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| <p><strong>Testimony of John R. Longenecker</strong></p> |
| <p><strong>Longenecker & Associates, Inc.</strong></p> |
| <p><strong>Management Consultants</strong></p> |
| <p><strong>United States Senate</strong></p> |
| <p><strong>Committee on Energy and Natural Resources</strong></p> |
| <p><strong>Hearing on Uranium Enrichment D&D Fund</strong></p> |
| <p><strong>November 15, 2007</strong></p> |
| <p>Mr. Chairman, thank you for the opportunity to appear today to present my views on the Uranium Enrichment D&D Fund. The United States has an overarching need for a comprehensive strategy for how to maintain viable, competitive nuclear fuel cycle companies in this country for the decades ahead. Addressing nuclear fuel cycle issues is a key element in allowing the US to continue to rely on nuclear power in the future. Over the past several years DOE has been working to put in place the policy and technology base for a sustainable, competitive domestic nuclear fuel industry for the future. </p> |
| <p>A healthy US uranium enrichment business is a key part of a sustainable domestic nuclear fuel industry. It’s troubling that today the US imports a higher percentage of its uranium enrichment services for nuclear fuel than it does crude oil. However, it’s gratifying to see that there are multiple efforts underway to construct new uranium enrichment capacity in the US.</p> |
| <p>The issue of how to decommission and decontaminate the existing GDPs is also vitally important. GDP D&D is an important issue to those who reside in the vicinity of the three US GDP sites, the nuclear industry, electric ratepayers, and the federal government. </p> |
| <p>There is no question that the GDPs sites must be remediated, and DOE is working to define the most effective approach to that task. However, there are significant public policy questions regarding how to pay for the GDP D&D.</p> |
| <p>I strongly believe that the US government should be liable for all future costs of GDP D&D, just as they were prior to the enactment of this provision in 1992. The US government can secure all of the funds required for GDP D&D by selling in a controlled manner its excess inventories of HEU and other forms of uranium, including high assay tails, material previously considered as waste. </p> |
| <p>US HEU was generated by the GDPs as part of the nation’s defense effort under programs that were paid for by all taxpayers. It seems reasonable public policy to recover the value of this material, and to use the proceeds for a range of DOE and other programs that have broad public benefit, such as GDP D&D. </p> |
| <p>There is a strong factual base that US utilities were not responsible for the radioactive contamination of the gaseous diffusion plants. Essentially all of the contamination at the three GDP sites occurred during the first 15-20 years of operation, during which time these plants were devoted solely to generating enriched uranium for US military needs. When the GDPs began operating for commercial fuel enrichment in the late 1960’s, the three GDPs were already highly contaminated. When DOE managed the GDPs for commercial enrichment operations, its pricing structure was developed to include all program costs, including the eventual D&D of the GDPs. </p> |
| <p>USEC’s GDP lease, that was approved in 1993, reflects this fact, with USEC having no GDP D&D liability for either the Portsmouth or Paducah GDPs. As a commercial enterprise, USEC has the liability for any depleted uranium that it generates, and for new facilities that it constructs like the Advanced Centrifuge Plant. It seems to me that this definition of D&D liability is fair and equitable, and also should extend to the US utilities that purchased enrichment services produced by the GDPs in the past.</p> |
| <p>Despite this, over the past 15 years, utilities were assessed more than $2.5 billion for GDP D&D, as well as uranium and thorium mill tailing remediation costs. </p> |
| <p>Extension of the current tax on utilities that operate nuclear power plants to fund future D&D activities could place added pressures on USEC and other evolving US uranium enrichment businesses that are already under strong competitive pressures. </p> |
| <p>Taxes like this lead utilities to be concerned about future assessments to generate funds for US government programs, and are just one additional factor encouraging US utilities to buy enrichment services from foreign suppliers. Since this provision was enacted in 1992, USEC’s share of the US SWU market has decreased from more than 80% to about 45% in 2006. Even more striking, this reduction in market share occurred in the face of trade sanctions imposed against foreign competitors.</p> |
| <p>Also, of the SWU delivered to US utilities today, an overwhelming majority is obtained by USEC from Russia under the Megatons to Megawatts program, which downblends weapons grade uranium for commercial use. The Russian government agreed to downblend 500 MT of its HEU inventories in 1993 and this program has had significant non proliferation benefits. </p> |
| <p>But, the US now is very dependent on these supplies from Russia, and deliveries are scheduled to terminate in six years.</p> |
| <p>Based on the success of the Russian HEU downblending program, it seems that there is an obvious and equitable source for funding future GDP D&D – namely, the downblending and sale in a controlled manner of a portion of the excess inventories of US HEU and other forms of uranium. This HEU was produced by the US GDPs, and can be used to fund their clean up, to provide supply security for new nuclear power plants in the US, as a key part of US non proliferation policy, and to help stabilize future nuclear fuel prices.. This approach is particularly attractive given the increase in uranium and enrichment prices. </p> |
| <p>The quantities to be sold, the timing, and the sales process must be carefully developed to assure that a healthy domestic nuclear fuel cycle industry continues in the future. Since the existence of large government inventories of HEU and other forms of uranium will always be a concern impacting future investment in the commercial nuclear fuel cycle industry, a firm disposition plan and schedule are essential.</p> |
| <p><strong>Summary</strong></p> |
| <p>In summary, I believe that the US government should be liable for all future costs of GDP D&D as it was prior to the enactment of this provision in 1992. US utility payments over the past 15 years of approximately $2.66 billion more than satisfy the desire for industry to make an equitable contribution to GDP D&D in the public interest.</p> |
| <p>The US government can secure all of the funds required for GDP D&D by selling in a controlled manner its excess inventories of HEU and other forms of uranium. US HEU was generated by the GDPs as part of the nation’s defense effort, and was paid for by all taxpayers. Its seems reasonable public policy to recover the value of this material and to use the proceeds for a range of programs that have broad public benefit. </p> |
| <p>Thank you for your attention.</p> |
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