Vol. 80 Thursday, 

No. 88 May 7, 2015 

Part III 

Department of Energy 

Excess Uranium Management: Secretarial Determination of No Adverse 

Impact on the Domestic Uranium Mining, Conversion, and Enrichment 

Industries; Notice 

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26366 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

DEPARTMENT OF ENERGY 

Excess Uranium Management: 

Secretarial Determination of No 

Adverse Impact on the Domestic 

Uranium Mining, Conversion, and 

Enrichment Industries 

AGENCY: Office of Nuclear Energy, 

Department of Energy. 

ACTION: Notice. 

SUMMARY: On May 1, 2015, the Secretary 

of Energy issued a determination 

(‘‘Secretarial Determination’’) covering 

continued transfers of uranium for 

cleanup services at the Portsmouth 

Gaseous Diffusion Plant and for downblending of highly-enriched uranium to 

low-enriched uranium. The Secretarial 

Determination covers transfers of up to 

the equivalent of 2,500 metric tons of 

natural uranium (‘‘MTU’’) per year in 

2015 and up to the equivalent of 2,100 

MTU in each year thereafter. For the 

reasons set forth in the Department’s 

‘‘Analysis of Potential Impacts of 

Uranium Transfers on the Domestic 

Uranium Mining, Conversion, and 

Enrichment Industries,’’ which is 

incorporated into the determination, the 

Secretary determined that these 

transfers will not have an adverse 

material impact on the domestic 

uranium mining, conversion, or 

enrichment industry. 

DATES: Effective May 1, 2015. 

ADDRESSES: The 2015 Secretarial 

Determination and supporting 

documents are available on the 

Department’s Web site at http://

www.energy.gov/ne/downloads/2015- 

secretarial-determination. 

FOR FURTHER INFORMATION CONTACT: Mr. 

David Henderson, U.S. Department of 

Energy, Office of Nuclear Energy, 

Mailstop NE–52, 19901 Germantown 

Rd., Germantown, MD 20874–1290. 

Phone: (301) 903–2590. Email: 

David.Henderson@Nuclear.Energy.Gov. 

SUPPLEMENTARY INFORMATION: The 

Department of Energy (DOE) holds 

inventories of uranium in various forms 

and quantities—including low-enriched 

uranium (LEU) and natural uranium— 

that have been declared as excess and 

are not dedicated to U.S. national 

security missions. Within DOE, the 

Office of Nuclear Energy (NE), the Office 

of Environmental Management (EM), 

and the National Nuclear Security 

Administration (NNSA) coordinate the 

management of these excess uranium 

inventories. Much of this excess 

uranium has substantial economic value 

on the open market. One tool that DOE 

has used to manage its excess uranium 

inventory has been to enter into 

transactions in which DOE exchanges 

excess uranium for services. This notice 

involves uranium transfers of this type 

under two separate programs. 

Specifically, DOE transfers uranium in 

exchange for cleanup services at the 

Portsmouth Gaseous Diffusion Plant and 

for down-blending of highly-enriched 

uranium to LEU. 

These transfers are conducted in 

accordance with the Atomic Energy Act 

of 1954 (42 U.S.C. 2011 et seq., ‘‘AEA’’) 

and other applicable law. Specifically, 

Title I, Chapters 6–7, 14, of the AEA 

authorize DOE to transfer special 

nuclear material and source material. 

LEU and natural uranium are types of 

special nuclear material and source 

material, respectively. The USEC 

Privatization Act (Pub. L. 104–134, 42 

U.S.C. 2297h et seq.) places certain 

limitations on DOE’s authority to 

transfer uranium from its excess 

uranium inventory. Specifically, under 

section 3112(d)(2) of the USEC 

Privatization Act (42 U.S.C. 2297h– 

10(d)(2)), the Secretary must determine 

that the transfers ‘‘will not have an 

adverse material impact on the domestic 

uranium mining, conversion or 

enrichment industry, taking into 

account the sales of uranium under the 

Russian Highly Enriched Uranium 

Agreement and the Suspension 

Agreement’’ before DOE makes certain 

transfers of natural or low-enriched 

uranium under the AEA. 

On May 1, 2015, the Secretary of 

Energy determined that continued 

uranium transfers for cleanup services 

at Portsmouth and down-blending 

services will not have an adverse 

material impact on the domestic 

uranium mining, conversion, or 

enrichment industry (‘‘2015 Secretarial 

Determination’’). This determination 

covers transfers of up to the equivalent 

of 2,500 metric tons of natural uranium 

(‘‘MTU’’) per year in 2015 and up to the 

equivalent of 2,100 MTU in each year 

thereafter. The Secretary based his 

conclusion on the Department’s 

‘‘Analysis of Potential Impacts of 

Uranium Transfers on the Domestic 

Uranium Mining, Conversion, and 

Enrichment Industries,’’ which is 

incorporated into the determination. 

The Secretary considered, inter alia, the 

requirements of the USEC Privatization 

Act of 1996 (42 U.S.C. 2297h et seq.), 

the nature of uranium markets, and the 

current status of the domestic uranium 

industries, as well as sales of uranium 

under the Russian HEU Agreement and 

the Suspension Agreement. This 

Determination replaces the previous 

determination issued in May 2014, 

which covered transfers for these two 

programs of up to the equivalent of 

2,705 MTU per year. 

The full text of the 2015 Secretarial 

Determination is set forth below. 

Issued in Washington, DC, on May 1, 2015. 

Peter B. Lyons, 

Assistant Secretary for Nuclear Energy, Office 

of Nuclear Energy. 

Set forth below is the full text of the 

Secretarial Determination. 

Secretarial Determination for the Sale 

or Transfer of Uranium 

Since May 15, 2014, the Department 

of Energy (‘‘Department,’’ ‘‘DOE’’) has 

transferred natural uranium and lowenriched uranium in specified amounts 

and transactions, subject to a 

determination I made on that date 

pursuant to § 3112(d)(2) of the USEC 

Privatization Act, 42 U.S.C. 2297h-10(d) 

(‘‘2014 Determination’’). For the reasons 

provided herein, the 2014 

Determination is replaced by the 

determination described below, and no 

further transfers pursuant to the 2014 

Determination will take place. 

The 2014 Determination covered 

transfers of up to the equivalent of 2,705 

metric tons of natural uranium (‘‘MTU’’) 

per year, in natural uranium 

hexafluoride provided to contractors for 

cleanup services at the Paducah or 

Portsmouth Gaseous Diffusion Plant and 

in low-enriched uranium transferred to 

contractors for down-blending highly 

enriched uranium. The 2014 

Determination concluded that the 

transfers it described would not have 

adverse material impacts on the 

domestic uranium industries. In issuing 

this determination to supersede the 

2014 Determination, I do not repudiate 

that conclusion or invalidate transfers 

made pursuant to the 2014 

Determination. 

However, after balancing the 

Department’s goals regarding the 

projects being partly supported by 

uranium transactions with the 

Department’s goal to help maintain 

healthy domestic nuclear industries, 

and reviewing responses to the 

Department’s solicitations for public 

input, I have concluded that the lower 

rates of uranium transfers described 

herein are appropriate in the near term. 

I have therefore determined to permit 

transfers only at the lower rates 

described below. To avoid disruption to 

the projects involved, the Department 

will continue transferring at the preexisting rates for approximately two 

months, as described below. 

Accordingly, I determine that the 

following transfers will not have an 

adverse material impact on the domestic 

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Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 26367 

mining, conversion, or enrichment 

industry: 

(1) In calendar year 2015, up to 2,000 

MTU contained in natural uranium 

hexafluoride, transferred to contractors 

for cleanup services at the Portsmouth 

Gaseous Diffusion Plant, in transfers of 

up to 600 MTU per quarter until June 

30, 2015 and up to 400 MTU per quarter 

for the remainder of 2015; and 

(2) in calendar year 2016 and 

thereafter, up to 1,600 MTU per 

calendar year contained in natural 

uranium hexafluoride, transferred to 

contractors for cleanup services at the 

Portsmouth Gaseous Diffusion Plant, in 

transfers of up to 400 MTU per quarter; 

and 

(3) in calendar year 2015 and 

thereafter, an amount of low-enriched 

uranium equivalent to up to 500 MTU 

of natural uranium per calendar year, 

transferred to contractors for downblending highly-enriched uranium to 

low-enriched uranium; 

PROVIDED THAT 

(4) in the event transfers of lowenriched uranium do not reach the 

equivalent of 500 MTU of natural 

uranium in any calendar year, transfers 

of natural uranium may exceed 400 

MTU in the fourth quarter of that 

calendar year so long as the total 

amount transferred by the Department 

does not exceed the equivalent of 2,500 

MTU of natural uranium in calendar 

year 2015 or the equivalent of 2,100 

MTU of natural uranium in a 

subsequent year. 

I base my conclusions on the 

Department’s ‘‘Analysis of Potential 

Impacts of Uranium Transfers on the 

Domestic Uranium Mining, Conversion, 

and Enrichment Industries,’’ which is 

incorporated herein. As explained in 

that document, I have considered, inter 

alia, the requirements of the USEC 

Privatization Act of 1996 (42 U.S.C. 

2297h et seq.), the nature of uranium 

markets, and the current status of the 

domestic uranium industries. I have 

also taken into account the sales of 

uranium under the Russian HEU 

Agreement and the Suspension 

Agreement. 

Date: May 1, 2015. 

Ernest J. Moniz, 

Secretary of Energy. 

