous	 
materials, will cost billions of dollars and could span decades. 
In 1992, the Energy Policy Act created the Uranium Enrichment	 
Decontamination and Decommissioning Fund (Fund) to pay for the	 
plants' cleanup and to reimburse licensees of active uranium and 
thorium processing sites for part of their cleanup costs. This	 
report discusses (1) what DOE has done to reduce the cleanup	 
costs authorized by the Fund, and (2) the extent to which the	 
Fund is sufficient to cover authorized activities.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-692 					        
    ACCNO:   A10689						        
  TITLE:     Uranium Enrichment: Decontamination and Decommissioning  
Fund Is Insufficient to Cover Cleanup Costs			 
     DATE:   07/02/2004 
  SUBJECT:   Cost control					 
	     Federal funds					 
	     Financial analysis 				 
	     Funds management					 
	     Future budget projections				 
	     Powerplants					 
	     Special fund accounts				 
	     Strategic planning 				 
	     Uranium						 
	     Contamination					 
	     Cost estimates					 
	     Uranium Enrichment Decontamination and		 
	     Decommissioning Fund				 
                                                                 

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GAO-04-692

United States General Accounting Office

                     GAO Report to Congressional Committees

July 2004

URANIUM ENRICHMENT

Decontamination and Decommissioning Fund Is Insufficient to Cover Cleanup Costs

                                       a

GAO-04-692

Highlights of GAO-04-692, a report to congressional committees

Decontaminating and decommissioning the nation's uranium enrichment
plants, which are contaminated with hazardous materials, will cost
billions of dollars and could span decades. In 1992, the Energy Policy Act
created the Uranium Enrichment Decontamination and Decommissioning Fund
(Fund) to pay for the plants' cleanup and to reimburse licensees of active
uranium and thorium processing sites for part of their cleanup costs.

This report discusses (1) what DOE has done to reduce the cleanup costs
authorized by the Fund, and (2) the extent to which the Fund is sufficient
to cover authorized activities.

GAO recommends that the Congress consider reauthorizing the Fund for an
additional 3 years and require DOE to reassess the Fund's sufficiency
before it expires to determine if further extensions will be necessary.
GAO also recommends that DOE develop plans for the Paducah and Portsmouth
plants that identify the most probable time frames and costs for
completing the cleanup. DOE generally agreed with our recommendations, but
stated its reluctance to develop plans for the plants now. GAO believes
that without these plans, DOE will be unable to develop a more precise
cost estimate or reassess the Fund's sufficiency.

www.gao.gov/cgi-bin/getrpt?GAO-04-692.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Robin Nazarro at (202)
512-3841 or [email protected].

July 2004

URANIUM ENRICHMENT

Decontamination and Decommissioning Fund Is Insufficient to Cover Cleanup Costs

The Department of Energy (DOE) has taken steps to reduce cleanup costs by
taking actions that address recommendations made by the National Academy
of Sciences and by pursuing an accelerated, risk-based cleanup strategy at
the plants. In some cases, however, DOE has only partially addressed the
Academy's recommendations. For example, one recommendation suggested that
DOE develop three plans-namely, headquarters level, plant-complex level,
and site level-that address and integrate the decontamination and
decommissioning of the facilities. Only one plant has developed a plan,
however. Additionally, DOE is pursuing an accelerated, risk-based cleanup
strategy at the plants that it believes will reduce cleanup costs.
According to DOE officials, an accelerated, risk-based strategy will
accelerate time frames for cleanup, and establish "realistic cleanup
criteria" in DOE's regulatory cleanup agreements.

Despite DOE efforts to reduce costs, we found that based on current
projected costs and revenues, the Fund will be insufficient to cover the
cleanup activities at the three plants. Specifically, our Baseline model
demonstrated that by 2044, the most likely time frame for completing
cleanup of the plants, costs will have exceeded revenues by $3.5 billion
to $5.7 billion (in 2004 dollars). Importantly, we also found that the
Fund would be insufficient irrespective of which model we used, including
models that estimated the final decommissioning at the plants under (1)
accelerated time frames, (2) deferred time frames, or (3) baseline time
frames, and with additional revenues from federal government contributions
as authorized under current law. Because the Paducah and Portsmouth plants
are now estimated to cease operations by 2010 and 2006, respectively,
extending the Fund by an additional 3 years would give DOE an opportunity
to develop plans, including more precise cost estimates, for the cleanup
of these plants and to better determine if further Fund extensions will be
necessary.

Cleanup Costs Outweigh Fund Revenues

Source: GAO.

Contents

  Letter

Results in Brief
Background
DOE Has Taken Several Actions to Reduce Cleanup Costs
Based on Current Projected Costs and Revenues, the Fund Will Not

Be Sufficient to Complete Cleanup at the Three Plants Conclusions Matters
for Congressional Consideration Recommendations for Executive Action
Agency Comments and Our Evaluation Scope and Methodology

                                                                     1 3 6 13

18 21 22 22 22 23

Appendixes

Appendix I:

Appendix II:

Appendix III: Appendix IV: Fund Modeling Methodology, Assumptions, and
Results

Modeling Methodology
Baseline Model Data, Assumptions, and Uncertainties
Alternative Models
Results

DOE Actions Taken That Addressed the National Academy of Sciences' Cost
Reduction Recommendations

Comments from the Department of Energy

GAO Contacts and Staff Acknowledgments

GAO Contacts
Staff Acknowledgments

27 27 28 30 32

41

47

48 48 48

Tables     Table 1: Status of the Academy's Major Recommendations       14 
                           Table 2: Comparison of Models                   40 
                Table 3: Recommendations, Status, and Explanation of the 
                                                                 Actions 
                                   Taken by DOE                            42 
Figures     Figure 1: Location of the Three Uranium Enrichment Plants      
               Figure 2: The Decontamination and Decommissioning Process 7 11
             Figure 3: Total Fund Expenditures, Fiscal Years 1994-2003     12 
                         Figure 4: Baseline Model Results                  33 
                        Figure 5: Accelerated Model Results                34 
                         Figure 6: Deferred Model Results                  35 
                       Figure 7: Revenue Added Model Results               36 
                Figure 8: Revenue Added Plus Interest Model Results        37 

Contents

Figure 9: Present Value of Fund Balance for Baseline, Accelerated, and
Deferred Models 38 Figure 10: Present Value of Fund Balance for Baseline,
Revenue Added, and Revenue Added Plus Interest Models 39

Abbreviations

CERCLA Comprehensive Environmental Response, Compensation and

Liability Act of 1980, as amended D&D decontamination and decommissioning
DOE Department of Energy RCRA Resource Conservation and Recovery Act of
1976, as amended USEC United States Enrichment Corporation

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
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separately.

A

United States General Accounting Office Washington, D.C. 20548

July 2, 2004

Congressional Committees

Decontaminating and decommissioning the Department of Energy's three
uranium enrichment plants-located near Oak Ridge, Tennessee; Paducah,
Kentucky; and Portsmouth, Ohio-will cost billions of dollars and could
span several decades. These plants, which encompass more than 30 million
square feet of floor space, miles of interconnecting pipes, and thousands
of acres of land, are contaminated with radioactive and hazardous
materials. The Department of Energy's (DOE) Office of Environmental
Management is responsible for cleanup of the three plants. Cleanup
activities include assessing, treating, and disposing of the contamination
found at the plants and the decontamination and decommissioning (D&D) of
inactive facilities. DOE conducts its cleanup activities under the
requirements of several federal environmental laws and compliance
agreements with relevant regulatory authorities, including the
Environmental Protection Agency and state regulatory agencies. While DOE
estimates that all cleanup work at the Oak Ridge plant will be complete by
2008, the Paducah and Portsmouth plants may continue operations for the
next several years,1 and DOE has not determined when the final
decontamination and decommissioning of these two plants will begin.

1In 2001, enrichment operations were ceased at the Portsmouth plant, but
the plant was placed on cold standby-a status that maintains the plant in
a usable condition.

In 1992, the Energy Policy Act, as amended,2 established the Uranium
Enrichment Decontamination and Decommissioning Fund (Fund) to pay for the
cleanup of the three plants. The Fund also covers the reimbursement of a
portion of the cleanup costs to licensees of active uranium and thorium3
processing sites that previously sold these materials to the federal
government. The Congress authorized annual contributions to the Fund for
15 years (ending in 2007), to be made by government appropriations and
payments from domestic utility companies that utilized the enriched
uranium produced by these plants for nuclear power generation. The
Congress specified that any unused balances in the Fund be invested in
Treasury securities and any interest earned be made available to pay for
activities covered under the Fund. In creating the Fund, the Congress also
required the National Academy of Sciences (Academy) to undertake a study
to assess the opportunities for cost reduction in carrying out the D&D
work at the three plants. In response, the Academy issued a report in 1996
that included 13 major recommendations to reduce D&D costs at the three
plants.4

As directed by Public Law 107-222, we conducted a review of the
sufficiency of the Fund. This report discusses (1) what actions DOE has
taken to reduce the cleanup costs the Fund is authorized to support, and
(2) the extent to which the Fund is sufficient to cover authorized
activities.

To determine what actions DOE has taken to reduce the cleanup costs the
Fund is authorized to support, we reviewed the National Academy of
Sciences' report that identified major cost reduction recommendations for
the nation's three uranium enrichment plants. We met with Academy
officials to gain further information about the study, and with DOE and
its contractor officials at each of the plants to determine the extent to
which DOE has taken actions to address the recommendations. While we were
able to obtain information on actions taken to date, DOE could not
determine whether the actions were taken as a result of the Academy's
recommendations. DOE was also generally unable to provide information

2All further references to the Energy Policy Act refer to the Energy
Policy Act, as amended.

3Thorium is a naturally occurring, slightly radioactive metal that can be
used as a nuclear fuel.

