Technetium, a radioactive metal that is produced as a by-product of fission  in a nuclear reactor, is considered a contaminant by commercial  specifications for nuclear fuel. USEC was able to determine that up to 9,550  metric tons of the 45,000 metric tons of uranium that DOE had transferred  to the corporation prior to privatization had been processed through the  contaminated production lines at Paducah and therefore was  contaminated with technetium. USEC Reported About 10 Percent of the Contaminated Uranium DOE Transferred to the Corporation before Privatization Remains to Be Decontaminated

Through the end of February 2006, USEC reported that about 960 metric  tons, or 10 percent, of the 9,550 metric tons of technetium-contaminated  uranium transferred to it by DOE prior to privatization remains to be  decontaminated. DOE estimates USEC will finish decontaminating this  uranium by the end of December 2006. DOE compensated USEC for its  decontamination costs using appropriated funds. From June 2002 through the end of February 2006, USEC had invoiced  DOE for decontamination costs totaling about $152 million. DOE has compensated USEC for its decontamination services in three  ways. DOE’s Oversight of USEC’s Uranium Decontamination Activities Has Been Hindered by Delays in Obtaining Key Information from USEC

DOE takes several steps to oversee USEC’s uranium decontamination  activities, including reviewing monthly reports submitted by USEC  detailing decontamination progress and costs and tracking the proceeds  USEC generates from selling clean uranium that DOE has transferred to  the corporation under the December 2004 agreement. As a result, DOE has some concerns  about whether USEC consistently conducts decontamination work in a  cost-effective manner and is currently uncertain whether the  compensation the department provided the corporation matches USEC’s  actual decontamination costs. Finally, DOE has also contracted with DCAA to audit the annual costs  submitted by USEC, which DOE uses to verify that USEC’s  decontamination costs match what DOE paid the corporation. DCAA uses these data in its audits to verify that  USEC’s incurred costs are reasonable. USEC’s Delays in Responding to Inquiries and Providing Financial Data Have Affected DOE’s Oversight

DOE officials told us that they have had difficulties receiving complete and  timely responses to their inquiries on USEC’s monthly reports. According to USEC, these other  audits have not found significant deficiencies. In the absence of DCAA audits of USEC’s annual decontamination costs,  DOE has taken steps to protect the government’s interests by limiting the  amount of compensation paid to USEC. In addition, to assist the Congress in its continuing oversight of the  department, we further recommend that the Secretary of Energy report  the following information in DOE’s annual budget request to the Congress  until USEC has completed uranium decontamination:  the remaining quantities of uranium in USEC’s and DOE’s inventories that  need to be decontaminated, the estimated costs of completing this decontamination work,  the source of funds necessary to compensate USEC, and the progress DCAA has made completing the annual audits of USEC’s  decontamination costs.
Why GAO Did This Study

Prior to the 1998 privatization of the U.S. Enrichment Corporation (USEC), the Department of Energy (DOE) transferred about 45,000 metric tons of natural uranium to USEC to, among other things, be enriched to fulfill USEC's nuclear fuel contracts. About 9,550 metric tons were subsequently discovered to be contaminated with technetium, a radioactive metal, at levels exceeding the specification for nuclear fuel. Although DOE has not admitted liability, DOE and USEC have entered into agreements under which USEC is decontaminating the uranium. DOE has compensated USEC for its decontamination costs in several ways, including using proceeds from sales of government-owned clean uranium. GAO was asked to examine (1) USEC's progress in decontaminating uranium and (2) DOE's oversight of USEC's decontamination activities. A forthcoming GAO legal opinion will address DOE's legal authority to transfer clean uranium to USEC for sale and use the proceeds to compensate USEC for its decontamination services.

What GAO Found

As of February 28, 2006, USEC reported that about 10 percent of the contaminated uranium that DOE transferred to the corporation prior to privatization remains to be decontaminated, or about 960 metric tons of the 9,550 contaminated metric tons transferred. DOE estimates USEC will finish decontaminating this uranium by the end of December 2006. Through the end of February 2006, USEC has invoiced DOE for a total of about $152 million in decontamination costs. DOE takes several steps to oversee USEC's uranium decontamination activities. DOE reviews monthly USEC reports that detail, among other things, the corporation's decontamination progress and costs. In addition, DOE, through the Defense Contract Audit Agency (DCAA), audits USEC to verify that USEC's actual costs match the amount DOE paid to the corporation and are in accordance with the provisions of the uranium decontamination agreement. However, DOE has had difficulties completing some of its oversight because of USEC's delays in providing financial data and other information. DOE officials told us that USEC sometimes takes up to 6 months before responding to its inquiries about the corporation's monthly reports. As a result, DOE has some concerns about whether USEC consistently conducts decontamination work in a cost-effective manner. DCAA has also experienced significant delays obtaining USEC financial data that it requires for its annual audit of USEC's costs. DOE uses these data to verify that USEC's actual decontamination costs match what DOE paid USEC. Until DCAA's audits are complete, DOE cannot be certain whether the compensation it provided to USEC matches USEC's actual decontamination costs. As a result, USEC may need to repay money to the government or DOE may owe additional money to USEC upon completion of these audits. In addition, the Congress has not received information to assist in the appropriations process on the progress and costs of decontamination.