Analysis of Potential Impacts of 

Uranium Transfers on the Domestic 

Uranium Mining, Conversion, and 

Enrichment Industries 

May 1, 2015 

Executive Summary 

The Department of Energy 

(‘‘Department’’ or ‘‘DOE’’) plans to 

transfer the equivalent of up to 2,100 

metric tons (‘‘MTU’’) of natural uranium 

per year (with a higher total for calendar 

year 2015, mainly because of transfers 

already executed or under way before 

today’s determination). These transfers 

would include 1,600 MTU in natural 

uranium hexafluoride transferred in 

exchange for cleanup services at the 

Portsmouth Gaseous Diffusion Plant; 

and low-enriched uranium, at an assay 

of 4.95 wt-% U–235, equivalent to 500 

MTU of natural uranium, transferred for 

services to down-blend highly enriched 

uranium. In support of a determination 

whether these transfers will have an 

adverse material impact on the domestic 

mining, conversion, or enrichment 

industry, the analysis below assesses the 

potential impacts of DOE’s transfers. It 

takes account of the transfers just 

described as well as past DOE transfers 

still affecting the markets and certain 

transfers contemplated for later years. 

For purposes of the Department’s 

determination, transfers will have an 

‘‘adverse material impact’’ when a 

reasonable forecast predicts that an 

industry will experience ‘‘material’’ 

harm that is reasonably attributable to 

the transfers. To test that attribution, the 

analysis compares the expected state of 

each industry in light of the planned 

transfers to what would happen in the 

absence of transfers. Such ‘‘but-for’’ 

analysis identifies what impacts DOE’s 

transfers can be said to cause. As a 

corollary proposition, the analysis does 

not conclude that transfers would be 

impermissible solely because an 

industry is weak. Conversely, it also 

does not regard transfers as permissible 

so long as they are not the sole or 

primary cause of an industry’s problem. 

The analysis must reflect existing 

conditions, whether prosperous or 

difficult; and the proper question is to 

what degree the effects of DOE’s 

transfers would make an industry 

weaker. 

Not every impact will be an ‘‘adverse 

material impact’’ for these purposes. In 

general, the Department regards an 

‘‘adverse material impact’’ as a harm of 

real import and great consequence, 

beyond the scale of what normal market 

fluctuations would cause. 

The analysis evaluates six factors for 

each industry: changes to prices; 

changes in production levels at existing 

facilities; changes to employment in the 

industry; changes in capital 

improvement plans; the long-term 

viability of the industry; and, as 

required by statute, sales under certain 

agreements permitting the import of 

Russian-origin uranium. The analysis 

relies on myriad inputs, including a 

study prepared for the Department by 

consultant Energy Resources 

International, Inc., market data and 

forecasts from several sources, reports 

by other market consultants, and 

additional submissions in response to 

the Department’s requests for comment. 

The uranium mining industry serves 

the market for uranium concentrates. 

DOE’s transfers, including those 

described above, constitute less than 4% 

of global demand for uranium 

concentrates. The Department forecasts, 

on the basis of consonant results from 

multiple economic models that these 

transfers will tend to suppress prices 

(on average over a 10 year period) by 

about $2.70 per pound. While this price 

effect will decrease producers’ revenues, 

the near-term impact will be smaller 

because most producers primarily sell 

on long-term contracts and therefore 

have limited exposure to price 

fluctuations. The impact on production 

and employment in the industry will 

also be limited. As prices increase over 

the coming decade, there appears to be 

little domestic production for which 

DOE’s transfers would make the 

difference between expansion and 

contraction. In the long-term, the 

Department concludes that the effect of 

its transfers would delay decisions to 

expand or increase production capacity 

but would not change the eventual 

outcomes. 

The uranium conversion industry 

processes uranium concentrates into 

uranium hexafluoride suitable for 

enrichment. Most conversion is sold on 

long-term contracts, and the sole 

domestic converter makes essentially all 

its sales that way. The distinctive 

feature of the conversion market is that 

the price for long-term contracts appears 

not to be the product of ordinary market 

forces. It has been stable for five years 

despite market changes that have caused 

the prices for uranium and enrichment 

to change by 50% or more, and despite 

the fact that none of the major 

converters in Western countries is 

producing at full capacity. These 

conditions arise in part because 

conversion is a key step in the nuclear 

fuel cycle, but one that makes up fairly 

little of the overall price of uranium 

fuel. At the same time, most of the costs 

of conversion are fixed costs. It appears 

that fuel customers are willing to pay 

the prices converters demand to secure 

long-term supplies. In light of these 

conditions, the Department concludes 

that the term price will remain stable 

despite DOE’s transfers. Transfers will 

tend to cause a suppression of the global 

spot price by about $0.70 per kgU, but 

the domestic industry has no or almost 

no exposure to the spot price. DOE 

assumes the domestic industry will lose 

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26368 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

1The May 2014 Secretarial Determination is 

available on DOE’s Web site at: http://

www.energy.gov/articles/energy-departmentannounces-secretarial-determination-no-adversematerial-impact-uranium. 

2The 2014 ERI Report, the 2015 ERI Report, and 

the comments received in response to the RFI and 

the NIPC are available at http://www.energy.gov/ne/ 

downloads/excess-uranium-management. Some 

comments were marked as containing confidential 

information. Those comments are provided with 

confidential information removed. 

some sales as a consequence of DOEsourced material’s appearing on the 

market. Those sales will reduce the 

industry’s revenues. But if the decrease 

in production were to increase average 

costs above current term prices, the 

industry would be able to increase 

prices correspondingly. The Department 

also concludes that its transfers will 

have, at most, limited impact on 

employment and plans for capital 

improvement and expansion. As it did 

with respect to the uranium mining 

industry, the Department concludes that 

the effect of its transfers would, at 

worst, slightly delay decisions to 

undertake major capital improvements 

or capacity expansions. 

The enrichment industry applies 

enrichment capacity to produce lowenriched uranium. It can also, by 

appropriate use of enrichment capacity, 

conserve natural uranium (through a 

mechanism called ‘‘underfeeding’’) and 

effectively generate additional uranium 

supply. On the basis of several different 

models, DOE forecasts that its transfers 

will cause a price suppression of about 

$5.25 per SWU (separative work units, 

the unit for measuring enrichment 

services) in the near term and $5.40 per 

SWU over the longer term. The vast 

majority of enrichment is sold on longterm contracts, and indeed an 

enrichment provider typically will not 

invest in capacity without having such 

contracts in hand. The sole domestic 

enricher began operations in 2008, and 

contracts typically last 10 years or more. 

The domestic industry therefore has 

little exposure to current prices for 

enrichment. Because enrichers can also 

sell conserved natural uranium, a 

suppression of uranium concentrate and 

conversion prices can also affect their 

revenues. But that impact should be 

relatively small because naturaluranium sales consume only 10–15% of 

enrichment capacity. The Department 

also concludes that because enrichment 

facilities cannot easily decrease 

capacity, DOE transfers will not cause 

changes in production levels or 

employment at existing facilities. In the 

longer term, DOE’s transfers will not 

significantly affect investment decisions 

because substantially higher prices 

would be needed to justify investment 

than could be obtained without market 

growth, even absent DOE’s transfers. As 

it did with respect to the mining and 

conversion industries, the Department 

concludes that the effect of its transfers 

would, at most, slightly delay decisions 

to construct additional capacity. 

The Department recognizes that 

market conditions have been difficult in 

recent years for all three industries. But 

its analytical task under section 

3112(d)(2) is to forecast what additional 

harm industry would suffer that can 

reasonably be attributed to its transfers 

of uranium. The Department concludes 

that the potential impacts to the 

domestic uranium mining, conversion, 

and enrichment industries from 

transfers at the rates described above are 

not so great as to constitute adverse 

material impacts. 

Table of Contents 

I. Introduction 

A. Review of Procedural History 

B. Legal Authority 

C. Brief History of DOE Transfers 

D. Transfers Considered in This 

Determination 

II. Overview of Uranium Markets 

A. The Nuclear Fuel Cycle 

B. The Uranium Markets 

C. The Nature of Demand for Uranium 

D. The Nature of Uranium Supply 

E. Uranium Prices 

III. Analytical Approach 

A. Overview 

B. Comments on DOE’s Interpretation of 

Section 3112(d)(2) 

C. Factors Under Consideration 

IV. Assessment of Potential Impacts 

A. Uranium Mining Industry 

B. Uranium Conversion Industry 

C. Uranium Enrichment Industry 

V. Other Comments 

VI. Conclusion 

I. Introduction 

A. Review of Procedural History 

In preparation for this Secretarial 

Determination, DOE sought information 

from the public through a Request for 

Information (RFI) published in the 

Federal Register on December 8, 2014 

(79 FR 72661). DOE specifically 

requested comment on the effects of 

continued uranium transfers on the 

domestic uranium industries and 

recommendations about factors to be 

considered in assessing the possible 

impacts of DOE transfers. In response to 

the RFI, DOE received comments from 

a diverse group of parties representing 

interests across the nuclear industry. 

DOE also received comments from trade 

associations, nuclear utilities, local 

governmental bodies, and members of 

the public. 

In addition, DOE tasked Energy 

Resources International, Inc., (ERI) to 

assess the potential effects on the 

domestic uranium mining, conversion, 

and enrichment industries of the 

introduction of DOE excess uranium 

inventory in various forms and 

quantities through sale or transfer 

during calendar years 2015 through 

2024 (‘‘2015 ERI Report’’). This study 

also updated an earlier analysis that ERI 

prepared prior to the May 2014 

Secretarial Determination 1 (‘‘2014 ERI 

Report’’). 

On March 18, 2015, DOE published a 

Notice of Issues for Public Comment 

(NIPC) in the Federal Register (80 FR 

14107). That notice announced the 

public availability of comments 

received in response to the December 

2014 Request for Information, 2015 ERI 

Report, and a list of factors for analysis 

of the impacts of DOE transfers on the 

uranium mining, conversion, and 

enrichment industries. DOE received 

comments from members of the 

uranium mining, conversion, and 

enrichment industries, trade 

associations, and DOE contractors.2

B. Legal Authority 

DOE manages its excess uranium 

inventory in accordance with the 

Atomic Energy Act of 1954 (42 U.S.C. 