4National Academy of Sciences, Affordable Cleanup? Opportunities for Cost
Reduction in the Decontamination and Decommissioning of the Nation's
Uranium Enrichment Facilities (Washington, D.C., 1996).

regarding the cost savings, if any, achieved by implementing these
actions. To determine other steps DOE has taken to reduce cleanup costs,
we visited all three plants and interviewed DOE and contractor officials
from DOE headquarters, the Oak Ridge Operations Office, the Lexington
Office, and the site offices at each of the three plants. Additionally, we
obtained and analyzed documentation regarding DOE's accelerated cleanup
strategy at the Oak Ridge and Paducah plants, as well as each of the three
plants' draft risk-based end state vision documents, to better understand
DOE's proposed options for consideration. We also interviewed regulatory
authorities responsible for overseeing cleanup activities at the plants,
including officials at the Environmental Protection Agency and state
regulatory agencies in Kentucky, Ohio, and Tennessee.

To assess the sufficiency of the Fund to pay for the total projected costs
of the Fund's authorized activities, we interviewed DOE and contractor
officials responsible for the Fund's financial data and obtained DOE's
current estimates for uranium and thorium reimbursement costs, the cleanup
costs at the three plants, and the current and likely revenue projections.
We assessed the reliability of this data and determined that the data were
sufficient for the purposes of our report. We used the data to develop a
number of simulation models that factored in the cost and revenue
projections on an annual basis and uncertainties surrounding inflation
rates, interest rates, costs, revenues, and the timing of the final D&D
work at the Paducah and Portsmouth plants. See appendix I for a detailed
description of our modeling methodology, assumptions, and results. We
interviewed DOE and contractor officials from DOE Headquarters, the Oak
Ridge Operations Office, the Lexington Office, and the site offices at
each of the three plants, as well as officials from the federal and state
regulatory offices party to the plants' cleanup agreements. We also toured
the Oak Ridge plant to identify the major uncertainties that could impact
future cleanup costs at the plants. Our scope and methodology are
presented at the end of this report. We performed our work between
September 2003 and March 2004 in accordance with generally accepted
government auditing standards.

Results in Brief	DOE has attempted to reduce cleanup costs by taking
actions consistent with recommendations made by the National Academy of
Sciences (Academy) and by pursuing an accelerated, risk-based cleanup
strategy at the three plants. DOE has adopted measures that address many
of the Academy's recommendations, such as conducting focused technology
demonstrations to improve the decontamination and decommissioning

process. However, in some cases, DOE has only partially addressed the
Academy's recommendations. For example, one recommendation suggested that
DOE develop three plans-namely, headquarters level, plant-complex level,
and site level-that address and integrate the decontamination and
decommissioning of the facilities, among other cleanup activities at the
sites. DOE has not developed a headquarters-level or plant complex-level
plan that addresses and integrates the decontamination and decommissioning
of all three plants. Oak Ridge is the only plant with an agreed-upon
decontamination and decommissioning plan. Additionally, DOE is pursuing an
accelerated, risk-based cleanup strategy at the plants that it believes
will reduce cleanup costs. According to DOE officials, an accelerated,
risk-based strategy will accelerate time frames for cleanup at the Oak
Ridge and Paducah plants, and establish "realistic cleanup criteria" in
their regulatory cleanup agreements. By implementing cleanup actions more
quickly and ensuring that its cleanup efforts are both cost effective and
environmentally sound, DOE hopes it can avoid unnecessary costs while
reducing risks posed to human health and the environment. However, some
state and federal regulators have suggested that if DOE proposes changes
to current cleanup agreements, renegotiating those agreements could delay
cleanup and, therefore, potentially increase costs.

Despite DOE efforts to reduce costs, we found that based on current
projected costs and revenues, the Fund will be insufficient to cover the
activities authorized under the Fund. We determined that while the Fund is
sufficient to cover reimbursements to uranium and thorium licensees, the
Fund is insufficient to cover the complete cleanup at the three plants.
Specifically, our Baseline model demonstrated that by 2044, the most
likely time frame for completing all cleanup activities at the plants,
cleanup costs will have exceeded revenues by $3.5 billion to $5.7 billion
(in 2004 dollars). Importantly, we found that the Fund would be
insufficient irrespective of what estimates were used, including models
that estimated the final decommissioning at the plants under (1)
accelerated time frames, (2) deferred time frames, or (3) baseline time
frames, and with additional revenues from government contributions as
authorized under current law. Further, until DOE has more specific
information about such factors as the dates for beginning and completing
the decommissioning work at the Paducah and Portsmouth plants, it is not
possible to more precisely determine the total resources needed to cover
the Fund's authorized activities. Because the Paducah and Portsmouth
plants are now estimated to cease operations by 2010 and 2006,
respectively, DOE should be able to develop plans, including more precise
cost estimates, for the

decontamination and decommissioning of these plants. Extending the Fund by
an additional 3 years would give DOE an opportunity to develop these plans
and a better estimate of the costs to clean up the plants. With this
information, DOE could better determine if further extensions to the Fund
will be necessary.

In order to better ensure that the Fund will be sufficient to cover the
projected costs for the authorized activities, we are recommending that
the Congress consider reauthorizing the Fund for an additional 3 years to
2010, and require DOE to reassess the sufficiency of the Fund before the
expiration date to determine if additional extensions will be necessary.
To further reduce the uncertainty surrounding the sufficiency of the Fund,
we are also recommending that the Secretary of Energy develop
decontamination and decommissioning plans that would identify the most
likely time frames for completing the final work at the Paducah and
Portsmouth plants.

DOE generally agreed that our report accurately presents the current
status of the Fund and concurred with our recommendations that the
Congress consider reauthorizing the Fund for 3 additional years and
require DOE to reassess the sufficiency of the Fund before it expires in
2010 to determine if additional extensions will be necessary. DOE also
stated that it would develop decontamination and decommissioning plans for
the remainder of the facilities at Paducah and Portsmouth "at the
appropriate time," but did not specify a date. We believe that unless DOE
develops decontamination and decommissioning plans that include the most
probable time frames and costs for completing final work at Paducah and
Portsmouth, DOE will not be able to develop a more precise estimate of the
total funds necessary to cover the authorized cleanup activities or assess
the Fund's sufficiency and determine if further extensions are necessary.

Background	The federal government has enriched uranium for use by
commercial nuclear power plants and for defense-related purposes for more
than 40 years at three plants located near Oak Ridge, Tennessee; Paducah,
Kentucky; and Portsmouth, Ohio (see fig. 1). These uranium enrichment
plants are largely obsolete, however, due to the emergence of newer, more
efficient technologies and the globalization of the uranium enrichment
market. DOE now faces the task of decontaminating, decommissioning, and
undertaking other remedial actions5 at these large and complex plants that
are contaminated with hazardous industrial, chemical, nuclear, or
radiological materials.

5Remedial actions refer to environmental cleanup activities directed at
eliminating or reducing contaminate sources and contaminated soil and
groundwater.

Figure 1: Location of the Three Uranium Enrichment Plants

                                  Source: DOE.

In 1991, at the request of the House Subcommittee on Energy and Power, GAO
analyzed the adequacy of a $500 million annual deposit into a fund to pay
for the cost of cleanup at DOE's three uranium enrichment plants.6 We
reported that a $500 million deposit indexed to an inflation rate would
likely be adequate, assuming that deposits would be made annually into the
fund as long as cleanup costs were expected to be incurred, which at the
time of the study was until 2040. Additionally, in a related report we
concluded that the decommissioning costs at the plants should be paid by
the beneficiaries of the services provided-in this case, DOE's commercial
and governmental customers.7

In 1992, the Congress passed the Energy Policy Act, which established the
Uranium Enrichment Decontamination and Decommissioning Fund (Fund) to pay
for the costs of decontaminating and decommissioning the nation's three
uranium enrichment plants. The Energy Policy Act also authorized the Fund
to pay remedial action costs associated with the operation of the plants
to the extent funds are available and to reimburse uranium and thorium
licensees for the portion of their cleanup costs associated with the sale
of these materials to the federal government. The Energy Policy Act
authorized the collection of revenues for 15 years to pay for authorized
cleanup costs. The revenues are derived from: (1) an assessment on
domestic utilities of up to $150 million annually, based on a ratio of
their purchases of enriched uranium to the total purchases from DOE,
including those for defense; and (2) federal government appropriations for
the difference between the authorized funding under the Energy Policy Act
and the assessment on utilities.8 In addition, the Energy Policy Act
provided that balances in the Fund be invested in Treasury securities and
any interest earned be made available to pay for activities covered under
the Fund.

DOE's Office of Environmental Management is responsible for management of
the Fund and cleanup activities at the three plants, which,

6U.S. General Accounting Office, Uranium Enrichment: Analysis of
Decontamination and Decommissioning Scenarios, GAO/RCED-92-77BR
(Washington, D.C.: Nov. 15, 1991).

7U.S. General Accounting Office, Comments on Proposed Legislation to
Restructure DOE's Uranium Enrichment Program, GAO/T-RCED-92-14
(Washington, D.C.: Oct. 29, 1991).

8The following revenue amounts are authorized: $480 million for fiscal
years 1992-1998; $488.3 million for fiscal years 1999-2001; and $518.2
million for fiscal years 2002-2007. Both domestic utility assessments and
government appropriations are to be adjusted annually for increases in the
Consumer Price Index.

through fiscal year 2003, were mostly carried out by its contractor,
Bechtel Jacobs. The department's Oak Ridge Operations Office in Oak Ridge,
Tennessee, had historically provided the day-to-day management of the Fund
and oversight of the cleanup activities at all three uranium enrichment
plants. However, in October 2003, DOE established a new office in
Lexington, Kentucky, to directly manage the cleanup activities at the
Paducah and Portsmouth plants. The Oak Ridge Operations Office continues
to manage the Fund and the cleanup activities at the Oak Ridge plant.

