Kenneth Fletcher
WC Monitor
10/31/2014

The Department of Energy is paying the vast majority of surveillance and maintenance costs for former commercial uranium mill sites that are supposed to be covered by fees charged to the mill operators, the DOE Inspector General ‘s Office said in a report released this week. The “Title II” uranium mill tailings sites are cleaned up by the commercial operators and then handed over to DOE’s Office of Legacy Management for long-term management using a surveillance charge assessed to the operator. Between Fiscal Years 2010 and 2012, DOE spent $4.25 million on the Title II sites, but only received $148,000 in surveillance charges, according to the IG. LM currently manages six sites, but it plans to eventually cover the remaining 21 sites slated for closure. In the period covered by the report, DOE also spent $1.1 million for pre-transfer activities for other sites that at this point are not covered by the mill operators.

The surveillance charge is assessed to the mill operators by the Nuclear Regulatory Commission, though DOE ultimately ends up managing the sites. The fee cannot be increased for sites that have already been handed over to the government. “While we recognize this, we believe that the inadequacy of the surveillance charges to cover incurred costs at the six sites provides valuable lessons learned for ensuring that assessments are sufficient to produce the revenue necessary to cover site surveillance and maintenance at future closure sites,” the IG report states

NRC: DOE Must Submit Formal Cost Proposals

DOE and the NRC are currently in talks about how to assess the fee moving forward, with LM becoming “more engaged” on the topic, according to the IG. “Legacy Management has provided certain unit cost estimates to the Commission and asserts it has obtained a verbal agreement from the Commission on the acceptability of its hourly labor rates and certain other labor costs. However, Commission officials told us that it cannot take action to accept proposed rates and overall cost estimates until Legacy Management formally submits its cost proposals to the Commission,” the report states.

While LM believes it has done everything possible to resolve the issues, the NRC still has questions about its estimates, according to the report. “Further, the Commission stated they are even more concerned with the large overhead costs the Department incurs through the use of contractors to manage its sites, their ability to justify these costs to the specific licensees and their ability to defend high contract awards and general and administrative fees should the surveillance charge be judicially challenged,” the report states. “According to Commission officials, Legacy Management needs to justify these costs in writing and provide sufficient detail to allow the Commission to make a defensible decision.”

DOE also has not included pre-transfer costs in the surveillance charge, though the NRC agrees that pre-transfer activities are necessary and LM guidance includes such activities two years before transfer. “Despite this agreement, there is currently no provision in the rules for these costs to be part of the surveillance charge calculation and modification of governing legislation will likely be required before such costs can be included. According to the Commission, Legacy Management can include pre-transfer costs in its surveillance charge estimates,” the report states.

Shortfall to Increase by $10 Million by FY 2020

The IG had several suggestions for DOE as it continues to work with the NRC on the issue. DOE should provide the NRC “sufficient detail, rationale and justification to clearly demonstrate the nexus to radiological health and safety for all costs and activities, including pre-transfer costs,” and also re-evaluate whether it is necessary to incur costs “that do not have a justifiable nexus to radiological health and safety,” according to the report. It adds, “While we recognize that excess costs cannot be recovered from the owners of the six closed sites, we estimate that the shortfall in revenues relative to costs at the six sites currently in Legacy Management custody will increase by nearly $10 million by FY 2020. In addition, Legacy Management anticipates spending another $3.1 million by FY 2020 for its pre-transfer work that will not be covered by revenues.” DOE and the NRC declined to comment on the report.