2011 et seq., ‘‘AEA’’) and other 

applicable law. Specifically, Title I, 

Chapters 6–7, 14, of the AEA authorize 

DOE to transfer special nuclear material 

and source material. Low-enriched 

uranium (LEU) and natural uranium are 

types of special nuclear material and 

source material, respectively. 

The USEC Privatization Act (Pub. L. 

104–134, 42 U.S.C. 2297h et seq.) places 

certain limitations on DOE’s authority to 

transfer uranium from its excess 

uranium inventory. Specifically, under 

section 3112(d) of the USEC 

Privatization Act (42 U.S.C. 2297h– 

10(d)), DOE may make certain transfers 

of natural or low-enriched uranium if 

the Secretary determines that the 

transfers ‘‘will not have an adverse 

material impact on the domestic 

uranium mining, conversion or 

enrichment industry, taking into 

account the sales of uranium under the 

Russian Highly Enriched Uranium 

Agreement and the Suspension 

Agreement.’’ 42 U.S.C. 2297h– 

10(d)(2)(B). The validity of any 

determination under this section is 

limited to no more than two calendar 

years subsequent to the determination. 

See Section 306(a) of Division D, Title 

III of the Consolidated and Further 

Continuing Appropriations Act, 2015 

(Pub. L. 113–235). 

Section 3112 of the USEC 

Privatization Act also contains 

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Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 26369 

3The 2008 Policy Statement and the 2008 Excess 

Uranium Inventory Management Plan are available 

at http://www.energy.gov/ne/downloads/excessuranium-inventory-management-plan-2008. 

4The 2008 Plan explained that ‘‘unallocated’’ 

means HEU that ‘‘is not presently obligated or 

approved for a specific purpose or DOE program.’’ 

2008 Plan, at 1 n.1. 

5 1,680 MTU of this material is either natural or 

low-enriched. The remaining amount is depleted. 

The figure for the natural uranium equivalent of 

this material includes only the natural and lowenriched uranium. 

6The quantity of depleted uranium includes only 

the UF6 with an assay above 0.35 wt-% U–235. 

provisions covering transfers of 

enriched uranium to other federal 

agencies, § 2297h–10(e)(1), to any 

person for national security purposes, 

§ 2297h–10(e)(2), and to State or local 

agencies or nonprofit, charitable, or 

educational institutions, § 2297h– 

10(e)(3). For transfers to these entities, 

the Act does not require that the 

Secretary determine that there will not 

be an adverse material act on the 

domestic uranium industries. Other 

subsections of section 3112 cover 

transfers related to the down-blending 

of Russian highly enriched uranium. 

§ 2297h–10(b). 

C. Brief History of DOE Transfers 

1. 2008 Plan 

In March 2008, then-Secretary of 

Energy Bodman released a Policy 

Statement outlining a framework within 

which DOE intended to make decisions 

concerning use and disposition of its 

excess uranium inventory (‘‘2008 Policy 

Statement’’).3 The Policy Statement 

observed that uranium DOE possesses 

‘‘is a valuable commodity both in terms 

of monetary value and the role it could 

play in achieving vital Departmental 

missions and maintaining a healthy 

domestic nuclear infrastructure,’’ and it 

laid out certain principles for managing 

the inventory prudently to achieve those 

values. The 2008 Policy Statement 

established that the Department would 

engage, when appropriate, in 

transactions in which it would exchange 

uranium for services or for other 

uranium. All transactions involving 

transfers or sales outside the 

Government, the Statement noted, must 

provide ‘‘reasonable value’’ for the 

Department. ‘‘Reasonable value takes 

into account market value, as well as 

other factors such as the relationship of 

a particular transaction to overall 

Departmental objectives and the extent 

to which costs to the Department have 

been or will be incurred or avoided.’’ 

The Policy Statement declared that DOE 

would maintain sufficient uranium 

inventories to meet its own needs and 

would sell or transfer only uranium 

excess to those needs. In addition, the 

Policy Statement asserted that DOE 

would manage its uranium ‘‘in a manner 

that is consistent with and supportive of 

the maintenance of a strong domestic 

nuclear industry.’’ In that vein, the 

Statement noted that ‘‘as a general 

matter, the introduction into the 

domestic market of uranium from 

Departmental inventories in amounts 

that do not exceed ten percent of the 

total annual fuel requirements of all 

licensed nuclear power plants should 

not have an adverse material impact on 

the domestic uranium industry.’’ 2008 

Policy Statement, at 2. 

Based on this policy statement, in 

December 2008 DOE released its Excess 

Uranium Inventory Management Plan 

providing a comprehensive inventory of 

its excess uranium and details about 

DOE’s preliminary plans for future 

management of its excess uranium 

inventory (‘‘2008 Plan’’). DOE’s excess 

uranium inventory in 2008 consisted of 

highly enriched uranium (HEU), natural 

uranium hexafluoride (UF6) of various 

origins, uranium of various enrichments 

in forms other than UF6 that does not 

meet commercial specifications (‘‘offspec non-UF6’’), and depleted uranium 

in the form of UF6. The volumes of these 

inventories at the time of the issuance 

of the 2008 Plan are listed in Table 1. 

The 2008 Plan identified several 

transactions that were ongoing, planned, 

or under consideration for disposition of 

DOE’s excess uranium. 

TABLE 1—EXCESS URANIUM INVENTORY FROM TABLE 1 OF 2008 PLAN

Inventory Amount 

(in MTU) 

Natural 

uranium 

equivalent 

(in MTU) 

Unallocated HEU 4 ................................................................................................................................................. 67 .6 12,440 

U.S.-origin natural UF6 .......................................................................................................................................... 5,156 N/A 

Russian-origin natural UF6 .................................................................................................................................... 12,440 N/A 

Off-spec non-UF6 5 ................................................................................................................................................. 4,461 2,900 

Depleted UF6 6 ....................................................................................................................................................... 75,300 25,950 

2. Recent Uranium Transfers 

Since 2008, DOE has managed its 

inventory in accordance with the 2008 

Policy Statement and Plan. The survey 

below includes the transfers involving 

the largest volumes, which are the ones 

most relevant for assessing how DOE’s 

transfers have affected uranium markets. 

DOE’s National Nuclear Security 

Administration (NNSA) has transferred 

LEU down-blended from HEU 

(‘‘blended LEU,’’ or ‘‘BLEU’’) to the 

Tennessee Valley Authority for use in 

its Brown’s Ferry Nuclear Plant. This 

program is discussed below in Section 

I.D.2.a. DOE and NNSA have also been 

transferring a small amount of highassay LEU (i.e. above 5 wt-% U–235) to 

foreign and domestic research reactors. 

This program is discussed below in 

Section I.D.2.e. 

In 2008, NNSA began an additional 

program of down-blending 

approximately 12.1 metric tons of HEU. 

In the course of this program, NNSA has 

transferred a portion of the resulting 

LEU to the contractor in exchange for 

the down-blending services. Prior to the 

start of this program the Secretary 

determined in October 2008 that the 

transfer of LEU in exchange for the 

down-blending of up to 12.1 metric tons 

of HEU would not have an adverse 

material impact on the domestic 

uranium mining, conversion, or 

enrichment industries. The amount of 

derived LEU was expected to be 

equivalent to approximately 336 MTU 

of natural uranium. 2008 Plan, at 11. 

NNSA is currently engaged in a 

successor program to down-blend 

another 3 metric tons of HEU, and the 

transfers considered in this analysis 

include further LEU in exchange for the 

down-blending services. 

In July 2009, DOE announced that it 

would accelerate cleanup efforts at the 

Portsmouth Gaseous Diffusion Plant 

through increased funding and through 

transferring uranium in exchange for 

cleanup services. Beginning in 

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26370 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

7The 2013 Excess Uranium Inventory 

Management Plan is available at http://www.energy.

gov/ne/downloads/excess-uranium-inventorymanagement-plan. 

8This figure includes only natural and lowenriched uranium. As of the 2013 Plan, DOE had 

disposed of the depleted uranium in forms other 

than UF6 either through disposal or sale. 

9The quantity of depleted uranium in this table 

includes only the UF6 with an assay above 0.34 wt- 

% U–235. The corresponding figure from the 2008 

plan included UF6 with an assay above 0.35 wt-% 

U–235. 

November 2009, DOE’s Office of 

Environmental Management (EM) 

transferred up to 300 MTU per quarter 

of natural uranium hexafluoride to the 

contractor at Portsmouth. Transfers 

during the period of November 2009 to 

December 2010 were limited to no more 

than 1,125 MTU, in accordance with the 

Secretary’s determination in November 

2009 that these transfers up to those 

rates would not have an adverse 

material impact on the domestic 

uranium mining, conversion, or 

enrichment industries. 

Beginning in March 2011, EM 

transferred uranium for cleanup services 

at Portsmouth at an increased rate of 

450 MTU per quarter. These transfers 

were conducted in accordance with the 

Secretary’s Determination in March 

2011 that such transfers between the 

first quarter of 2011 and the end of 

calendar year 2013 would not have an 

adverse material impact on the domestic 

uranium mining, conversion, or 

enrichment industry. Transfers during 

this period were limited to no more than 

1,605 MTU per calendar year. 