Currently, the Fund is used to pay for the following activities:

o 	Reimbursements to uranium and thorium licensees. The Energy Policy Act
provides that the Fund be used to reimburse licensees of active uranium
and thorium processing sites for the portion of their decontamination and
decommissioning activities, reclamation efforts, and other cleanup costs
attributable to the uranium and thorium materials they sold to the federal
government.9

9The Energy Policy Act authorizes reimbursements to uranium licensees not
to exceed $350 million and reimbursements to the thorium licensee not to
exceed $365 million for the portion of their cleanup costs associated with
the sale of these materials to the federal government. The remaining
unused authorized amounts are adjusted annually based upon the Consumer
Price Index.

o 	Cleanup activities at the three uranium enrichment plants.10 Cleanup
activities at the plants include remedial actions, such as assessing and
treating groundwater or soil contamination; waste management activities,
such as disposing of contaminated materials; the surveillance and
maintenance of the plants, such as providing security and making general
repairs to keep the plants in a safe condition; the decontamination and
decommissioning (D&D) of inactive facilities by either cleaning up the
facilities so they could be reused or demolishing them; and other
activities, such as litigation costs at the three plants and funding to
support site-specific advisory boards.11 See figure 2 for an example of
the D&D process, including before, during, and after D&D work is complete
at a facility.

10Cleanup activities are conducted under the requirements of the Resource
Conservation and Recovery Act of 1976, as amended (RCRA); the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (CERCLA); and compliance agreements with regulatory
authorities, which include the Environmental Protection Agency and state
regulatory agencies in Kentucky, Ohio, and Tennessee.

11There are additional activities being carried out at the uranium
enrichment plants that are not currently paid for by the Fund. For
example, the costs to dispose of each plant's depleted uranium
hexafluoride (a byproduct of the uranium enrichment process) are currently
paid for by a separate appropriation within DOE's budget. Some of these
activities could be paid for by Fund resources in the future.

Figure 2: The Decontamination and Decommissioning Process

During D&D. Facility demolition nearing completion. After D&D. Building
rubble awaiting disposal.

Source: DOE.

From fiscal year 1994, when the Fund began incurring costs, through fiscal
year 2003, a total of $3.2 billion (in 2004 dollars) from the Fund has
been spent on the uranium and thorium reimbursement program and cleanup
activities-remedial actions, waste management, surveillance and
maintenance, decontaminating and decommissioning, and other activities-at
the three uranium enrichment plants (see fig. 3).

Figure 3: Total Fund Expenditures, Fiscal Years 1994-2003

4%

Other ($117 million)

Waste management ($210 million)

Uranium and thorium reimbursements ($447 million)

Surveillance and maintenance ($500 million)

Decontamination and decommissioning ($591 million)

Remedial actions ($1.3 billion)

Source: GAO analysis of DOE data.

Note: Total Fund expenditures for fiscal years 1994 through 2003 were $3.2
billion, adjusted to fiscal year 2004 dollars.

The Oak Ridge uranium enrichment plant, known as the East Tennessee
Technology Park, is located on 1,500 acres of land just outside of Oak
Ridge, Tennessee. It is the oldest of the three plants and has not
produced enriched uranium since 1985. According to DOE officials, while
most of the remedial actions and D&D work remain, the majority of the key
regulatory decision documents are in place and the agency is now
positioned to begin implementing the cleanup work. DOE currently plans to
complete all cleanup at the plant and close the site by the end of fiscal
year 2008.

The Paducah plant, located on about 3,500 acres of land west of Paducah,
Kentucky, continues to enrich uranium for commercial nuclear power plants
under a lease to a private company, the United States Enrichment
Corporation (USEC). According to USEC's director of communications, for
planning purposes USEC assumes that the plant will continue operations
until about 2010. Because the plant is still operating, DOE has initiated
a limited amount of D&D. However, it is currently undertaking studies and
implementing a series of remedial actions while the plant is in operation,
and estimates that it will complete these actions by 2019. DOE has not yet

determined when it will begin D&D of the facilities currently in use
(final D&D).

The Portsmouth plant, a 3,700-acre site located north of Portsmouth, Ohio,
ceased enriching uranium in May 2001, due to reductions in the commercial
market for enriched uranium. Later that year, the plant was placed on cold
standby, so that production at the facility could be restarted in the
event of a significant disruption in the nation's supply of enriched
uranium.12 Current plans call for maintaining the plant in cold standby
until September 2006, though a recent DOE Inspector General's report found
that DOE has not established a well-defined endpoint for the cold standby
program and extensions to the program may be possible.13 While D&D of the
facilities currently on cold standby (final D&D) has not yet been
initiated, DOE has been working on remedial actions at several
contaminated areas. DOE has not yet determined when final D&D will begin
at the Portsmouth plant.

DOE Has Taken Several Actions to Reduce Cleanup Costs

DOE has taken several steps to reduce cleanup costs by taking actions
consistent with the National Academy of Sciences' (Academy) cost reduction
recommendations and by pursuing an accelerated, risk-based cleanup
strategy at the uranium enrichment plants. DOE has adopted measures that
address most of the Academy's major cost recommendations, such as
conducting focused technology demonstrations to improve the
decontamination and decommissioning process. DOE is also pursuing an
accelerated cleanup strategy at the Oak Ridge and Paducah plants to
accelerate the time frames for conducting cleanup, which it expects will
reduce operational costs. In addition, DOE is revisiting each plant's
envisioned end state-the anticipated land use after the completion of
cleanup efforts-to determine if cleanup at each of the plants is based on
a technical risk assessment appropriate for the sites' future land use.
According to DOE, this risk-based end state approach focuses DOE's
environmental cleanup efforts in a way that is both cost effective and
protective of human health and the environment. However, state and federal
regulators have voiced concerns that if cleanup

12USEC was responsible for uranium enrichment before operations ceased and
was awarded the contract to maintain the plant in cold standby condition.

13U.S. Department of Energy, Office of Inspector General, Cold Standby
Program at the Portsmouth Gaseous Diffusion Plant (Washington, D.C.,
December 2003).

agreements must be renegotiated, the cleanup could be delayed and result
in increased costs.

DOE Has Taken Actions DOE has taken actions consistent with most of the 13
major cost reduction That Address the National recommendations made by the
Academy in its 1996 report on opportunities Academy of Sciences' Cost for
D&D cost reductions at the three plants.14 These recommendations

suggested a variety of cost reduction measures, including
developingReduction specific technologies and suggestions for planning,
management, and Recommendations regulatory coordination. Table 1 shows the
focus and status of the

Academy's recommendations.

Table 1: Status of the Academy's Major Recommendations

                           Status of recommendations

Focus of recommendations

Number of recommendations

                                   Addressed

Partially addressed

Not applicable

Management, including contract management, development of D&D strategic
plans, and security 5 1 4

                          Development of D&D                        
                                technologies      4          2              1 
                 Regulatory coordination and                        
                     stakeholder involvement      2          1              1 
                    Recycling/waste disposal      2          2              0 
                                       Total     13          6              6 

Source: GAO analysis of DOE information.

As table 1 shows, DOE took actions that address 6, or almost half, of the
Academy's 13 recommendations. For example, the Academy recommended that
DOE convert depleted uranium hexafluoride-a byproduct of the uranium
enrichment process-to a more stable chemical form for storage or disposal.
DOE recently awarded a contract to construct and operate conversion
facilities at both Paducah and Portsmouth. In March 2004, DOE

14National Academy of Sciences, Affordable Cleanup? Opportunities for Cost
Reduction in the Decontamination and Decommissioning of the Nation's
Uranium Enrichment Facilities (Washington, D.C., 1996).

began shipping the cylinders of depleted uranium hexafluoride stored at
Oak Ridge to Portsmouth for conversion.

For another 6 recommendations, DOE took actions that partially implemented
the recommendations-either initially taking actions that implemented the
recommendation and then later modifying its approach, or taking actions
that addressed only a portion of the recommendation or only one of the
three plants. For example, the Academy recommended that DOE develop three
plans-namely, headquarters level, plant-complex level, and site level-that
address and integrate the D&D of the facilities, environmental remediation
activities, and the management of depleted uranium hexafluoride. DOE has
not developed a headquarters-level or plant complex-level D&D plan that
addresses and integrates D&D of all three plants with other DOE
activities. Oak Ridge is the only plant with an agreed-upon D&D plan that
incorporates D&D, other cleanup activities, and the management of depleted
uranium hexafluoride. The Paducah plant currently has a plan that lays out
DOE's approach for a portion of its cleanup, but the plan does not address
final D&D. DOE does not have a D&D plan for the Portsmouth plant. However,
the DOE site manager said the agency is currently working to develop a
Portsmouth strategic plan that will address final D&D, other cleanup
activities, and management of depleted uranium hexafluoride.

DOE officials told us they have achieved cost savings as a result of the
actions they have taken that address the Academy's recommendations.
However, in most cases they were not able to quantify the cost savings
achieved because the actions taken were either improvements to processes
or procedures already in place or because they have not quantitatively
evaluated the savings. For example, the Academy recommended that DOE
consider the technical and management approaches successfully used for the
D&D of the Capenhurst uranium enrichment plant in the United Kingdom.
According to DOE officials, they considered the technical and management
approaches used at both the Capenhurst plant and other U.S. D&D projects
before beginning D&D efforts at Oak Ridge and have, in several cases,
contracted with experienced environmental management contractors (who have
participated in decommissioning activities at these sites) to take
advantage of their expertise and knowledge. However, DOE has not
quantitatively evaluated the financial savings from these efforts.

In one instance, DOE has not taken action to implement the Academy's
recommendation because the recommendation made by the Academy is no longer
applicable. The Academy recommended that DOE establish a modest research
program to develop methods to decontaminate diffusion barrier material15
effectively. According to DOE officials, such research is no longer needed
because the material is placed into an on-site disposal facility,
eliminating the need for decontamination. DOE has constructed an on-site
disposal facility at Oak Ridge, and similar facilities are being
considered for both Paducah and Portsmouth. Appendix II provides
additional details on the Academy's recommendations and the actions that
DOE has taken to address them.

15Diffusion barrier material is the material used to separate and enrich
uranium during the enrichment process.

