15. ENVIRONMENTAL COMPLIANCE

Environmental compliance costs include the handling, treatment and disposal of hazardous substances and wastes. Pursuant to the USEC Privatization Act, environmental liabilities associated with the Paducah GDP prior to July 28, 1998 are the responsibility of the U.S. government.

Depleted Uranium

USEC stores depleted uranium generated from its operations at the Paducah GDP and accrues estimated costs for its future disposition. At December 31, 2011, the liability for depleted uranium disposition was $145.2 million. Under federal law, USEC has the option to send its depleted uranium to DOE for disposition but will continue to explore alternatives. DOE has constructed facilities at the Paducah and Portsmouth sites to process large quantities of depleted uranium owned by DOE. If USEC were to dispose of its depleted uranium with DOE, it would be required to reimburse DOE for the related costs, including USEC's pro rata share of DOE's capital costs. Processing DOE's depleted uranium is expected to take about 25 years. The method and timing of the disposal of USEC's depleted uranium has not been determined. DOE has taken from USEC the disposal obligation for specific quantities of depleted uranium in past years, most recently through a cooperative agreement signed in March 2010 that provided for pro-rata cost sharing support for the funding of certain American Centrifuge activities in 2010 and through the March 13, 2012 agreement we entered into with DOE in which DOE accepted the disposal obligation for a specific quantity of depleted uranium in exchange for our transfer to DOE of title to LEU.

The long-term liability for depleted uranium disposition is dependent upon the volume of depleted uranium that USEC generates, projected methods of disposition and estimated disposition costs. USEC's estimate of processing, transportation and disposal costs are based primarily on estimated cost data obtained from DOE without consideration given to contingencies or reserves. Compliance with NRC regulations requires that USEC provide financial assurance regarding the cost of the eventual disposition of USEC's depleted uranium and stored wastes. USEC's estimate of the unit disposition cost for accrual purposes is approximately 30% less than the unit disposition cost for financial assurance purposes, which includes contingencies and other potential costs as required by the NRC. The financial assurance requirement is based on the quantity of depleted uranium at year-end plus expected depleted uranium to be generated over the following year. Since USEC is evaluating whether to extend Paducah GDP production beyond May 2012, the financial assurance in place as of December 31, 2011 is based on depleted uranium expected to be generated through May 2012. At December 31, 2011, financial assurance of $233.1 million in the form of surety bonds was in place for 2012, and is principally associated with the disposition of depleted uranium. Cash collateral deposits associated with these surety bonds, including interest earned, were $138.1 million at December 31, 2011.

USEC's estimated cost and accrued liability for depleted uranium disposition as well as financial assurance USEC provides for the disposition of depleted uranium are subject to change as additional information becomes available.

Stored Wastes

USEC's operations generate hazardous, low-level radioactive and mixed wastes. The storage, treatment, and disposal of wastes are regulated by federal and state laws. USEC utilizes offsite treatment and disposal facilities and stores wastes at the Paducah site pursuant to permits, orders and agreements with DOE and state agencies. Liabilities accrued for the treatment and disposal of stored wastes generated by USEC's operations, included in accounts payable and accrued liabilities, amounted to $2.1 million at December 31, 2011 and $2.0 million at December 31, 2010.

GDP Lease Turnover

Under the GDP lease agreement with DOE, ownership of capital improvements that USEC leaves behind as well as responsibility for decontamination and decommissioning ("D&D") transfers to DOE. The turnover requirements of the lease require USEC to remove certain uranium and USEC-generated waste and place the property in a safe shutdown condition. Accrued liabilities for lease turnover costs related to the Paducah GDP, included in other long-term liabilities, were $42.6 million at December 31, 2011 and $41.2 million at December 31, 2010.

USEC ceased uranium enrichment at the Portsmouth GDP in 2001. Over the past decade, USEC maintained the Portsmouth site and performed services under contract with DOE. On September 30, 2011, USEC completed the transition of Portsmouth site facilities to DOE. As part of the transition, at USEC's request, the NRC terminated our certificate of compliance for the Portsmouth site. In connection with the return of facilities, DOE agreed to accept ownership of all nuclear material at the site, some of which required processing for waste disposal. USEC agreed to pay DOE its cost of disposing of such wastes which was estimated to be $7.8 million and is included in accounts payable and accrued liabilities at December 31, 2011. Accrued liabilities for lease turnover costs related to the Portsmouth site, included in accounts payable and accrued liabilities, were $10.5 million at December 31, 2010.

American Centrifuge Decontamination and Decommissioning

Financial Assurance

USEC leases facilities in Piketon, Ohio from DOE for the American Centrifuge Plant. At the conclusion of the lease, USEC is obligated to return these leased facilities to DOE in a condition that meets NRC requirements and in the same condition as the facilities were in when they were leased to USEC (other than due to normal wear and tear). USEC owns all capital improvements at the ACP and, unless otherwise consented to by DOE, must remove them by the conclusion of the lease term. USEC is required to provide financial assurance to the NRC incrementally based on facility construction progress, centrifuge installation and decommissioning cost projections. USEC is also required to provide financial assurance to DOE in an amount equal to its current estimate of costs to comply with lease turnover requirements, less the amount of financial assurance required of USEC by the NRC for decontamination and decommissioning ("D&D").

As of December 31, 2011, USEC has provided financial assurance to the NRC and DOE in the form of surety bonds totaling $22.2 million. The surety bonds are partially collateralized with interest-earning cash deposits of $13.2 million at December 31, 2011. The amount of financial assurance has remained unchanged since the end of 2009, following USEC's decision to significantly reduce machine manufacturing and construction activities due to project funding uncertainty. When construction is resumed, the financial assurance requirements will increase each year commensurate with the status of facility construction and operations. As part of USEC's license to operate the ACP, USEC provides the NRC with a projection of the total D&D cost. The total D&D cost related to the NRC and the incremental lease turnover cost related to DOE is uncertain at this time and is dependent on many factors including the size of the plant. Financial assurance will also be required for the disposition of depleted uranium generated from future commercial centrifuge operations.

Asset Retirement Obligations

D&D requirements for the ACP create asset retirement obligations (see accounting policies in Note 1). Changes in USEC's asset retirement obligation ("ARO") balances since December 31, 2008 follow (in millions):


	ARO Liability		ARO Asset
Balance at December 31, 2008	$	13.7	$	13.0
Additional retirement obligation		6.3		6.3
Accretion		1.3
Balance at December 31, 2009	$	21.3	$	19.3
Additional retirement obligation		-		-
Accretion		1.3
Balance at December 31, 2010	$	22.6	$	19.3
Additional retirement obligation		-		-
Accretion		-
Balance at December 31, 2011	$	22.6	$	19.3

The capitalization of additional asset retirement obligations based on construction progress has been suspended since the third quarter of 2009, when USEC significantly reduced machine manufacturing and construction activities due to project funding uncertainty. At the end of 2010, USEC reassessed the long-term liability and determined that the current fair value of the obligation was accrued at a sufficient amount based on construction progress and no further increase would be made until additional commercial plant deployment resumed.