Beginning in 2012, EM transferred 

uranium for cleanup services at 

Portsmouth at an increased rate of 600 

MTU per quarter and no more than 

2,400 MTU per year. NNSA also 

extended its program of transferring 

LEU in exchange for down-blending 

services. The rate of transfers for downblending after May 2012 was equivalent 

to 400 MTU of natural uranium. These 

transfers were conducted in accordance 

with the Secretary’s determination in 

May 2012 that the sale or transfer of 

these amounts of uranium would not 

have an adverse material impact on the 

domestic uranium mining, conversion, 

or enrichment industries. In addition to 

these transfers, DOE also transferred in 

2012 and 2013 approximately 9,156 

MTU of depleted uranium to Energy 

Northwest. This transfer was included 

in the May 2012 Secretarial 

Determination and is discussed further 

in Section I.D.2.b. 

In March 2013, DOE transferred 

approximately 48 MTU of LEU to USEC 

Inc. in exchange for an amount of 

natural uranium hexafluoride 

equivalent to the feed component of that 

LEU—409 MTU—and the value of 

approximately 299,000 SWU of 

enrichment services. The value of these 

services was retained by USEC to fund 

a portion of DOE’s cost share under a 

2012 Cooperative Agreement between 

DOE and USEC. This transfer was 

conducted in accordance with the 

Secretary’s March 2013 determination 

that the sale or transfer of this uranium 

would not have an adverse material 

impact on the domestic uranium 

mining, conversion, or enrichment 

industries. 

3. 2013 Plan 

In July 2013, the Secretary issued a 

revised Excess Uranium Inventory 

Management Plan (‘‘2013 Plan’’), based 

on an updated inventory of the 

Department’s uranium as of December 

31, 2012.7 This updated inventory is 

summarized in Table 2. 

TABLE 2—EXCESS URANIUM INVENTORY FROM TABLE 1 OF 2013 PLAN

Inventory Amount 

(in MTU) 

Natural 

uranium 

equivalent 

(in MTU) 

Unallocated HEU ................................................................................................................................................... 18 .0 3,394 

Allocated HEU ....................................................................................................................................................... 11 .4 2,077 

LEU ........................................................................................................................................................................ 47 .6 409 

U.S.-origin natural UF6 .......................................................................................................................................... 5,234 N/A 

Russian-origin natural UF6 .................................................................................................................................... 7,705 N/A 

Off-spec LEU as UF6 ............................................................................................................................................. 1,106 1,876 

Off-spec non-UF6 8 ................................................................................................................................................. 221 600 

Depleted UF6 9 ....................................................................................................................................................... 114,000 25,000–35,000 

The 2013 Plan reaffirmed the 

Department’s goals of maintaining 

sufficient inventories to meet DOE 

needs, transacting ‘‘in a transparent and 

competitive manner,’’ and managing 

inventories in a manner ‘‘consistent 

with and supportive of the maintenance 

of a strong domestic uranium industry.’’ 

The plan included the transfer of 

enriched uranium to pay for downblending of HEU to LEU and the transfer 

of natural uranium in exchange for 

cleanup services at the Portsmouth 

Gaseous Diffusion Plant through 2021. 

2013 Plan, 13–15. The 2013 Plan also 

announced that DOE would no longer 

use the ten percent guideline 

established in the 2008 Policy and Plan. 

The 2013 Plan explained that DOE’s 

experience between 2008 and 2013, 

including a 2012 market impact analysis 

and a 2009 Finding of No Significant 

Impact and Mitigation Action Plan, led 

it to determine that DOE ‘‘can meet its 

statutory and policy objectives in regard 

to DOE uranium sales or transfers 

without an established guideline.’’ In 

addition, the plan noted that in light of 

the two-year limit on the validity of a 

determination under section 3112(d), an 

established guideline was no longer 

necessary. 

4. 2014 Determination 

On May 15, 2014, the Secretary 

determined that sales or transfers of a 

total of 2,705 MTU per calendar year 

will not have an adverse material 

impact on the domestic uranium 

mining, conversion, or enrichment 

industries (‘‘2014 Secretarial 

Determination’’). The 2,705 MTU was 

broken down as follows: 

• Up to 2,055 MTU per year to DOE 

contractors for cleanup services at the 

Paducah or Portsmouth Gaseous 

Diffusion Plant, in quarterly transfers of 

up to 600 MTU for the period 2014 

through 2021; 

• Up to 650 MTU per year to the 

National Nuclear Security 

Administration (NNSA)’s contractors for 

down-blending of HEU to LEU for the 

period 2014 through 2022; 

• Provided that, in the event downblending transfers do not reach 650 

MTU in any year, transfers for cleanup 

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services may exceed 600 MTU in the 

fourth quarter of that same calendar year 

so long as the total amount does not 

exceed 2,705 MTU. 

D. Transfers Considered in This 

Determination 

This section provides an overview of 

the various uranium transactions 

considered in this analysis. The first 

category of transfers are those that DOE 

plans to undertake during the next two 

years pursuant to today’s determination 

under section 3112(d). The second 

category includes other transfers that 

have been made or may be made that 

may be relevant to DOE’s analysis of the 

possible impacts of transfers in the first 

category. The third category includes 

the Russian HEU Agreement and 

Suspension Agreement. This last 

category of transactions does not 

directly involve DOE, but section 

3112(d) of the USEC Privatization Act 

instructs DOE to take account of them. 

1. Planned Transfers That are Covered 

by Today’s Determination Under 

Section 3112(d) 

Today’s determination concludes that 

certain transfers will not cause adverse 

material impacts on the domestic 

uranium industries. Those transfers, 

outlined below, include transfers of 

natural uranium for cleanup services at 

the Portsmouth Gaseous Diffusion Plant 

and of LEU for down-blending services. 

a. Portsmouth Cleanup 

Through its Office of Environmental 

Management (EM), DOE contracts with 

Fluor B&W Portsmouth for cleanup 

services at the Portsmouth Gaseous 

Diffusion Plant. This work involves 

decontamination and decommissioning 

of approximately 415 facilities 

(including buildings, utilities, systems, 

ponds, and infrastructure units) that 

make up the former uranium 

enrichment facility. In recent years, 

work under this contract has been 

funded through both appropriated 

dollars and uranium transfers. As the 

value of transferred uranium changes 

depending on market prices and on the 

Department’s decisions regarding how 

much uranium to transfer, uranium can 

constitute a greater or lesser proportion 

of the total funding. 

During the period covered by today’s 

determination, DOE plans to transfer up 

to 1,600 MTU per calendar year of 

natural uranium hexafluoride in 

exchange for cleanup services at the 

Portsmouth Gaseous Diffusion Plant. 

Today’s determination will be issued in 

the middle of calendar year 2015, after 

DOE has transferred material for part of 

the year at the higher rates permitted by 

the 2014 Determination. However, 

performing the analysis and 

determination on a calendar-year basis 

will just mean that DOE’s analysis 

reflects a higher overall rate for 2015, in 

light of the material already transferred. 

Accordingly, for the sake of simplicity, 

DOE will analyze 2015 transfers for the 

cleanup program of up to 2,000 MTU. 

b. Down-Blending of HEU 

NNSA contracts with WesDyne 

International for down-blending of HEU 

to LEU. The HEU is transferred to 

WesDyne’s contractor, Nuclear Fuel 

Services, Inc., in many forms— 

including metal, oxide, and 

compounds—and the resulting LEU is 

in the form of aqueous uranyl nitrate. 

This program is part of the United 

States’ efforts to eliminate more than 

200 metric tons of excess HEU, which 

is a material that is costly to store 

securely and represents a proliferation 

risk. To complete down-blending, the 

contractor buys natural uranium and 

uses it to dilute the U–235 contained in 

the HEU, producing LEU enriched to 

4.95 wt-% U–235. 

Work under these contracts continues 

to be funded through the transfer of 

some of the LEU that results from the 

down-blending. Under the terms of the 

contract with WesDyne, DOE can use a 

mix of money and uranium—ranging 

from entirely money to entirely 

uranium—to fund this contract, but in 

practice funding has been entirely 

through uranium transfers and is 

expected to continue to be entirely 

through uranium unless circumstances 

necessitate the use of appropriated 

money. 

During the period covered by today’s 

determination, DOE plans to transfer an 

amount of low-enriched uranium 

equivalent to up to 500 MTU of natural 

uranium. This amount is derived by 

transferring up to 60 MTU per calendar 

year of low-enriched uranium at 4.95 

wt-% U–235 in the form of aqueous 

uranyl nitrate for down-blending 

services. Assuming a tails assay of 0.20 

wt-% U–235, it would require 

approximately 555 MTU of natural 

uranium and approximately 520,000 

separative work units (‘‘SWU’’) to 

produce that quantity of LEU. In order 

to down-blend the HEU to LEU, the 

down-blending contractor must 

purchase natural uranium hexafluoride 

for use as diluent in an amount equal to 

about 10% of the natural uranium 

equivalent contained in the LEU, i.e. 55 

MTU. Thus, DOE considers the natural 

uranium equivalent of this amount of 

LEU to be 500 MTU. 

As with the transfers for cleanup 

services at the Portsmouth Gaseous 

Diffusion Plant, DOE has already 

transferred some amount of LEU during 

2015 at rates permitted by the 2014 

determination. For the sake of clarity 

and for simplicity, and for reasons like 

those discussed above, today’s 

determination and this analysis cover an 

amount of low-enriched uranium 

equivalent to up to 500 MTU of natural 

uranium for 2015. 

2. Other Uranium Transfers by DOE 

In addition to transfers described 

above, this analysis considers several 

transfers that are not covered by today’s 

determination, for various reasons. 