DOE Is Pursuing an Accelerated, Risk-Based Cleanup Strategy at the Plants
to Reduce Costs

DOE is pursuing an accelerated cleanup strategy at the Oak Ridge and
Paducah plants. Adopted after a 2002 review of DOE's environmental
management program found that only about one-third of the program's budget
went to actual cleanup work, this accelerated cleanup strategy is intended
to reduce the time needed to complete the cleanup of sites.16 DOE says
that by implementing cleanup actions more quickly, it can reduce the
amount it spends on maintenance, fixed costs, and other activities
required to support safety and security. At the Oak Ridge plant, DOE plans
to accelerate the plant's cleanup and closure time frame from 2016 to
2008. DOE estimates that this acceleration in cleanup and closure could
achieve cost savings of $465 million.17 DOE has also proposed an
accelerated cleanup plan for the Paducah plant. This plan, submitted to
state and federal regulatory authorities for approval in November 2003 and
approved in April 2004, establishes (1) a series of prioritized response
actions, (2) ongoing site characterizations to support future response
action decisions, and (3) decontamination and decommissioning of the
currently operating gaseous diffusion plant once it ceases operations.18
DOE's plan reduces the time frame for completing the prioritized response
actions from 2030 to 2019 and could, according to DOE estimates, save
about $288 million. DOE is continuing negotiations with state and federal
regulatory authorities in hopes of further reducing the time frame for
completion of the prioritized response actions. However, as we reported in
April 2004, the total scope of the cleanup at Paducah is unclear.
Furthermore, DOE has not yet determined when D&D of the plant facilities
currently in use will begin.

DOE is also revisiting each plant's envisioned end state to determine if
cleanup at each plant is based on a technical risk assessment appropriate
for the sites' future land use. The 2002 environmental management review
found that the current cleanup approach and, in some cases,
interpretations of DOE's policy orders and requirements, as well as laws,

16Department of Energy, A Review of the Environmental Management Program
(Washington, D.C., Feb. 4, 2002).

17DOE estimates that accelerating the cleanup at the Oak Ridge plant will
reduce the overall cleanup cost by $866,176,000. However, this amount
includes other activities not covered by the Fund. The savings to the Fund
is an estimated $465,072,000.

18As we reported in our April 2004 report, DOE has had and continues to
have difficulty in reaching stakeholder agreement on its cleanup plans.
U.S. General Accounting Office,

Nuclear Waste Cleanup: DOE Has Made Some Progress in Cleaning Up the
Paducah Site, but Challenges Remain, GAO-04-457 (Washington, D.C.: April
2004).

regulations, and cleanup agreements, were too conservative and created
obstacles to achieving the timely cleanup of the plants. As a result, DOE
required each of its environmental management sites, including the three
plants, to develop a risk-based "vision" to identify acceptable risk
levels consistent with the site's future land use, including an analysis
that identified the differences between the current end state and one that
is based on a risk assessment. Each of the uranium enrichment plants has
developed a draft risk-based end state vision that is currently under
review by DOE headquarters, state and federal regulatory officials, and
local stakeholders. Once these visions are approved, the plants will
re-evaluate their strategic approaches and cleanup activities to determine
if renegotiating cleanup agreements is appropriate. According to DOE
officials, if it is determined that changes are necessary, any changes
would be made in accordance with all applicable requirements and
procedures, including public involvement and regulatory approval. However,
state and federal regulators with whom we spoke are concerned that if the
plants are required to renegotiate cleanup agreements as a result of
proposed changes, the cleanup process could be delayed, in turn resulting
in increased costs. For instance, federal and state regulatory officials
at Oak Ridge are concerned that, given the amount of work remaining and
the short time frame for the plant's closure, DOE might be unable to meet
its projected 2008 closure date if respective parties have to renegotiate
already agreed-upon cleanup standards.

Based on Current Projected Costs and Revenues, the Fund Will Not Be
Sufficient to Complete Cleanup at the Three Plants

Despite DOE efforts to reduce costs, we found that based on current
projected costs and revenues, the Fund will be insufficient to cover
authorized activities. We determined that the Fund will be sufficient to
cover the reimbursements to the uranium and thorium licensees. However,
our Baseline model demonstrated that by 2044, the most likely time frame
for completion of cleanup at the three plants, cleanup costs will have
exceeded revenues by $3.5 billion to $5.7 billion (in 2004 dollars).
Importantly, we found that the Fund would be insufficient irrespective of
which estimates we used, including models that estimated the final cleanup
work at the plants under (1) accelerated time frames, (2) deferred time
frames, or (3) baseline time frames, and with additional contributions to
the Fund equaling the difference between the amounts that have been
appropriated to date and the total amount authorized under the Energy
Policy Act. Given the numerous uncertainties surrounding the cleanup work
at the nation's three uranium enrichment plants, it is not possible to
more precisely determine the total resources needed to cover the Fund's
authorized activities until DOE has better information about such factors

as the dates for beginning and completing the decommissioning work at the
Paducah and Portsmouth plants.

Our Baseline model demonstrated that by the time all cleanup at the plants
is completed, costs will have exceeded revenues by $3.5 billion to $5.7
billion (in 2004 dollars). The Baseline model was developed using cost
estimates that assumed cleanup, including the decontamination and
decommissioning of all facilities (final D&D), would occur by 2044. This
time frame was developed in consultation with DOE officials about what the
most likely cleanup time frames would be. It is important to note,
however, that DOE has not yet made a decision about when the final D&D
will occur at the Paducah and Portsmouth plants.

Because DOE has not determined when final D&D will begin at the Paducah
and Portsmouth plants, we also developed two alternative
models-Accelerated and Deferred-to assess whether the timing of the final
D&D work at these plants would have a significant impact on the total
costs. Total cleanup time was reduced by 20 years in the Accelerated model
and increased by 8 years in the Deferred model. The timing of D&D can
affect total cleanup costs because, among other things, each plant must
pay significant annual security and maintenance costs that will be
incurred as long as DOE maintains facilities on the sites. For example, at
the Paducah plant, the safeguarding and security costs after the plant is
shut down are projected to be more than $26 million annually (in 2004
dollars).

We found that irrespective of what model we used-Accelerated or
Deferred-the Fund will be insufficient to cover the projected cleanup
costs at the uranium enrichment plants. In present value, the Fund
deficiency would range from a high of $3.8 billion in the Accelerated
model to a low of $0.63 billion in the Deferred model.19 Thus, while
accelerating or deferring the cleanup at the Paducah and Portsmouth plants
could affect overall costs, the Fund would still be insufficient to cover
the total cleanup

19Because of the difference in completion dates, the comparison of the
Fund balance in constant 2004 dollars would not be meaningful. To make the
comparison of the various models possible, we estimated the present value
of the Fund's balance in 2004 dollars. Because present value analysis
reflects time value of money-that costs are worth more if they are
incurred sooner and worth less if they occur in the future, the present
value under the deferral model declines more than the other options.
However, in reality the net effect would depend on many other factors. If,
for example, deferral of D&D would add substantially to such costs as
safeguarding and security or costs associated with increased health risks
then the reduction due to adjusting for time value of money could be more
than offset by increases in other costs.

costs irrespective of the time frames of final D&D at the Paducah and
Portsmouth plants.

Because federal contributions to the Fund have been less than the
authorized amount, we also developed two models to assess the affect of
additional contributions from government appropriations.20 First, we
developed a model-Revenue Added-that continued government contributions to
the Fund until they equaled the total amount authorized under the Energy
Policy Act. Building on this model, we developed an additional Revenue
Added Plus Interest model that calculated and added to the Fund the
interest that would have been earned if all authorized government
contributions had been made. We found that under both models, despite
additional revenues, the Fund would still be insufficient to cover all
cleanup costs. In present value, the Fund deficiency would range from a
high of $2.6 billion in the Revenue Added model to a low of $0.09 billion
in the Revenue Added Plus Interest model. Even if the full amount of funds
authorized by law were appropriated, and interest accrued on this
additional amount, cleanup costs would still exceed revenues.

While our analysis was able to capture several uncertainties surrounding
the Fund-including interest rates, inflation rates, cost and revenue
variances, and the timing of final D&D-there are additional uncertainties
we were unable to capture, including uncertainties due to possible changes
in the scope of the cleanup; whether the Fund will be required to pay for
additional activities, such as long-term groundwater monitoring once the
plants are closed; as well as potential litigation costs the Fund would
have to support. Significant changes in the scope of the cleanup work
could impact the costs of cleanup activities at the plants. For example, a
recent risk analysis exercise completed by DOE for the Paducah plant
indicated that such changes could increase cleanup costs by more than $3
billion and extend the time frame for cleanup to more than 30 years past
the original scheduled end date of 2019.21 Additionally, uncertainties
surrounding waste disposal at the Paducah and Portsmouth plants could
significantly impact cleanup costs. Current DOE cost estimates assume that
on-site disposal facilities will be built, which would minimize waste
transportation costs.

20According to DOE's records, at the start of fiscal year 2004, the
government's actual contributions to the Fund were $707 million less than
the amount authorized under the Energy Policy Act.

21This end date does not include final D&D of the plant, but only includes
the major remedial actions currently planned at the site.

These facilities have yet to be constructed at the plants or agreed upon
by regulatory authorities. However, if DOE is not able to build these
on-site facilities, waste disposal costs could increase substantially. For
example, at the Portsmouth plant, contractor officials estimated that if
they have to ship all of the waste off site, disposal would cost at least
$515 million (in 2002 dollars) more than the projected cost of disposing
of the waste in an on-site facility.

Further, there may be additional activities the Fund is required to
support that are not currently included in DOE's cost projections. For
example, after each site has completed all of the necessary cleanup work,
there will be long-term stewardship costs at the plants, such as continual
groundwater monitoring. Currently, DOE officials assume these long-term
stewardship costs will be covered by a separate funding source. Similarly,
the costs to store and dispose of each plant's depleted uranium
hexafluoride are currently covered by a separate appropriation. However,
DOE officials acknowledge that if another funding source is not available
for these costs, they may be required to use resources from the Fund.

