Report: Government violated laws to prop up struggling U.S. uranium enrichment firm USEC

Correction: An earlier version of this article referred to the Government Accountability Office as the General Accountability Office.

The Energy Department, in an effort to prop up a troubled uranium enrichment company, arranged for uranium transfers that failed to comply with laws about fair pricing, national security determinations and limits to prevent the department from flooding the domestic uranium market, the Government Accountability Office said in a report released to the public Monday.

The company, USEC, ceased enrichment activities in May 2013 and declared bankruptcy in March 2014, battered by weak demand from nuclear plants, its outdated enrichment facility in Kentucky and a shortage of capital to invest in new technology and a plant in Ohio.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 with operating cash. The GAO said that the Energy Department sometimes put a value on uranium transfers — known as tailings — taken from its vast stockpile while other times treating them as worthless or even an environmental liability, the report said.

It said that the department transferred enriched uranium from USEC in March 2012 for what it said were national security reasons, then transferred it back to USEC in March 2013 without obtaining a needed presidential determination.

“Our government has kept this uranium company on life support, wasting money and flouting the law, even though it was clear that it would end up in bankruptcy,” said Sen. Edward J. Markey (D-Mass.), who sits on the Senate Environment and Public Works Committee and who requested the study with Rep. Michael C. Burgess (R-Tex.). “This is the kind of government waste that Americans just don’t understand. It’s time to commit this junk technology to the junk bin.”

The Energy Department disputed the report’s findings, the GAO said.

The Obama administration has paid special attention to USEC because of the company’s unusual history — as well as the location of its plants in key political swing states. From the 1940s, the federal government supplied enriched uranium to military and commercial users. In 1992, USEC was established as a government corporation. In 1998, it was privatized by an act of Congress, and it leased the 60-year-old gaseous diffusion technology in Paducah, Ky., from the Energy Department.

But the company has struggled. Its Paducah plant consumes as much electricity as the city of Memphis, and work on its new American Centrifuge technology at a plant in Ohio has stalled.

The entire Ohio congressional delegation and the Energy Department have defended USEC, saying it provides jobs and that it is needed as the only American-owned enrichment company to supply material to make tritium for U.S. weapons. Many experts dispute this, saying that the military has enough tritium to last a couple of decades.

USEC closed at $3.41 a share Friday, less than 1 percent of its May 2007 peak. The company is valued at $17 million.

The GAO report said that the Energy Department had failed to obtain a presidential order before selling part of its uranium inventory, thus violating the Atomic Energy Act of 1954.

The report also says that the Energy Department violated a guideline that it not sell from its stockpiles uranium equal to more than 10 percent of annual domestic nuclear fuel requirements, so that the federal government does not hurt the private uranium mining industry.

Steven Mufson covers energy and other financial news.
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