Although some of these transfers are not 

subject to section 3112(d), the 

Department has analyzed their potential 

impacts on domestic industries, for 

those transfers already concluded, and 

will analyze such impacts for those yet 

to be carried out, to provide a complete 

picture of the Department’s uranium 

transfers. In addition, in 2009, DOE 

issued a Finding of No Significant 

Impact (‘‘FONSI’’) in connection with 

its National Environmental Policy Act 

review of its proposed action to sell or 

disposition excess depleted, natural, 

and low-enriched uranium. In the 

Mitigation Action Plan included as part 

of the 2009 FONSI, DOE undertook to 

‘‘conduct an analysis prior to particular 

sales or transfers . . . to ensure there 

would be no potentially significant 

impacts to the domestic uranium 

industry.’’ As part of its Mitigation 

Action Plan, the Department committed 

to conducting a market impact analysis 

of depleted uranium sales or transfers to 

determine whether such sales or 

transfers would cause potentially 

significant impacts on the domestic 

uranium industries, and to adjust the 

proposed sales or transfers ‘‘as 

necessary to ensure that such 

potentially significant impacts are 

avoided or mitigated.’’ 74 FR 31420, at 

31421–22 (July 1, 2009). 

In addition, this analysis considers 

some transfers that may be subject to 

section 3112(d) but that are still only 

being planned. While today’s 

determination does not cover those 

transfers because they are not yet close 

enough to fruition, DOE conducts this 

analysis with awareness that these other 

transfers may happen in years to come. 

a. Blended Low-Enriched Uranium to 

Tennessee Valley Authority 

DOE has a significant quantity of HEU 

inventory that contains various 

contaminants, so that the down-blended 

LEU product would not meet American 

Society for Testing and Materials 

commercial nuclear fuel specifications. 

Under a 2001 Interagency Agreement 

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10Note that the amount of ‘‘natural uranium 

equivalent’’ contained in a given amount of 

depleted uranium depends on the assay of the 

depleted uranium. These terms are discussed more 

fully below. 

11Under this arrangement, USEC received LEU 

from Russia, sold the enrichment component, and 

then returned the natural uranium component in 

the form of natural uranium hexafluoride to the 

Russian Executive Agent. The Russian Executive 

Agent entered into a separate agreement with a 

consortium of western uranium producers to sell 

the natural uranium and conversion. 

between DOE and the Tennessee Valley 

Authority (TVA), DOE provides such 

‘‘off-spec’’ blended low-enriched 

uranium (BLEU) to TVA, which uses it 

in its Brown’s Ferry Nuclear Plant. 

Through 2012, NNSA had downblended and transferred to TVA an 

amount of LEU derived from 46 MTU of 

HEU. In July 2013, NNSA and TVA 

modified the Interagency Agreement to 

add a small amount of additional downblended material. 

b. Depleted Uranium Hexafluoride to 

Energy Northwest 

In 2012 and 2013, DOE transferred 

9,075 MTU of high assay depleted 

uranium hexafluoride (DUF6) to Energy 

Northwest. Energy Northwest then 

contracted with USEC, Inc.—now 

known as Centrus Energy Corp.—to 

enrich the tails to LEU. Energy 

Northwest sold most of the resulting 

LEU to TVA, for use in its reactors 

between 2015 and 2022. Energy 

Northwest retained the remaining LEU 

for use in its own reactors. DOE 

accepted title to 8,582 MTU of 

secondary tails resulting from the 

enrichment of the high-assay tails. 

c. Depleted Uranium Hexafluoride to 

Global Laser Enrichment 

In July 2013, DOE issued a Request for 

Offers for the sale of depleted and offspecification uranium hexafluoride 

inventories. These inventories include 

large amounts of high-assay and lowassay depleted UF6 (DUF6). In total, the 

material includes approximately 538 

thousand MTU of DUF6 contained in 

over 65,000 cylinders currently stored at 

DOE’s Paducah and Portsmouth sites. 

Under the terms of the Request for 

Offers, transfers of DUF6 would begin in 

calendar year 2019 and would not 

exceed 2,000 metric tons natural 

uranium equivalent each year.10 In 

November 2013, DOE announced that it 

was entering into negotiations with GEHitachi Global Laser Enrichment, LLC 

(GLE) for the sale of this material. GLE 

proposed to license, construct, and 

operate a new laser enrichment facility 

in Paducah, KY, to re-enrich the 

depleted tails. 

d. Off-Specification Uranium 

The July 2013 Request for Offers also 

sought offers for the sale of certain 

amounts of uranium hexafluoride that, 

like the LEU provided to TVA 

mentioned above, do not meet American 

Society for Testing and Materials 

specifications. This ‘‘off-spec’’ material 

consists of approximately 1,106 MTU 

contained in 239 cylinders at the 

Paducah and Portsmouth Gaseous 

Diffusion Plants. In November 2013, 

DOE announced that it would enter into 

negotiations with AREVA for the sale of 

this inventory. 

In 2008, a DOE contractor issued a 

Request for Proposals for the sale and 

disposition of off-specification, non-UF6

uranium located at the Portsmouth 

Gaseous Diffusion Plant. This inventory 

consists of approximately 4,461 MTU of 

uranium in various forms, including 

metal, oxides, fluorides, and aqueous 

solutions. 

e. Uranium Transfers for Research 

Applications 

DOE also transfers LEU enriched to 

assays between 5 and 20 wt-% U–235 

for domestic and foreign research 

applications. Most of these transfers are 

conducted in accordance with section 

3112(e) of the USEC Privatization Act, 

such as transfers to domestic and 

foreign research reactors; however, some 

may fall within section 3112(d), such as 

transfers for use in commercial research 

and isotope production applications. In 

general, these transfers do not 

contribute to any impacts that DOE 

uranium transfers overall have on 

domestic uranium industries, because 

the transfers do not displace 

commercially supplied uranium, 

conversion, or enrichment from the 

market. No commercial supplier is 

currently capable of providing LEU at 

these assays, so a research reactor 

operator would not be able to replace 

DOE-sourced material by buying 

uranium hexafluoride and having it 

enriched to those levels. In general, it 

would also be technologically infeasible 

for research reactor operators to replace 

DOE-sourced high-assay LEU by 

converting the reactors to use 

commercial-assay LEU and retain the 

ability of the reactor to be used for 

research. Even if these reactors could 

use LEU (either at high or low assay) 

from commercial suppliers, the amounts 

are extremely small. Thus, DOE’s 

supply of high-assay LEU for research 

applications has at most a de minimis 

effect on the commercial uranium 

markets, and this analysis therefore does 

not consider these transfers further. 

3. Transactions Under Russian HEU 

Agreement and Suspension Agreement 

As explained below, section 3112(d) 

of the USEC Privatization Act states that 

a Secretarial Determination must take 

into account the sales of uranium under 

two agreements relating to uranium 

from the Russian Federation: The 

Agreement Between the Government of 

the United States of America and the 

Government of the Russian Federation 

Concerning the Disposition of Highly 

Enriched Uranium Extracted from 

Nuclear Weapons, Feb. 18, 1993 

(‘‘Russian HEU Agreement’’), and the 

Agreement Suspending the 

Antidumping Investigation on Uranium 

from the Russian Federation, 57 FR 

49220, at 49235 (Oct. 30, 1992) 

(‘‘Suspension Agreement’’). 

a. Russian HEU Agreement 

The Russian HEU Agreement was 

originally signed on February 18, 1993, 

and provided for the purchase over a 20- 

year period of LEU derived from 500 

MTU of weapons-origin HEU from 

Russia. In total, this material contained 

the equivalent of almost 400 million 

pounds U3O8, 150 million kilograms of 

uranium (kgU) of conversion services, 

and approximately 92 million SWU of 

enrichment services. 

The sale of this uranium into the 

commercial market has not directly 

involved DOE. The material was 

actually transferred to the United States 

through a commercial agreement 

between the U.S. and Russian Executive 

Agents. The U.S. Executive Agent— 

initially the United States Enrichment 

Corporation, and later the private 

corporation USEC, Inc.—then sold the 

LEU into the U.S. nuclear fuel market to 

commercial utilities. 

The USEC Privatization Act altered 

the implementation of the Russian HEU 

Agreement. The Act directed the 

Executive Agent to enter into an 

agreement to return to the Russian 

Executive Agent an amount of uranium 

equivalent to the natural uranium 

component of LEU received under the 

agreement after January 1, 1997, or, if 

the Russian Executive Agent did not 

enter such an agreement, to auction the 

uranium.11 The Act also placed annual 

limits on the delivery to U.S. utilities of 

the uranium thus provided to the 

Russian Executive Agent. Specifically, 

the Act limited deliveries to no more 

than 2 million pounds U3O8 equivalent 

in 1998. The limit increased annually, 

finally reaching 20 million pounds U3O8

equivalent in 2009 and each year 

thereafter. 42 U.S.C. 2297h–10(b)(5). 

The USEC Privatization Act did not 

place any limit on the delivery of the 

conversion component of uranium 

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12Some nuclear reactors, particularly pressurized 

heavy water reactors, use natural uranium. 

13Port Hope, Ontario, Canada, and COMURHEX 

Malve ́si/Pierrelatte, France, use the wet process. 

See AREVA, ‘‘Chemical Operations Around the 

World,’’ http://www.areva.com/EN/operations-687/

Continued 

returned to the Russian Executive Agent 

or auctioned in the absence of a return 

agreement. 42 U.S.C. 2297h–10(b)(8). 

The last deliveries under the Russian 

HEU Agreement took place in 2013. 

b. Suspension Agreement 

In 1991, the Department of Commerce 

initiated an antidumping duty 

investigation under the Tariff and Trade 

Act to determine whether imports of 

uranium from the U.S.S.R. were being 

sold into the United States at less than 

fair value. In 1992, the Department of 

Commerce entered into an agreement 

with the Russian Federation 

(‘‘Suspension Agreement’’) suspending 

the antidumping investigation and 

establishing export limits on uranium 

from those countries. 57 FR 49220 (Oct. 