Finally, litigation costs supported by the Fund are another source of
uncertainty. Future litigation costs could vary depending on the extent to
which lawsuits are pursued and whether the actions are decided in favor of
the federal government. Various legal claims related to domestic utility
company assessments have been made against the Fund. All of the actions
decided to date have been in favor of the federal government. However,
additional claims may be filed. Additionally, there have been litigation
costs associated with lawsuits against DOE by workers and adjoining
landowners at the Paducah and Portsmouth plants, often concerning
allegations of property or human health damages.

Conclusions	Based on DOE's current estimates, and the most likely time
frame for completing cleanup, costs will exceed revenues in the Fund by
$3.5 billion to $5.7 billion (in 2004 dollars). However, DOE has yet to
make a number of decisions that will impact the costs of cleanup,
including when decontamination and decommissioning at the Paducah and
Portsmouth plants will occur. Until DOE resolves some of these
uncertainties and has more specific information, it is impossible to more
precisely determine the total funds necessary to cover the authorized
cleanup activities. While the precise amount of additional revenue needed
cannot be determined, our analysis shows that additional contributions to
the Fund beyond its current 2007 expiration date will be necessary to
cover the costs of authorized

activities irrespective of when DOE decides to undertake D&D of the
Paducah and Portsmouth plants. Because the Paducah and Portsmouth plants
are now estimated to cease operations by 2010 and 2006, respectively, DOE
should be able to develop plans, including more precise cost estimates,
for D&D of these plants. Extending the Fund by an additional 3 years would
give DOE an opportunity to develop these plans and a better estimate of
the costs to clean up the plants. With this information, DOE could better
determine if further extensions to the Fund will be necessary.

Matters for In order to better ensure that the Fund will be sufficient to
cover the Congressional projected costs for authorized activities, the
Congress should consider

Consideration  o  reauthorizing the Fund for an additional three years to
2010, and

o 	requiring DOE to reassess the sufficiency of the Fund before the
expiration date to determine if extensions beyond 2010 will be necessary.

Recommendations for Executive Action

To help reduce uncertainty regarding the sufficiency of the Fund, we are
recommending that the Secretary of Energy take the following two actions:

o 	develop a decontamination and decommissioning plan for the Paducah
plant that would identify the most probable time frames and costs for
completing final D&D, and

o 	develop a decontamination and decommissioning plan for the Portsmouth
plant that would identify the most probable time frames and costs for
completing final D&D.

Agency Comments and 	We provided a draft of this report to DOE for review
and comment. DOE generally agreed that our report accurately presents the
current status of

Our Evaluation	the Fund and concurred with the report's matters for
congressional consideration. DOE also stated that it would develop
decontamination and decommissioning plans for the remainder of the
facilities at Paducah and Portsmouth "at the appropriate time," but did
not indicate when would be an "appropriate time." We recognize that the
decontamination and

decommissioning of the Paducah and Portsmouth plants may not occur for
years and that any plans developed by DOE would have to be periodically
updated. However, many of the uncertainties that currently exist and could
have significant impact on the costs of DOE efforts will not be resolved
until DOE develops D&D plans for the Paducah and Portsmouth plants that
identify the most probable time frames and costs for completing final D&D.
We recommended that the Congress consider extending the Fund for 3 years,
in part, to provide DOE with an opportunity to develop these plans. Until
DOE does so, it will not be able to develop a more precise estimate of the
total funds necessary to cover the authorized cleanup activities or to
reassess the sufficiency of the Fund and determine if further extensions
are necessary.

DOE also provided technical comments that we incorporated, as appropriate.
DOE's written comments on our report are included in appendix III.

Scope and Methodology

To determine what actions DOE has taken to reduce the cleanup costs the
Fund is authorized to support, we reviewed the National Academy of
Sciences' 1996 report that identified 13 major cost reduction
recommendations for the nation's three uranium enrichment plants.22 We met
with Academy officials to gain further information about the study and
with DOE and its contractor officials at each of the plants to determine
the extent to which DOE has taken actions to address the recommendations.
While we were able to obtain information on actions taken to date, DOE
could not determine whether the actions were taken as a result of the
Academy's recommendations. DOE was also generally unable to provide
information regarding the cost savings, if any, achieved by implementing
these actions. To determine other steps DOE has taken to reduce cleanup
costs, we visited all three plants and interviewed DOE and contractor
officials from DOE headquarters, the Oak Ridge Operations Office, the
Lexington Office, and the site offices at each of the three plants.
Additionally, we obtained and analyzed documentation regarding DOE's
accelerated cleanup strategy at the Oak Ridge and Paducah plants,
including the plants' planning documents and other DOE management reports.
We also obtained and reviewed each of the three plants' draft risk

22National Academy of Sciences, Affordable Cleanup? Opportunities for Cost
Reduction in the Decontamination and Decommissioning of the Nation's
Uranium Enrichment Facilities (Washington, D.C., 1996).

based end state vision documents, to understand DOE's proposed options for
consideration. Additionally, we attended a public meeting in Paducah,
where DOE presented a draft risk-based end state vision to the community,
to better understand the proposal. We also interviewed regulatory
authorities responsible for overseeing cleanup activities at the plants,
including officials at the Environmental Protection Agency's Region IV and
Region V, the Commonwealth of Kentucky's Department for Environmental
Protection, the Tennessee Department of Environment and Conservation, and
the Ohio Environmental Protection Agency.

To assess the sufficiency of the Fund to pay for the total projected costs
of the Fund's authorized activities, we interviewed DOE and contractor
officials responsible for the Fund's financial data and obtained DOE's
current estimates for uranium and thorium reimbursement costs, the cleanup
costs at the three plants, and the current and likely revenue projections.
We used these data to develop a number of simulation models that factored
in the cost and revenue projections on an annual basis and uncertainties
surrounding inflation rates, interest rates, costs, revenues, and the
timing of the final D&D work at the Paducah and Portsmouth plants. See
appendix I for a detailed description of our modeling methodology,
assumptions, and results. We interviewed DOE and contractor officials from
DOE Headquarters, the Oak Ridge Operations Office, the Lexington Office,
and the site offices at each of the three plants, as well as officials
from the federal and state regulatory offices party to the plants' cleanup
agreements. We also toured the Oak Ridge plant to identify the major
uncertainties that could impact future cleanup costs at the plants.

In addition, we assessed the reliability of the data used to develop our
simulation models. We obtained, from key DOE and contractor database
officials, responses to a series of data reliability questions covering
issues such as data entry access, quality control procedures, and the
accuracy and completeness of the data. Follow-up questions were added
whenever necessary. We also interviewed DOE and contractor officials and
reviewed relevant documentation to determine how cost estimates for future
cleanup, including the final D&D work, were developed at each of the
plants. We obtained historical cost estimates for several D&D projects
completed at the Oak Ridge plant and compared them with updated or actual
costs. We also interviewed and obtained relevant work papers from KPMG, a
private accounting firm hired by the DOE Inspector General's Office to
conduct annual financial audits of the Fund, to understand and incorporate
their audit findings. KPMG's annual financial audits have

concluded that the cost and revenue data related to the Fund appear to be
complete and accurate, that internal controls are operating effectively,
and that Fund managers have complied with all significant provisions of
laws, regulations, and compliance agreements. Based on our own work, in
conjunction with that of KPMG, we determined that the financial data
provided were sufficiently reliable for the purposes of our report.

We are sending copies of this report to the Secretary of Energy. We will
also make copies available to others upon request. In addition, the report
will be available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions on this report, please call me at
(202) 512-3841. Other staff contributing to this report are listed in
appendix

IV.

Robin M. Nazzaro Director, Natural Resources and Environment

List of Congressional Committees

The Honorable Pete V. Domenici
Chairman
The Honorable Jeff Bingaman
Ranking Minority Member
Committee on Energy and Natural Resources
United States Senate

The Honorable Joe Barton
Chairman
The Honorable John D. Dingell
Ranking Minority Member
Committee on Energy and Commerce
House of Representatives

Appendix I

Fund Modeling Methodology, Assumptions, and Results

This appendix describes the methodology, assumptions, and results of the
models we developed to evaluate the sufficiency of the Uranium Enrichment
Decontamination and Decommissioning Fund (Fund). Specifically, this
appendix contains information on the following:

o 	the simulation technique and the Baseline model we developed to
estimate the balance of the Fund by the time all cleanup activities are
scheduled to be completed;

o 	the data sources, assumptions, and uncertainties we used for the
Baseline model;

o 	the additional models-Accelerated, Deferred, Revenue Added, and Revenue
Added Plus Interest-that we developed to analyze the effects of additional
uncertainties associated with decontamination and decommissioning time
frames and revenues to the Fund;

o 	our simulation results for individual models as well as a comparison of
results from the alternative models.

Modeling Methodology 	To conduct our analysis, we first developed an Excel
spreadsheet simulation model that annually tracked all estimated
contributions to and payments from the Fund starting in fiscal year 2004
and extending out until all cleanup activities are scheduled to be
completed. We also estimated the interest that could be earned by unused
balances of the Fund each year, and included these earnings in the annual
Fund balance.1 Our analysis began with the Fund balance at the end of
fiscal year 2003 and continued until all cleanup work at the three uranium
enrichment plants was projected to be completed. The completion date for
the Baseline model and Revenue models was set at fiscal year 2044-the most
likely date for the completion of all cleanup activities at the three
plants. However, for the Accelerated and Deferred models, the completion
dates were set at fiscal year 2024 and fiscal year 2052, respectively.

