Management Controls over the Department of Energy's Uranium Leasing Program, OAS-M-08-05

The Department of Energy's Uranium Leasing Program was established by the Atomic
Energy Act of 1954 to develop a supply of domestic uranium to meet the nation's defense
needs. Pursuant to the Act, the Program leases tracts of land to private sector entities for
the purpose of mining uranium ore. According to Department officials, one purpose of
the Program is to obtain a fair monetary return to the Government. The Program is
administered by the Department's Office of Legacy Management through a contractor.
The uranium leases issued by the Department include two types of royalty payments: an
annual royalty and a production royalty. The annual royalty is a flat rate and is paid to
the Department whether production has occurred or not. The production royalty is based
on a calculation of the value of the uranium ore that was produced by the mine.
The Department leased tracts of Federal land located in southwestern Colorado to various
private sector companies. The most recent 1 O-year lease period was from 1996 to 2006,
during which time the Department leased 13 active tracts of land. Industry interest in
production recently increased due to higher uranium prices. Accordingly, in July 2007,
the Department issued a final Programmatic Environmental Assessment on the upcoming
1 O-year lease period, in which it selected an "Expanded Alternative" that will result in the
activation of 38 tracts of land. If production occurred on all 38 tracts, the Department
estimated royalties could total $1 8 million a year. Since the Department is planning to
issue new leases with the potential for increased royalties stemming from the Program's
upcoming expansion, we initiated this audit to determine if the Department was
effectively administering its Uranium Leasing Program.