30, 1992). 

The Suspension Agreement has been 

amended several times since it first 

came into force. At the time the USEC 

Privatization Act was passed in 1996, 

the Suspension Agreement allowed 

Russian natural uranium and SWU to be 

imported only if it was matched with an 

equal portion of newly-produced U.S.- 

origin natural uranium or SWU. These 

‘‘matched sales’’ were subject to annual 

volume limits ranging from 1.9 million 

to 6.6 million pounds U3O8 equivalent 

between 1994 and 2003. 59 FR 15373, 

at 15374 (Apr. 1, 1994). The USEC 

Privatization Act specifically stated that 

sales of the natural uranium component 

of HEU under the Russian HEU 

Agreement were excluded from the 

Suspension Agreement limits. 42 U.S.C. 

2297h–10(b)(6). 

The most recent iteration of the 

Suspension Agreement entered into 

force in 2008. 73 FR 7705 (Feb. 11, 

2008). That agreement provides for the 

resumption of sales of natural uranium 

and SWU beginning in 2011. While the 

HEU Agreement remained active (i.e. 

2011–2013), the annual export limits 

were relatively small—between 0.4 and 

1.1 million pounds U3O8 equivalent. 

After the end of the Russian HEU 

Agreement, restrictions range between 

11.9 and 13.4 million pounds U3O8

equivalent per year between 2014 and 

2020. 73 FR 7705, at 7706 (Feb. 11, 

2008). 

II. Overview of Uranium Markets 

The nuclear fuel market consists of 

four separate industries: mining/milling, 

conversion, enrichment, and fabrication. 

These industries interact in complicated 

and sometimes counterintuitive ways. 

In order to analyze the effect on the 

various industries of introducing a given 

amount of uranium into the market, it 

is necessary to understand how uranium 

is processed into nuclear fuel, how the 

different aspects of this process interact, 

and how the consumers of uranium— 

nuclear reactor owners/operators— 

procure uranium. This section provides 

an overview of these industries and 

markets, beginning with the process for 

producing nuclear fuel from uranium 

ore. 

A. The Nuclear Fuel Cycle 

In order to be useful as fuel for a 

reactor, uranium must be in a specific 

chemical form, it must have the correct 

isotopic concentration, and it must be 

fabricated into the correct physical 

shape and orientation. The four nuclear 

fuel cycle industries—mining, 

conversion, enrichment, and 

fabrication—ensure that reactor 

operators have a steady supply of usable 

fissile material to fuel their reactors. 

1. Mining 

The first step in the nuclear fuel cycle 

is mining. Uranium is relatively 

common throughout the world and is 

found in most rocks and soils at varying 

concentrations. There are two primary 

methods of mining uranium: 

Conventional and in-situ recovery. 

Which method is used for a particular 

deposit depends on the specific 

characteristics of the deposit and 

surrounding rock. 

Conventional mining can involve 

either open pit or underground removal 

of uranium ore. Once removed from the 

ground, the uranium ore must be 

transported to a mill for processing. 

Many mining operations are located 

close to mills; where mines are close 

together, one mill may process ore from 

several different mines. Once at the 

mill, the ore is crushed and chemically 

treated to remove the uranium from the 

other minerals, a process called 

‘‘leaching.’’ The solids are then 

separated from the solution and dried. 

The final result is a powdered uranium 

oxide concentrate, often known as 

‘‘yellowcake’’ and predominately made 

of triuranium octoxide, or U3O8. This 

powdered yellowcake can be packed in 

drums and shipped for the next stage of 

processing. 

An alternative mining process is 

known as in-situ recovery (ISR). In ISR 

mining, the uranium ore is not removed 

from the ground as a solid. Instead, an 

aqueous solution—either acid or 

alkali—is pumped into the ground 

through injection wells, through a 

porous ore deposit, and back out 

through production wells. As the 

solution moves through the ore deposit, 

the uranium in the ore dissolves or 

leaches into the solution. Once the 

uranium-laden solution is pumped out, 

it is pumped to a treatment plant where 

uranium is recovered and dried into 

yellowcake. In order to maintain a stable 

rate of production, wellfields must be 

continually developed and placed into 

production. 

There are several key differences 

between conventional and ISR mines. 

ISR mining typically has lower costs, 

both capital and operational. ISR mines 

also have a shorter lead-time for 

development. There are other 

advantages compared to conventional 

mining such as decreased radiation 

exposure for workers, reduced surface 

disturbance, and reduced solid waste. 

However, ISR mining can only extract 

uranium located in deposits that are 

permeable to the liquid solution used to 

recover the uranium, and the permeable 

deposit must have an impermeable layer 

above and below to prevent the solution 

from leaching into groundwater. To the 

extent that uranium is located in other 

types of deposit ISR mining may not be 

possible. 

2. Conversion 

The second step in the nuclear fuel 

cycle is conversion. When yellowcake 

arrives at conversion facilities it may 

contain various impurities. The 

conversion process refines the uranium 

compounds and prepares it for the next 

stage. 

As discussed in the next section, most 

nuclear reactors require uranium that is 

enriched in the isotope U–235.12 The 

enrichment process typically requires 

uranium to be in a gaseous form. To 

meet this need, U3O8 is converted into 

uranium hexafluoride (UF6), which 

sublimes—i.e. converts directly from 

solid to gas—at a temperature (at normal 

atmospheric pressure) of approximately 

134 °F (56.5 °C). The UF6 is then loaded 

into large cylinders and shipped to an 

enrichment facility. 

There are several different processes 

for converting U3O8 to UF6. The two 

most significant processes are known as 

the ‘‘wet process’’ and ‘‘dry process.’’ 

Both processes have three essential 

steps: Reduction, hydrofluorination, and 

fluorination. These steps do not differ 

substantially between the two processes. 

The main difference between the wet 

process and dry process is in how they 

remove impurities. In the wet process, 

used in facilities in France and Canada, 

yellowcake is treated with nitric acid, 

concentrated, and dried into UO3

powder prior to reduction.13 In the dry 

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chemistry-business-unit-sites-around-theworld.html (accessed Mar. 31, 2015); Cameco, ‘‘Port 

Hope Conversion,’’ http://www.cameco.com/fuel_

services/port_hope_conversion/ (accessed Mar. 31, 

2015). 

14 Details on the dry process are described at: 

ConverDyn, ‘‘Honeywell Dry Fluoride Volatility 

Conversion Process,’’ http://www.converdyn.com/

product/conversion.html (accessed Mar. 31, 2015). 

Although the three most significant western 

converters use either the wet or dry process, 

conversion plants in Russia use a slightly different 

process called the ‘‘direct fluorination’’ method. 

This method is described in UxC Conversion 

Market Outlook—December 2014, 8–9 (2014). 

15The measure of assay is sometimes referred to 

in terms of ‘‘weight-percent’’ or ‘‘wt-%.’’ 

process, used at the Metropolis Works 

facility in Illinois, purification takes 

place at the very end of the process 

through distillation of UF6.14

3. Enrichment 

The third step in the nuclear fuel 

cycle is enrichment. As found in nature, 

uranium consists of a mixture of 

different uranium isotopes. The two 

most significant isotopes are U–235 and 

U–238. The relative concentration of the 

various isotopes of uranium in a given 

amount is referred to as the isotopic 

concentration or ‘‘assay.’’ 15 Uranium as 

found in nature consists of 

approximately 0.711% U–235, 99.283% 

U–238, and trace amounts of U–234. 

Uranium that exhibits the naturally 

occurring isotopic concentration is 

called ‘‘natural uranium.’’ 

Nuclear reactors typically require 

uranium that is enriched in the isotope 

U–235, meaning that it has a higher 

concentration of U–235 compared to 

natural uranium. Commercial light 

water reactors, which are the most 

common type of nuclear reactor, 

typically require an assay of 3% to 5% 

U–235. Uranium enriched in the isotope 

U–235 is referred to as low-enriched 

uranium (LEU) if the assay is less than 

20% but above 0.711%, and highlyenriched uranium (HEU) if the assay is 

greater than 20%. 

There are many different enrichment 

processes, but only two have been used 

commercially: Gaseous diffusion and 

gas centrifugation. These technologies 

exploit the mass difference between U– 

238 and U–235 atoms. In a centrifuge, 

centripetal acceleration tends to 

concentrate lighter materials towards 

the center of the rotation and heavier 

materials towards the outside of the 

rotating vessel. The mass difference 

between a UF6 molecule with U–238 

and one with U–235 is slight, so even 

at high rotation speeds the 

concentration changes are small. To 

achieve a concentration increase from 

0.711% to 5%, a facility passes material 

through many stages of centrifugation. 

Currently, all commercial enrichment 

services use gas centrifuge technology; 

the last commercial-scale gaseous 

diffusion facility ceased operating in 

2013. 

After UF6 arrives from a conversion 

facility, it can be introduced into the 

enrichment centrifuges. Material 

introduced in this manner is referred to 

as ‘‘feed.’’ The centrifuges then separate 

the isotopes into varying levels of 

enrichment and produce two streams of 

material: Product and tails. The product 

is the enriched UF6 output. This LEU is 

then pumped into a 2.5 ton cylinder and 

shipped to a fabrication facility. Just as 

the product stream has a higher 

proportion of U–235 to U–238 than the 

original feed, the other stream, the tails, 

has a lower proportion of U–235 to U– 

238. This material is referred to as 

‘‘depleted.’’ It is pumped into large 

(typically 10 or 14 ton) cylinders and 

then stored on site at the enrichment 

facility for eventual disposal or other 

use. The assay of U–235 in the tails from 

an enrichment process depends on what 

concentration of U–235 was needed in 

the enriched product and how much 

natural uranium was used as feed. 