Building on the Excel spreadsheet model, we used a commercially available
forecasting and risk analysis software program called Crystal Ball to
model the uncertainties associated with cost and economic assumptions

1The Energy Policy Act provided that balances in the Fund be invested in
Treasury securities and any interest earned be made available to pay for
activities covered under the Fund.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

used in the model. Using the Crystal Ball program in concert with the
Excel model, we were able to expand our capability to explore a wide range
of possible values, instead of one single value, for such variables as
interest rates, inflation rates, and cleanup costs. The Crystal Ball
program uses a process called Monte Carlo simulation. That is, it
repeatedly and randomly selects values for interest rates, inflation
rates, and costs from distribution ranges that we prespecified for these
variables. Using these values for the appropriate cells in the spreadsheet
model, Crystal Ball then makes the calculations and forecasts the results.
Repeating the same process, Crystal Ball can calculate the results based
on hundreds or thousands of such trials. Our simulation results were based
on 1,500 different trials. The Crystal Ball program produces the entire
range of forecasts for the given model and shows the confidence level for,
or the likelihood associated with, any specific forecast.

Baseline Model Data, Assumptions, and Uncertainties

The Department of Energy (DOE) and its contractor was our primary source
for all the cost data used to develop our Baseline model. For Fund
revenues, we generally assumed the Fund would receive contributions as
authorized by current legislation. DOE also provided us with the time
frames for completing the cleanup work at each of the plants and, when
possible, contingency estimates for the costs. Since DOE's cost data were
provided in different dollar values, we converted all cost data to 2004
dollars using either the inflation rates used by DOE or the Consumer Price
Index. More specific sources of data and assumptions to the modeling work
were as follows:

Revenues to the Fund. To construct the Baseline model, we assumed
contributions to the Fund would come from three sources: federal
government appropriations, payments from domestic utility companies, and
interest earned on investments of Fund balances. We assumed that
government contributions would continue from fiscal years 2004 through
2007, as authorized by the Energy Policy Act. However, for the federal
government contributions in fiscal years 2004 and 2005, we used actual
appropriations and the President's budget request, respectively; for the
remaining years, we assumed contributions would be at the level authorized
in the current legislation. For payments from domestic utility companies,
we assumed the assessment would remain unchanged at the fiscal year 2004
level, and assumed payments would continue through fiscal year 2007, as
authorized by the Energy Policy Act. Additionally, as required by law, the
Fund can accrue interest income from investing the unused balance of the
fund in government securities. Therefore, we

Appendix I Fund Modeling Methodology, Assumptions, and Results

estimated the investment earnings of the Fund annually and included it in
the available Fund balances. To calculate investment earnings, we used a
range of different interest rates based on the Fund's previous earnings.
We assumed that the real interest rate earned on the Fund investment has a
triangular distribution, with minimum and maximum values based on
historical performance of the Fund's investments since 1994. Similarly, we
used the performance of the Consumer Price Index since 1994 to develop a
triangular distribution for price indices to adjust the data where
necessary.

Costs of the Fund. DOE, in conjunction with its contractor officials
responsible for conducting the cleanup work at the three uranium
enrichment plants, provided cost estimates for all anticipated activities
that will be paid for from the Fund starting in fiscal year 2004, and that
will carry forward until all cleanup activities have been completed at
each of the three plants. Cost estimates included (1) reimbursements to
uranium and thorium licensees and (2) costs to complete the cleanup at the
three uranium enrichment plants.

1.	Reimbursements to uranium and thorium licensees. The Energy Policy Act
authorized reimbursements to uranium licensees not to exceed $350 million
and reimbursements to the thorium licensee not to exceed $365 million for
the portion of their cleanup costs associated with the sale of these
materials to the federal government. The remaining unused authorized
amounts are adjusted annually based upon the Consumer Price Index. We
assumed that the annual reimbursement amount will be fixed at the fiscal
year 2004 level and will carry forward until the total amount authorized
by law has been allocated. Based on the current balance of the Fund,
anticipated revenues, and the total available reimbursement amount
remaining, we determined that the Fund would be sufficient to cover the
reimbursements to the uranium and thorium licensees.2

2.	Cleanup costs at the three uranium enrichment plants. Cleanup costs for
decontamination and decommissioning (D&D) work were kept separate from all
other cleanup cost activities, which include remedial actions, waste
management, surveillance and maintenance, and other (including all other
activities the Fund supports such as litigation fees

2At the end of fiscal year 2003, the Fund balance was $3.4 billion,
whereas the total remaining balance for reimbursements was about $400
million-a total of $214 million had been paid to uranium licensees and
$171 million had been paid to the thorium licensee.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

and funds to support site-specific advisory boards). Cleanup costs were
broken out annually and by each plant. Due to the different uncertainties
surrounding these costs, D&D costs were then further segregated for
process buildings (the large buildings where uranium is enriched) and all
other remaining D&D costs. The Baseline model costs for the cleanup
activities at the three plants were developed under the assumption that
the final D&D (all D&D and other required cleanup actions at the plants
once the facilities cease operations) would occur between 2004 and 2008 at
the Oak Ridge plant; between 2018 and 2032 at the Paducah plant; and
between 2010 and 2044 at the Portsmouth plant. These are the most likely
time frames for completing the final D&D work, based on discussions with
DOE and contractor officials.

Cost Uncertainties. To capture uncertainties inherent in the data, we used
the Crystal Ball program in concert with the Baseline model we developed.
With the Crystal Ball program, we could assign a range of values, rather
than a single value, to each cell of the spreadsheet model. We developed
the range of values for each cost category based on extensive discussions
with DOE and its contractor staff who provided the cost estimates. After
considering their recommendations and input, we assumed that all cleanup
costs at the three uranium enrichment plants, with the exception of D&D of
the process buildings at the Paducah and Portsmouth plants, could increase
by a uniform probability of up to 20 percent.3 Given the considerable
uncertainty associated with costs for D&D of the process buildings and the
experience to date at the Oak Ridge plant, we assumed, based on the values
provided by DOE, the costs for this work at Paducah and Portsmouth could
increase by a uniform probability of up to 85 percent.4

Alternative Models	Because not all uncertainties could be incorporated
into one model, we developed several alternative models to our Baseline
model. Specifically,

3Uniform probability of up to 20 percent indicates costs could increase by
any factor between 0 and 20 percent, with all values having equal
likelihood of occurring.

4We found that the cost to D&D the major process buildings at the Oak
Ridge plant is now estimated to be about 85 percent higher than the cost
estimate that was developed in 2000. The Paducah and Portsmouth plants'
process buildings cost estimates were also developed in 2000, and were
largely based on the same assumptions used to develop the Oak Ridge cost
estimate. In general, officials with whom we spoke agreed that based on
the experience at Oak Ridge, costs could increase in a similar fashion at
Paducah and Portsmouth.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

since DOE has not determined when final decontamination and
decommissioning of the Paducah and Portsmouth plants will begin, we
developed two alternative models-Accelerated and Deferred-to show the
effects of different timing assumptions on the sufficiency of the Fund.
Further, because federal contributions to the Fund have been less than the
authorized amount, we developed two additional models-Revenue Added and
Revenue Added Plus Interest-to include additional contributions to the
Fund based on revenues from federal government appropriations. These
alternative models were built using the same data, assumptions, and
uncertainties that were used for the Baseline model, except for specific
changes discussed below.

Accelerated and Deferred Models

Because DOE has not determined when the final decommissioning and
decontamination work for the Paducah and Portsmouth uranium plants will
begin and when it will be completed, DOE, in conjunction with its
contractor officials, developed two additional cost series for the Paducah
and Portsmouth plants that varied in the start and completion dates for
the final D&D work, which we then incorporated into our Accelerated and
Deferred models. The completion of all D&D activities in the Accelerated
model was reduced by 20 years from 2044 to 2024, and increased by 8 years
in the Deferred model to 2052.

The Accelerated cost series was developed under the assumption that final
D&D could be completed faster than under the Baseline model, given
unconstrained funding. For the Accelerated approach, Paducah's final D&D
work would begin in 2010 and end by 2024; Portsmouth's final D&D work
would begin in 2007 and be completed by 2024. These time frames were
determined in consultation with DOE and contractor officials. They
represent the soonest the D&D work would most likely start, according to
DOE and its contractor officials, and represent the earliest likely time
frame that the total D&D and other associated cleanup work could be
completed.

The Deferred cost series was developed under the assumption that given
current funding constraints, it may not be realistic for two major D&D
projects to be carried out concurrently. Thus, Deferred time frames were
determined by DOE, assuming that all work would be completed at the
Portsmouth plant first and then initiated at the Paducah plant. For the
Deferred model, Portsmouth's final D&D work was estimated to be completed
from 2010 to 2037 and Paducah's from 2038 to 2052.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

Revenue Added Models 	According to DOE's records, by the start of fiscal
year 2004, when our analysis begins, the government's actual contributions
to the Fund were $707 million less than authorized under the Energy Policy
Act. To capture the effect of the government meeting its total authorized
annual contributions on the balance of the Fund, we developed two
additional models-a Revenue Added and a Revenue Added Plus Interest model.
For the Revenue Added model, we assumed that government contributions to
the Fund would continue annually at the authorized level until the total
government contributions as authorized by law had been met, which would
occur in fiscal year 2009. For the Revenue Added Plus Interest model, we
built on the Revenue Added model to include the effect of forgone interest
that the Fund could have earned if the government had contributed the full
authorized amount. In other words, we continued government payments into
the Fund until the total amount authorized (regardless of amounts actually
appropriated), as well as interest on the unpaid portion of the authorized
amount, is paid to the Fund. We assumed these additional payments would be
made to the Fund in the same amounts as the 2004 annual authorized amount,
which extended payments through fiscal year 2010.

