US Department of Energy officials did not have legal authority to transfer millions of dollars worth of uranium resources to the only local company that uses American-developed technology to enrich the commodity, a report by the Government Accountability Office (GAO) revealed Monday.
The company, United States Enrichment Corp. (USEC), stopped enrichment activities in May last year, declaring bankruptcy in March, as a result of weak demand from nuclear plants, its outdated enrichment facility in Kentucky and a shortage of capital to invest in new technology and a plant in Ohio.
The GAO examined four transfers of uranium by the Energy Department in 2012 and 2013 that indirectly provided USEC (NYSE:USU) with operating cash.
The above is possible because the Energy Department sometimes puts a value on uranium transfers — known as tailings — taken from its vast stockpile while other times treats them as worthless or even an environmental liability, according to the report.
"For the largest transaction — DOE's transfer of tails to a third party for re-enrichment — GAO believes that DOE likely did not have authority to transfer tails under restrictions imposed by the USEC Privatization Act," GAO says.
Energy Department officials disputed GAO, claiming sufficient authority under the Atomic Energy Act to conduct the transfer.
But the congressional watchdog countered, noting that "even if DOE had such authority … it did not meet the act's requirement to charge a price for the [uranium] because it transferred them without charging any price at all."
In another of the four transactions, the accountability office report notes the Energy Department transferred ownership of uranium "that it previously obtained to meet national security needs, without obtaining a presidential determination that the uranium material was no longer necessary for national security needs."
The GAO also questions whether the Energy Department knows if the actual value of the uranium assets involved in the four transfers.
The Obama administration has paid special attention to USEC because of the firm’s unusual history — as well as the location of its plants in key political swing states, as The Washington Post reported in January 2012.
The US government began supplying enriched uranium to military and commercial users in the 1940s. By 1992, it had established the USEC, which was privatized six years later.
Image courtesy of the US Department of Energy.