Typical tails assays range from 0.1% to 

0.4%. 

4. Fabrication 

The final step in the process is 

fabrication. Almost all nuclear reactors 

require fuel to be in the form of uranium 

dioxide (UO2). At the fabrication 

facility, the enriched UF6 is converted 

into UO2 powder, and then formed into 

small ceramic pellets. These pellets are 

then loaded into metal tubes and 

attached together to form fuel 

assemblies. Fuel design is reactor 

specific, and thus each fuel assembly is 

manufactured to the unique 

specifications of the reactor operator. 

Although fabrication is an important 

step in the fuel cycle, this analysis does 

not cover effects in the fabrication 

market. 

5. Secondary Supply 

Uranium that undergoes the abovedescribed four steps without any 

intermediate use is generally termed 

‘‘primary supply.’’ However, there are 

other sources of uranium available in 

the market. Uranium from these other 

sources is collectively known as 

‘‘secondary supply.’’ In addition to 

government inventories of uranium left 

over from other uses such as weapons 

production, the most significant 

secondary supplies come from excess 

enrichment capacity. 

Due to technical constraints, enrichers 

generally cannot easily decrease 

capacity that is already constructed and 

operating. If an enricher were to shut 

down a centrifuge that is currently 

spinning, it may not be possible to 

restart the centrifuge. Due to this 

possibility, decreasing capacity risks 

damaging the machines and destroying 

the substantial capital investment in 

construction. As a result, enrichers that 

have unsold capacity will tend to apply 

the excess enrichment work in one of 

two ways. 

First, enrichers can apply extra 

separative work to a given amount of 

feed material, thus extracting more of 

the U–235. This is known as 

‘‘underfeeding’’ because it enables the 

production of a given amount of 

enriched product with a smaller amount 

of feed material. Normally, a purchaser 

of enrichment services seeking a 

specific amount of enriched product 

would need to determine (1) how much 

natural uranium feed to provide and (2) 

how much SWU to apply to it. 

Increasing the amount of enrichment 

services has a cost, but the additional 

work will extract more of the U–235 

content of the feed material so that less 

is needed, at less cost. The relationship 

between the prices of uranium 

concentrates, conversion, and 

enrichment can be used to determine 

the amount of feed and SWU—and thus 

also the resulting tails assay—that will 

lead to the lowest cost per kilogram of 

enriched product. This is known as the 

‘‘optimal tails assay.’’ If an enricher 

knows that it has excess capacity, it may 

choose to feed in a smaller amount of 

natural uranium and apply more SWU 

to that material than was purchased. 

Thus, the end result is the desired 

amount of enriched product, depleted 

tails, and the natural uranium that was 

delivered to the enricher but was not fed 

into the enrichment process. The 

enricher can then sell this natural 

uranium on the open market. 

Second, enrichers can feed depleted 

tails back into the enrichment process 

and apply additional separative work to 

them. This is known as re-enrichment of 

tails. As described above, the optimum 

tails assay varies over time as the prices 

of uranium concentrates, conversion, 

and enrichment change relative to each 

other. Over time, depleted tails with 

relatively high assays may accumulate. 

An enricher may choose to select the 

highest-assay tails and feed them back 

into the enrichment process. These tails 

can be enriched up to the level of 

natural uranium (0.711%) or higher. 

The enricher may then sell the resulting 

natural uranium or LEU on the open 

market. 

An additional source of secondary 

supply is from recycled uranium and 

plutonium either from reprocessing of 

commercial spent fuel or from weaponsmstockstill on DSK4VPTVN1PROD with NOTICES2

Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 26375 

grade plutonium disposition. The 

product of these processes enters the 

fuel cycle and is fabricated into mixed 

oxide (MOX) fuel. MOX fuel is currently 

in use in Europe and Japan. Two 

commercial facilities currently produce 

MOX fuel in France and in the United 

Kingdom. Other facilities, such as the J– 

MOX project in Japan, are either 

planned or under construction. 

6. Note on Units 

As discussed above, the different 

uranium industries use slightly different 

units. Uranium concentrates are 

generally measured in pounds U3O8, 

conversion services are generally 

measured in kgU as UF6, and 

enrichment services are measured in 

SWU. 

It is worth noting that the measures of 

uranium concentrates and conversion 

services are not identical for several 

reasons. In addition to the fact that one 

is denominated according to U.S. 

customary units and the other is 

denominated under the international 

system of units (SI), the measure of 

uranium concentrates refers to the mass 

of U3O8 whereas the conversion metric 

refers only to the mass of the uranium 

atoms. Only about 85% of the mass of 

U3O8 consists of uranium. Thus, one 

kilogram of U3O8 contains 

approximately 0.848 kgU. Furthermore, 

converting between pounds U3O8 and 

kgU as UF6 must take into account an 

estimated 0.5% loss during the 

conversion process. Taking all this into 

account, one pound U3O8 is equivalent 

to 0.383 kgU as UF6, and one kgU as UF6

is equivalent to 2.61 pounds U3O8. 

Converting between uranium 

concentrates or conversion services and 

enrichment is more difficult because the 

amount of SWU necessary to produce a 

given amount of product depends on the 

desired product assay, the feed assay, 

and the tails assay. An example will 

serve to illustrate the significance of 

different assumptions. Assuming a tails 

assay of 0.30%, enriching 1,000 kgU as 

UF6 of natural uranium to an assay of 

4.50% would require approximately 

609.7 SWU and would yield 97.9 kgU of 

enriched uranium; if a tails assay of 

0.20% is used instead, enrichment 

would require approximately 913.9 

SWU and would yield 118.8 kgU of 

enriched uranium. 

DOE typically describes its uranium 

inventory in terms of MTU for natural 

uranium and MTU ‘‘natural uranium 

equivalent’’ for depleted and enriched 

uranium. These terms have a slightly 

different meaning depending on the 

form. For natural UF6—i.e. with an 

assay of 0.711%—1 MTU would 

represent 2,610 pounds U3O8, 1,000 kgU 

as UF6 of conversion services, and 0 

SWU. For enriched or depleted UF6, the 

amount of natural uranium equivalent 

depends on the assay. For depleted UF6, 

DOE calculates natural uranium 

equivalent as the amount of natural 

uranium product that could be 

produced by re-enriching the depleted 

material. For the purposes of this 

analysis, DOE assumes the enrichment 

process would use a tails assay of 

0.20%. As an example, 1,000 MTU of 

DUF6 with an average assay of 0.40% 

would yield approximately 350 MTU 

natural uranium equivalent. For LEU, 

DOE calculates natural uranium 

equivalent as the amount of natural 

uranium that would be needed as feed 

material to produce the LEU, given the 

assay of the LEU and assuming a tails 

assay of 0.20% and a feed assay of 

0.711%. For LEU resulting from downblending of HEU, DOE then subtracts 

out the amount of natural uranium 

feed—‘‘diluent’’—that is necessary to 

down-blend the HEU to the desired 

product assay. The amount of diluent 

required is typically equivalent to 

approximately 10% of the natural 

uranium that would be needed as feed 

for enrichment. This subtraction is 

appropriate for purposes of section 

3112(d) analysis to indicate how much 

natural uranium a given amount of LEU 

would displace from the market. 

Because DOE’s contractor procures 

diluent on the market (rather than from 

DOE inventory) in order to produce the 

transferred LEU, the transfer displaces 

that much less commercially supplied 

natural uranium. 

B. The Uranium Markets 

1. The Uranium Markets Are Separate 

Uranium concentrates, conversion 

services, and enrichment services can be 

traded separately. Prices for uranium 

concentrates are typically quoted in 

terms of dollars per pound U3O8. Prices 

for conversion services are typically 

quoted in terms of dollars per kilogram 

uranium (kgU). Prices for enrichment 

services are typically quoted in terms of 

dollars per SWU. 

A typical transaction may involve a 

single purchaser purchasing a given 

amount of uranium concentrate through 

a contract directly with the mining 

company. The uranium concentrate is 

typically delivered directly to a 

conversion facility rather than to the 

purchaser. The purchaser will also enter 

into a separate contract for conversion 

services. The terms of this contract will 

require the purchaser to deliver U3O8 to 

the converter, and the converter will 

provide UF6 in return. The UF6 will 

then be shipped directly to an enricher. 

As with conversion, the purchaser will 

enter into a separate contract for SWU 

from an enricher. Contracts terms vary, 

but this contract will likely require the 

purchaser to deliver a specific amount 

of natural UF6 feed and the enricher to 

deliver a specific amount of UF6

enriched to the desired assay. This LEU 

will typically be delivered directly to 

the fabricator to be made into nuclear 

fuel. 

Although there are separate markets 

for each step in the process, the 

different steps are sometimes combined. 

It is possible to buy natural UF6, which 

would reflect both the uranium 

concentrate and the conversion services. 

Similarly, it is possible to buy enriched 

UF6—usually known as enriched 

uranium product (EUP)—which would 

reflect all three steps. The price for 

these products is typically developed by 

adding the cost of the various steps 

together. Thus, the price of EUP would 

be based on the price of an equivalent 

amount of uranium concentrates, 

conversion, and enrichment. In practice, 

however, the price of a product 

material, like EUP or natural UF6, may 

occasionally differ somewhat from the 

sum of the input prices. Because most 

volume is transacted in long-term 

contracts, a small price gap may not be 

eliminated quickly by arbitrage. In 

addition, the price of a product material 

reflects transaction and shipping costs 

needed to move material through the 

various steps. 