Results	The balance of the Fund at the projected completion of all cleanup
work indicated whether the Fund will be sufficient to cover all costs
identified by DOE. We estimated the Fund balance in current (year of
completion) dollars and constant 2004 dollars. However, to compare the
results of various models with different completion dates, we also
estimated the present value of the Fund's balance in 2004. For each model,
the Crystal Ball program produced not only a range of possible values, but
also the probability associated with that value, as well as the expected
mean for the range. Figures 4 through 8 provide an overall illustration of
the results produced by the models in constant 2004 dollars. In the
figures, each bar shows the value by which costs could exceed revenues in
billions of 2004 dollars. The height of each bar is the probability that
the costs would exceed the revenues by that exact amount. Even though the
probability of one specific amount is low, there is a 100 percent
probability that the actual amount will fall somewhere within the range
(e.g. for the Baseline model, minus $3.5 billion to minus $5.7 billion).
As shown in figures 4 through 8, regardless of the model we used, the
revenue going into the Fund will not be sufficient to cover all of the
projected cleanup costs at the uranium enrichment plants.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

Figure 4: Baseline Model Results

Probability .026

.020

.013

.007

.000 -5.8 -5.2 -4.6 -4.1 -3.5 Billions of 2004 dollars

Source: GAO analysis of DOE data.

Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

Figure 5: Accelerated Model Results

Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

Figure 6: Deferred Model Results

Probability Mean = -5.2 .025

.019

.013

.006

.000 -6.3 -5.7 -5.2 -4.7 -4.0 Billions of 2004 dollars

Source: GAO analysis of DOE data.

Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

Figure 7: Revenue Added Model Results

.025

.019

.013

.006

.000 -4.8 -4.1 -3.4 -2.7 -2.0 Billions of 2004 dollars

Source: GAO analysis of DOE data.

Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

Figure 8: Revenue Added Plus Interest Model Results Probability

                                      .030

                                      .023

                                      .015

                                      .008

                                .000 Mean = -2.7

-4.5 -3.5 -2.5 -1.5 -.5

Billions of 2004 dollars

Source: GAO analysis of DOE data.

Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.

The figures show the results for the individual models in constant 2004
dollars in the year DOE projected that all cleanup work will be completed.
Because of the difference in the completion dates, the comparison of the
Fund balances across the different models will not be meaningful. To make
the comparison of the balances possible, we also estimated the present
value of the Fund in 2004 dollars. Figure 9 shows in present value how the
Fund balance of the Baseline model compares with the Accelerated and
Deferred models; Figure 10 shows in present value how the Fund balance of
the Baseline model compares with the two Revenue Added models.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

Figure 9: Present Value of Fund Balance for Baseline, Accelerated, and
Deferred Models

Probability .055

.041

.028

.014

.000 -4 -3.1 -2.3 -1.4 -.5 Billions of 2004 dollars

Baseline model Accelerated model Deferred model

Source: GAO analysis of DOE data.

Notes: In order to compare the results of various models with different
completion dates, we estimated the present value of the Fund's balance in
2004 dollars, as represented here.

The values on the horizontal axis of the figure are to provide a scale and
do not correspond exactly to the ranges of the Fund balance, which are
provided in table 2.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

                                      .036

                                      .027

                                      .018

                                      .009

                                      .000

-3 -2.3 -1.5 -.8 0

Billions of 2004 dollars

Baseline model
Revenue Added model
Revenue Added Plus Interest model

Source: GAO analysis of DOE data.

Notes: In order to compare the results of various models with different
completion dates, we estimated the present value of the Fund's balance in
2004 dollars, as represented here.

The values on the horizontal axis of the figure are to provide a scale and
do not correspond exactly to the ranges of the Fund balance, which are
provided in table 2.

The specific values for which the Fund could be insufficient under the
various models are shown in table 2. Though the Deferred model showed the
greatest insufficiency in the year the cleanup work is projected to be
completed, once the timing of expenditures is considered as in the present
value analysis, the deficiency of the Deferred alternative was not
significantly different from other models. On the other hand, the
deficiency of the Fund, as measured in present value mean, was the lowest
in the Revenue Added Plus Interest model. In this model, cleanup costs
would exceed revenues by $0.09 billion to $2.3 billion.

         Appendix I Fund Modeling Methodology, Assumptions, and Results

                         Table 2: Comparison of Models

Dollars in billions

                                                                      Revenue 
                                                                        Added 
                                                         Revenue         Plus 
                                                         Added       Interest 
                    Baseline   Accelerated    Deferred       model      model 
                       model      model         model              
    Completion                                                     
       date                                                        
(fiscal year)        2044            2024        2052      2044 

            Fund balance at completion of all cleanup: range (mean)

     Constant        -$5.7 to  -$5.2 to    -$6.2 to    -$4.7 to      -$4.2 to 
                        -$3.5    -$4.0       -$4.0       -$1.8          -$.43 
2004 dollars                                                   
                      (-$4.8)     (-$4.6)     (-$5.2)     (-$3.6)     (-$2.7) 
      Current        -18.5 to   -9.8 to    -26.4 to    -15.1 to      -13.3 to 
                         -7.6    -5.7        -8.8        -4.3            -1.0 
      dollars                                                     
                      (-12.5)      (-7.6)     (-16.7)      (-9.3)      (-7.1) 
Present value -3.1 to -.77   -3.8 to     -3.1 to     -2.6 to       -2.3 to 
                                 -1.8        -.63        -.39            -.09 
2004 dollarsa                                                  
                       (-1.7)      (-2.7)      (-1.5)      (-1.3)      (-1.0) 

Source: GAO analysis of DOE data.

aBecause of the difference in completion dates, the comparison of the Fund
balance in constant 2004 dollars would not be meaningful. To make the
comparison of the various models possible, we estimated the present value
of the Fund's balance in 2004 dollars. Because present value analysis
reflects time value of money-that costs are worth more if they are
incurred sooner and worth less if they occur in the future, the present
value under the deferral model declines more than the other options.
However, in reality the net effect would depend on many other factors. If,
for example, deferral would add substantially to such costs as
safeguarding and security or costs associated with increased health risks
then the reduction due to adjusting for time value of money could be more
than offset by increases in other costs.

Appendix II

DOE Actions Taken That Addressed the National Academy of Sciences' Cost
Reduction Recommendations

This appendix describes the actions taken by DOE that address the National
Academy of Sciences' (Academy) cost reduction recommendations. The Energy
Policy Act directed the Academy to conduct a study and to provide
recommendations for reducing the decontamination and decommissioning costs
at the three uranium enrichment plants. In 1996, after convening a
committee of academic and technical experts to carry out the study, the
Academy released a report highlighting 13 major recommendations entitled
Affordable Cleanup? Opportunities for Cost Reduction in the
Decontamination and Decommissioning of the Nation's Uranium Enrichment
Facilities. The recommendations address a variety of cost reduction
approaches, including developing specific technologies and suggestions for
planning, management, and regulatory coordination. While we were able to
obtain information on actions DOE has taken that are consistent with the
recommendations, DOE could not determine whether any actions to date were
taken directly in response to the Academy's recommendations. Table 3 shows
each of the Academy's major recommendations, the status of the
recommendation, and an explanation of the actions taken by DOE that
addressed the recommendation.

                                  Appendix II
                      DOE Actions Taken That Addressed the
                       National Academy of Sciences' Cost
                           Reduction Recommendations

Table 3: Recommendations, Status, and Explanation of the Actions Taken by
DOE

     Recommendation Status Action taken Focus of recommendation: management

Rather than constructing a new  Addressed At the Oak Ridge plant, all DOE  
      administration building,               and contractor staff are         
    existing facilities should be             housed in existing facilities.  
          used to house the                         At the Paducah and        
management and professional D&D            Portsmouth plants, DOE plans to 
               staff.                              use existing structures to 
                                               house staff when D&D efforts   
                                                          begin.              

DOE should develop three plans-namely, Partially
headquarters level, plant-complex level, and site level- addressed
that address and integrate D&D of the facilities,
environmental remediation activities, and the
management of the depleted uranium hexafluoride.

DOE has not developed a headquarters-level D&D plan that addresses and
integrates D&D of all three plants with other DOE activities. While DOE's
strategic plan discusses overall environmental management strategies and
objectives, the plan does not specifically address D&D of the three plants
as described by the Academy's recommendation. DOE also has not developed a
complexlevel D&D plan for the three plants. Oak Ridge is the only plant
with an agreed-upon D&D plan that incorporates D&D, other cleanup
activities, and the management of depleted uranium hexafluoride (a
byproduct of the uranium enrichment process). The Paducah plant currently
has a plan that lays out DOE's approach for a portion of its cleanup, but
the plan does not include details for final D&D. DOE does not have a D&D
plan for the Portsmouth plant. However, the DOE site manager said the
agency is currently working to develop a Portsmouth strategic plan that
will address final D&D, other cleanup activities, and management of
depleted uranium hexafluoride.

An independent contractor should be selected through Partially open
competition and should be assigned total addressed responsibility and
accountability for all aspects of the assigned D&D work.

In 1997, DOE awarded a contract to Bechtel Jacobs for cleanup work at the
Oak Ridge, Paducah, and Portsmouth plants. Bechtel Jacobs was responsible
for the planning and execution of remedial action, D&D, and waste
management at the three plants (with the exception of three of the Oak
Ridge plant's process buildings). In September 2003, DOE awarded a new
contract to Bechtel Jacobs for completing the cleanup work at the Oak
Ridge plant. Although the contract awarded in 1997 included all aspects of
the cleanup at the Paducah and Portsmouth plants, DOE is currently in the
process of bidding for two separate contracts at each plant-one for
remedial actions and one for infrastructure and site maintenance-because
of new federal contract initiatives.

                                  Appendix II
                      DOE Actions Taken That Addressed the
                       National Academy of Sciences' Cost
                           Reduction Recommendations

                         (Continued From Previous Page)

Recommendation                                 Status    Action taken 
A prioritized cost- and risk-reduction                   
approach should                                Partially 
be used as the basis for developing the D&D    addressed 
plan. This                                               
approach should be used to accomplish D&D                
activities                                               
prior to the completion of the entire plan.              

