B-307137, Department of Energy--December 2004 Agreement with the United States Enrichment Corporation, July 12, 2006

B-307137 Jul 12, 2006 Jump To VIEW DECISION DOWNLOADS RELATED PAGES GAO CONTACTS Highlights Section 3112(b) of the USEC Privatization Act of 1996, Pub. L. No. 104-134, 110 Stat. 1321-335, 1321-344 (Apr. 26, 1996), 42 U.S.C. sect. 2297h-10(b), authorized the Department of Energy (DOE) to transfer to the United States Enrichment Corporation (USEC) Russian-origin uranium so that USEC could sell the uranium on DOE's behalf for consumption by domestic end users, as provided for in a December 2004 agreement between DOE and USEC. DOE violated 31 U.S.C. sect. 3302(b), the miscellaneous receipts statute, and augmented its appropriations when it authorized USEC to hold, invest, and use the proceeds from public sales of government-owned uranium to compensate USEC for costs it incurred in decontaminating uranium on behalf of DOE, prior to enactment in November 2005 of specific statutory authority exempting the proceeds of those uranium sales from the miscellaneous receipts statute. View Decision B-307137, Department of Energy--December 2004 Agreement with the United States Enrichment Corporation, July 12, 2006 B-307137 July 12, 2006 The Honorable Pete V. Domenici Chairman, Committee on Energy and Natural Resources United States Senate Subject: Department of Energy—December 2004 Agreement with the United States Enrichment Corporation Dear Mr. Chairman: This responds to the Committee's request for a legal opinion regarding what has been referred to as a –barter arrangement— between the Department of Energy (DOE) and the United States Enrichment Corporation (USEC) under a December 10, 2004 Agreement.[1] As agreed with your staff, this letter addresses two principal legal issues: (1) whether DOE had authority to enter into the December 2004 Agreement; and (2) whether DOE had authority to use proceeds from USEC's sale of DOE uranium under the Agreement. As discussed below, on the first issue, we conclude that DOE was authorized to enter into the December 2004 Agreement by section 3112(b)(2)(D) of the USEC Privatization Act of 1996, 42 U.S.C. sect. 2297h-10(b)(2)(D). As required by that provision, DOE sold and received payment for Russian-origin uranium to be consumed by domestic end users, and DOE's failure to act within statutory deadlines did not terminate its authority. On the second issue, we conclude that DOE's actions violated the requirements of 31 U.S.C. sect. 3302(b), the miscellaneous receipts statute. When DOE directed USEC to receive, retain, and use proceeds from the sale of government-owned uranium to compensate USEC for expenses it incurred on behalf of the department, DOE improperly augmented its appropriations by $62 million. To resolve its improper use of sales proceeds, DOE should either seek and obtain congressional ratification of its use of the proceeds or adjust its accounts by transferring $62 million from its appropriation to the miscellaneous receipts of the Treasury. If DOE lacks sufficient budget authority to cover the adjustment, it should report a violation of the Antideficiency Act[2] in accordance with 31 U.S.C. sect. 1351.[3] BACKGROUND The Energy Policy Act of 1992 created USEC as a wholly owned government corporation to perform all uranium enrichment services for commercial purposes in the United States, services that DOE had previously provided.[4] Between 1993 and 1998, in preparation for USEC's eventual conversion to a private corporation, DOE transferred a total of approximately 45,000 metric tons of uranium (MTU) to USEC to help sustain it as a viable private enterprise. See 42 U.S.C. sect. 2297h-2(b); GAO, Nuclear Nonproliferation: Implications of the U.S. Purchase of Russian Highly Enriched Uranium, GAO-01-148 (Washington, D.C.: Dec. 15, 2000), at 34. The USEC Privatization Act of 1996 provided for sale of USEC to the private sector, and this process was completed in July 1998.[5] In early 2001, USEC notified DOE that up to 9,550 MTU that DOE had transferred to it was potentially contaminated with technetium[6] and claimed that DOE was liable for damages arising from this transfer.[7] To resolve its claim, USEC asked DOE to replace USEC's contaminated uranium with uncontaminated, or –clean,— uranium. Id.DOE did not admit liability but for a variety of reasons entered into a series of agreements with USEC starting in June 2002.[8] The agreements provided that DOE would either replace the contaminated uranium with clean uranium or compensate USEC in some way for decontaminating the uranium; in return, USEC would –release the United States from any and all liability and claims— with respect to a pro rata portion of the contaminated uranium.[9] The agreements also contained provisions helping to ensure continuation of a U.S.