USEC Inc. applauds the efforts by the U.S. Department of Energy (DOE) to manage its vast inventory of uranium products in a manner that achieves the most productive outcomes for the American public and the domestic nuclear industry.

The department’s inventory of uranium is a valuable national resource that needs to be responsibly managed in order to ensure the continued growth of nuclear power in the United States. Responsible management of this inventory will allow the department to support nuclear power’s domestic growth in a way that leads not only to new nuclear reactors being constructed but also to a stronger, more diverse domestic nuclear fuel industry of miners, converters, enrichers and fabricators. This will reduce our dependence on foreign suppliers at a time when our nation’s economy is becoming more reliant on, and therefore vulnerable to, foreign energy sources.

The recent policy statement signed by Secretary Bodman is a reiteration of DOE’s long-standing policy to ensure that sales of government-owned uranium stockpiles are made in a controlled manner that does not disrupt the existing supply chain. We believe the policy will benefit all stakeholders: the taxpayers, the expanding U.S. nuclear power fleet, the domestic nuclear fuel industry and the department’s internal needs for completing its programmatic objectives. However, implementation details need to be further refined and publicly stated for the benefit of the nuclear fuel market and to assure transparency in the process for all stakeholders.

While DOE has substantial inventories of non-commercial forms of uranium that need to be processed, an important near-term goal for the department should be the re-enrichment of its high-assay depleted uranium “tails” to levels of natural uranium or low enriched uranium. DOE has identified this waste material as a potential resource but has not identified any near-term actions to take advantage of current market conditions that make the re-enrichment program a valuable proposition.

One near term action where the U.S. Government can achieve several beneficial outcomes would be for DOE to take advantage of the opportunity to begin re-enrichment of its high-assay tails at the Paducah Gaseous Diffusion Plant as soon as possible.

An earlier assessment by USEC indicated that a four-year program (2008-2012) at the Paducah plant for re-enriching a portion of the high-assay tails could create a net value of $1 billion to the U.S. Treasury. Finalizing such a program in the next few months could achieve revenues for the U.S. government as early as 2009. A more extensive program to re-enrich most of DOE’s high-assay tails between 2012 and 2021 at Paducah could yield a net value of nearly $7 billion to the U.S. Treasury. The Government Accountability Office’s recent analysis appears to reach conclusions similar to USEC’s. Prices of $200 to $250 a kilogram for uranium were used in these analyses. The spot price of uranium peaked at more than $300 a kilogram in July of 2007 and is now closer to $200 a kilogram. Further delays in implementing the re-enrichment program could result in further erosion of potential financial benefits.

In addition to the near-term economic value realized, an extended tails re-enrichment program could continue the operations of the Paducah plant past its potential shutdown in 2012. This would provide the country with extra potential enrichment capacity to meet any supply shortfalls, enhancing our energy security at a time that new reactors are expected to be built. Utilizing the plant for a prolonged program would provide continued employment to a uniquely talented workforce in Kentucky and would support a community that has been a faithful contributor to the nation’s defense and nuclear power enrichment needs for more than 50 years.

The communities around the Paducah and Portsmouth Gaseous Diffusion Plants would also benefit from a reduction of the volume of waste materials stored at the sites and a potential new source of funding for the eventual cleanup of these facilities.

Another beneficiary would be the U.S. nuclear power industry, which would have a new source of uranium available to the market almost immediately. The recovered uranium could also be used for first cores for new reactors, as part of a nuclear fuel bank as envisioned under GNEP or to meet demand from U.S. utilities in the event of a supply disruption in the commercial market through the creation of a Strategic Uranium Reserve.

DOE and the U.S. taxpayers would also benefit immediately through the reduction in long-term liabilities for the storage, deconversion and disposal of the usable uranium extracted from the tails material. Re-enrichment reduces DOE’s liability by 20 percent for each kilogram of tails processed. That could reduce DOE’s liabilities by $500 million if all of the tails were eventually re-enriched. Add in the reduced costs for storage, cylinder maintenance and security for this liability and the benefits would compound over time.

At a time when the Congress faces severe budget challenges, the U.S. government and Congress should not pass up this timely chance to implement a simple, cost-effective plan to re-enrich DOE’s high-assay tails that can create value from a current waste by generating revenues and reducing liabilities for the U.S. taxpayer, while providing a much needed source of uranium to fuel our nation’s fleet of emissions-free nuclear power plants.

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