In the 1990s, DOE developed a risk-based prioritization system to rank
projects on the basis of overall risk reduction. DOE has now transitioned
to a prioritization approach that maximizes the use of available resources
while addressing near-term concerns first. The current prioritization
criteria used by DOE, in order of importance, consist of the following:
(1) imminent human health or safety risks, (2) compliance with existing
enforceable regulatory agreements, (3) actions required to mitigate risks
under current land use, and (4) activities that are on the critical path
for efficient completion of the Environmental Management Program. While
DOE has used this approach in developing the Oak Ridge plant's D&D plan,
D&D plans, including the approach DOE will take, have not yet been
developed for the Paducah and Portsmouth plants.

To reduce costs without compromising information security for the gaseous
diffusion technology, DOE should try to define physical security
requirements that allow uncleared workers under adequate supervision to
conduct D&D operations. In addition, DOE should conduct an in-depth
evaluation of the safeguards and security requirements during D&D to
determine how their impact on D&D costs could be reduced.

Partially DOE is evaluating steps to allow access, under adequate

addressedsupervision, to workers conducting D&D at the Oak Ridge plant who
do not have clearances. For example, DOE recently approved a new security
plan for the large process buildings at Oak Ridge. According to DOE
officials, by taking actions such as reducing the number of times security
forces search employees and constructing a perimeter fence around the
outskirts of buildings to eliminate the need for searches each time
employees enter or exit a building, they will not need to increase the
security staff. Without these changes, DOE would have had to significantly
increase the security staff on-site to handle the increased D&D activity.
Additionally, the Oak Ridge plant has a sitewide safeguards and security
plan that outlines security requirements across the site during D&D.
According to DOE, this plan is continually updated to reduce security
requirements as projects are completed, in order to reduce costs. The
Paducah and Portsmouth plants do not have D&D plans that specify the
security requirements that will be necessary during D&D operations.
However, the DOE site manager said that at the Portsmouth plant, officials
are actively looking at ways to reduce their security requirements as a
part of an effort to develop a strategic plan for D&D of the site.

                                  Appendix II
                      DOE Actions Taken That Addressed the
                       National Academy of Sciences' Cost
                           Reduction Recommendations

                         (Continued From Previous Page)

                       Recommendation Status Action taken

Focus of recommendation: development of D&D technologies

The high-assay decontamination facility should be eliminated; the
low-assay decontamination facility should be simplified to focus primarily
on aqueous decontamination and should be housed in existing buildings.

AddressedDevelopment of high-assay and low-assay decontamination
facilities (facilities to disassemble and decontaminate equipment
contaminated with enriched uranium) is no longer part of DOE's plans for
D&D. DOE abandoned the construction of these facilities after an
evaluation revealed how costly the process would be and instead has opted
to dispose of the material into on-site landfills, which do not require
aqueous decontamination. At Oak Ridge, this process is already under way.
DOE officials assume a similar approach will be taken at the Paducah and
Portsmouth plants when D&D is initiated at these plants. If DOE plans
change or it is unable to obtain approval for on-site disposal cells at
these sites, DOE may need to re-evaluate its approach.

A few highly focused D&D demonstrations should be undertaken to verify the
cost and effectiveness of specific technologies, including the following
two:

1. Optimization of aqueous decontamination to remove radioactive surface
contamination from materials and process equipment, with special attention
to Tc-99; and

2.Support of current DOE robotics programs, with highly focused
demonstrations to verify potential cost savings and safety benefits.

AddressedDOE has hosted several demonstrations and workshops to assess the
effectiveness of specific D&D technologies. For example, DOE's contractor
recently held a workshop to evaluate dismantlement technologies for
removing specific buildings at the Oak Ridge plant.

1. According to DOE officials, there is no longer a need to utilize
aqueous decontamination technology. The current waste acceptance criteria
allow DOE to dispose of the materials into an on-site disposal facility
whole, without first decontaminating the material.

2. DOE has evaluated different types of robotics for use at the Oak Ridge
plant and the agency is currently using a quasi-robotics program. For
example, a worker can sit in the cab of a robotic device and extend a
mechanical arm to cut or sheer piping, cables, or wire, precluding the
need to manually cut the materials.

The technical and management approaches used Partially
successfully for D&D of the United Kingdom's addressed
Capenhurst gaseous diffusion plant and for recently
completed D&D projects with U.S. power reactors
should be carefully considered by DOE to reduce costs
for D&D of the U.S. plants.

According to DOE officials, DOE has considered the technical and
management approaches used at both the Capenhurst plant and other U.S. D&D
projects, such as at the Hanford, Washington, site, to learn from their
experiences and reduce costs. Specifically, at the Oak Ridge plant, DOE
selected contractors who participated in D&D activities at other sites.
For example, DOE awarded a contract to D&D several large process buildings
at the Oak Ridge plant to British Nuclear Fuels Limited, based, in part,
on its experience at the Capenhurst plant. DOE has not yet initiated final
D&D at the Paducah and Portsmouth plants. However, the site manager for
both of these plants acknowledged that it will be important to identify
lessons learned from DOE's experiences at Oak Ridge and adopt best
practices once D&D begins at the plants.

                                  Appendix II
                      DOE Actions Taken That Addressed the
                       National Academy of Sciences' Cost
                           Reduction Recommendations

                         (Continued From Previous Page)

     Recommendation Status Action taken A modest research program should be
     established to Not applicable DOE is currently not pursuing methods to
                                 decontaminate

develop methods to decontaminate diffusion barrier material effectively.

diffusion barrier material (the material used to separate and enrich
uranium during the enrichment process). According to DOE officials, it is
not necessary to decontaminate this material at the Oak Ridge plant
because the material is placed directly into an on-site disposal cell,
eliminating the need for decontamination. DOE assumes a similar approach
will be taken at the Paducah and Portsmouth plants.

        Focus of recommendation: regulatory and stakeholder involvement

A stakeholder involvement program should be pursued to obtain timely and
substantive public participation and input to ensure that social values
are reflected in policy decisions.

AddressedDOE has generally sought stakeholder involvement at each of the
plants. DOE established Site Specific Advisory Boards at the Oak Ridge and
Paducah plants that are staffed by local stakeholders. The boards'
charters include providing input on cleanup policies and strategies and
reviewing work plans and activities. While the Portsmouth plant does not
have a Site Specific Advisory Board, DOE is currently working with the
community to establish a stakeholder group to address DOE's new risk-based
end state policy. DOE officials told us that they also regularly hold
public meetings to present cleanup project plans and progress reports to
Oak Ridge, Paducah, and Portsmouth city government organizations.
Additionally, DOE has established information centers open to the public
in or near all three communities. The centers provide information on each
of the plant's respective cleanup activities, in addition to general
information about its activities at other sites. The Portsmouth
information center is located within the secure perimeter of the site,
however, making public access somewhat less convenient than at the other
two centers.

DOE should seek coordination of Partially DOE coordinates all of its       
       all regulatory aspects                cleanup planning activities      
     of D&D with the appropriate   addressed through specific agreements with 
     state and federal agencies                    relevant state and federal 
    early in planning to provide             regulatory officials. While      
       consistency during D&D                mechanisms are in place to       
       planning and execution.                  coordinate the regulatory     
                                                aspects of its work, early    
                                                    coordination and planning 
                                               between DOE and its regulatory 
                                             entities have not always taken   
                                             place. For example, at the       
                                              Paducah plant, regulators have  
                                                    recently expressed        
                                             concern that DOE has excluded    
                                             them from the planning           
                                                 process for both the overall 
                                                cleanup approach and specific 
                                                        projects.             

                                  Appendix II
                      DOE Actions Taken That Addressed the
                       National Academy of Sciences' Cost
                           Reduction Recommendations

                         (Continued From Previous Page)

  Recommendation Status Action taken Focus of recommendation: recycling/waste
                                    disposal

DOE should develop an integrated, optimized waste management plan that
encompasses material reuse, recycling, packaging, transport, and waste
disposal. Consistent with cost reduction and public health and
environmental protection, materials should be cleaned to free-release
standards and released to the commercial sector for recycling. Material
that cannot be cleaned to free-release standards should be considered for
recycling within DOE or Department of Defense complexes in applications
where slightly contaminated materials are acceptable, such as for shield
blocks or waste containers.

AddressedIn 1997, DOE established the National Center of Excellence for
Metals Recycle as a DOE complexwide resource for pursuing recycling and
reuse alternatives for scrap equipment and surplus materials. The center
has reported a reuse savings for the three plant sites of approximately
$28 million since its establishment. However, in 2000, DOE suspended the
release of scrap metals, such as nickel, copper, and aluminum, for
recycling because of public concern that radioactive contamination might
remain on or in the scrap metal. As a result, the plants are currently
stockpiling or disposing of potentially valuable metals. For example,
about 15,500 tons of scrap nickel-a valuable industrial commodity-salvaged
from the Oak Ridge and Paducah plants have been stockpiled and are
awaiting disposition. If recycled, DOE could earn between $42 million to
$108 million, while disposal of the Oak Ridge plant's nickel stocks alone
are estimated to cost DOE about $10 million in transportation and disposal
costs. DOE is currently reassessing its recycling policies to determine if
scrap metals can be safely recycled.

The committee recommends that, if consistent with the Addressed DOE
recently awarded a contract to construct and operate prioritized cost-and
risk-reduction process, the depleted uranium hexafluoride conversion
facilities at the depleted uranium hexafluoride should be converted to
Paducah and Portsmouth plants. DOE has begun shipping the more stable
chemical form, uranium oxide, for the depleted uranium hexafluoride
cylinders currently storage or disposal. stored at the Oak Ridge plant to
Portsmouth for conversion.

                    Source: GAO analysis of DOE information.

                                  Appendix III

                     Comments from the Department of Energy

Appendix IV

                     GAO Contacts and Staff Acknowledgments

GAO Contacts	Robin M. Nazzaro, (202) 512-3841 Sherry L. McDonald, (202)
512-8302

Staff 	In addition to the individuals named above, John W. Delicath, Jason
Holsclaw, Alyssa M. Hundrup, Mehrzad Nadji, Judy Pagano, Michael

Acknowledgments	Sagalow, and Barbara Timmerman also made key contributions
to this report.

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