In addition, even though the three 

components are traded separately, there 

is some interrelationship between the 

prices. Since optimal tails assay is a 

function of the relative price of uranium 

concentrates, conversion, and SWU, 

changes in one price can lead to shifts 

in demand and supply in the other 

markets. Similarly, excess enrichment 

capacity used for underfeeding or reenrichment of tails increases supply of 

uranium concentrates and conversion 

services. Thus, changes in enrichment 

supply may contribute to changes in 

uranium concentrate and conversion 

prices. 

2. Uranium Is Fungible 

Although the above represents a 

typical series of uranium transactions, 

there are many other potential types of 

transactions. These other forms are 

possible because uranium at each stage 

of the fuel cycle is fungible. As long as 

the basic characteristics like form and 

assay are the same, one kilogram of 

material is essentially the same as any 

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26376 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

16Other important characteristics include the 

presence and concentration of contaminants, some 

of which can render material unusable as nuclear 

fuel. Industry standards specify the acceptable 

levels of contamination. 

17This is an annual average. Since reactors do not 

necessarily refuel every year, each reactor would 

actually require somewhat more than 24 MTU every 

18–24 months. 

other.16 Accounting mechanisms allow 

the ownership of each kilogram of 

material to be traceable, and they also 

allow ownership to be exchanged freely 

without physically manipulating the 

material. 

A simple example illustrates the types 

of transaction that this fungibility 

enables. After U3O8 is converted into 

UF6, it will typically be shipped to a 

specific enrichment facility. If the 

uranium was mined and converted in 

North America, it will typically be sent 

to an enricher in North America. 

However, the purchaser is not 

necessarily required to purchase 

enrichment services from the company 

whose facility the material is shipped 

to. Instead, the purchaser may be able to 

exchange ownership of an amount of 

UF6 located at a North American 

enrichment facility with an equivalent 

amount located at a facility in Europe. 

This is referred to as a ‘‘book transfer.’’ 

An entity can also sell conversion 

services or enrichment services without 

actually physically converting or 

enriching any material. A person that 

owns enriched UF6 may enter into a 

contract to sell SWU whereby it 

provides the desired amount of enriched 

UF6 in exchange for the cost of the SWU 

and a specific amount of natural UF6

‘‘feed.’’ A person can also use natural 

UF6 to sell conversion services by 

exchanging it for the cost of the 

conversion services plus the equivalent 

amount of U3O8. 

3. The Uranium Markets Are Global 

All three markets are global in nature. 

Purchasers are able to buy from 

suppliers worldwide and vice versa. 

Pricing for uranium concentrates and 

enrichment are essentially the same 

worldwide. Shipping costs are relatively 

low compared to other components of 

the prices, and the fungibility of the 

material allows suppliers and 

purchasers to minimize shipping costs 

through book transfers. 

Although conversion services also 

trade on a worldwide market, in recent 

years there has been a persistent 

difference between prices in North 

America and those in Europe. DOE 

believes this stems from a geographical 

imbalance in conversion capacity 

relative to enrichment capacity. There is 

more conversion capacity in North 

America than enrichment capacity, and 

conversely in Europe there is more 

enrichment than conversion capacity. 

Consequently, there is a regular net flow 

of conversion services from North 

America to Europe. Meanwhile, it seems 

likely that the cost of shipping is larger 

relative to the conversion price than it 

is relative to the price of uranium or 

enrichment—mainly because 

conversion is the least costly input 

among the three, roughly $7.50 per 

kilogram at current spot prices 

compared to just over $100 per kilogram 

for uranium in concentrates. DOE 

believes the price difference between 

North American conversion and 

European conversion reflect simply the 

additional cost of shipping converted 

material from North America to Europe, 

together with the fact that net flow is 

from North America to Europe. 

C. The Nature of Demand for Uranium 

1. Utility Use of Uranium 

The vast majority of uranium in 

commercial use is fuel for commercial 

power generation. According to the 

International Atomic Energy Agency 

(IAEA), there are 440 commercial 

reactors operating worldwide, 99 of 

which are in the United States. See 

IAEA, ‘‘Power Reactor Information 

System,’’ Mar. 2015, http://

www.iaea.org/pris/ (accessed March 24, 

2015). The total installed electricity 

generation capacity of all reactors 

worldwide is 378,220 MWe (megawatt 

electrical), 98,638 MWe of which is from 

U.S. reactors. Id. 

Nuclear reactors typically provide 

what is known as ‘‘baseload’’ electricity 

supply. This means that nuclear reactors 

generally operate close to their full 

practical capacity continuously. Thus, 

the amount of uranium needed for each 

reactor in a given year does not 

generally fluctuate with electricity use 

patterns. It depends instead on the total 

capacity of the reactor and the fuel 

reload schedule. The average reactor 

capacity worldwide is approximately 

860 MWe, and the average capacity of 

U.S. reactors is 996 MWe. Id. Reload 

schedules vary, but reactors typically 

must reload a portion of the total fuel 

in the core every 18 to 24 months. 

According to the World Nuclear 

Association (WNA), a typical 1,000 

MWe light water reactor operating today 

requires approximately 24 MTU of LEU 

at an assay of 4% each year.17 At a tails 

assay of 0.25%, this corresponds to 

approximately 140,000 SWU of 

enrichment, 195,000 kgU of conversion 

services, and 510,000 pounds U3O8. See 

WNA, ‘‘The Nuclear Fuel Cycle,’’ Oct. 

2014, http://www.world-nuclear.org/

info/Nuclear-Fuel-Cycle/Introduction/

Nuclear-Fuel-Cycle-Overview/ (accessed 

March 24, 2015). Reload amounts and 

schedules differ depending on reactor 

size and type. Pressurized heavy water 

reactors, for example, do not require 

enrichment at all. 

It is also worth noting that nuclear 

fuel makes up a very small percentage 

of overall costs for nuclear reactors— 

typically less than 10%. According to 

DOE’s Energy Information 

Administration (EIA), for new nuclear 

generation, variable operations and 

maintenance costs, which include fuel 

costs, account for only about 12% of 

total system levelized costs. See EIA, 

‘‘Levelized Cost of New Generation 

Resources in the Annual Energy 

Outlook 2014,’’ Apr. 2014, http://

www.eia.gov/forecasts/aeo/electricity_

generation.cfm (accessed Mar. 24, 2015). 

Further, the Nuclear Energy Institute 

reports that nuclear fuel costs make up 

about 30% of total operating costs. See 

NEI, ‘‘Fuel as a Percentage of Electric 

Power Production Costs,’’ http://

www.nei.org/Knowledge-Center/

Nuclear-Statistics/Costs-Fuel,- 

Operation,-Waste-Disposal-Life-Cycle/

Fuel-as-a-Percent-of-Production-Costs 

(accessed Mar. 30, 2015). 

2. Uranium Requirements 

The amount of fuel necessary to keep 

a reactor operating is relatively 

predictable. Although there is always 

the possibility of unplanned outages, 

reactor operators generally know how 

much enriched uranium they will need. 

The amount of uranium needed to fuel 

operating reactors is generally referred 

to as ‘‘requirements.’’ Small 

uncertainties in predictions about 

requirements are possible in the short 

run because an operator can vary its 

need for fuel to some degree by 

changing operating conditions. 

For a given reactor operator, this 

predictability enables the operator to 

purchase uranium, conversion, and 

enrichment on long-term contracts. 

These contracts often have first delivery 

as much as five years in the future and 

can extend as long as ten or even fifteen 

years from the contract date. In 

addition, because shutting down a 

reactor for refueling is a complex and 

carefully orchestrated process that 

requires extensive planning, a reactor 

operator generally has strong incentives 

to ensure well in advance of each 

refueling that the reactor will be 

sufficiently supplied with fuel. Longterm contracts help meet that goal by 

providing a reactor operator guaranteed 

quantities of supply. Consequently, the 

vast majority of purchases of uranium 

concentrates, conversion, and 

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enrichment are through term contracts— 

above 80%. The specific proportions of 

short-term versus long-term contracts 

are discussed below in Section II.E.1. 

Aggregate requirements are also 

relatively predictable. However, longterm projections of future requirements 

must take into account changes in 

requirements from short-term outages, 

permanent shutdowns, and new reactor 

construction. Various entities develop 

and publish projections of future 

uranium requirements based on 

different assumptions about the rates of 

these changes, as well as different 

assumptions about operating conditions 

like reload schedules and fuel 

utilization (‘‘burnup’’), and about the 

possibility of unplanned outages or 

other temporary fluctuations in nuclear 

fuel use. These forecasts typically are 

based only on the nuclear fuel expected 

to be used in operating reactors; they do 

not include purchases of strategic or 

discretionary inventory. 

3. Requirements Versus Demand 

Demand for uranium, conversion, or 

enrichment is generally not the same as 

reactor requirements in a given year. 

Some sources of demand are either in 

excess of or unconnected to reactor 

requirements. For example, many 

reactor operators hold strategic 

inventories of uranium beyond their 

requirements. This material provides 

flexibility in the event of a supply 

disruption. Different operators may have 

different strategic inventory policies, 

and those policies will shift over time. 

Changes in the level of strategic 

inventories held by individual reactors 

can produce additional demand or 

remove demand. Demand from reactor 

operators purchasing uranium for 

strategic inventory is commonly referred 

to as ‘‘discretionary demand.’’ 

There are a number of market 

participants that are currently building 

inventory well above the strategic 

inventory that is typical of other 

operators. China, for example, has in 

recent years purchased as much as three 

times its current annual requirements. 

Japanese reactors have also been 

building inventory well in excess of 

requirements. Many Japanese reactors 

were shut down following the accident 

at the Fukushima Daiichi nuclear power 

plant in March 2011. Even though the 

reactors are not currently operating, 

many Japanese operators have 

continued to receive contracted 

deliveries of uranium. 

In addition to reactor operators 

purchasing in excess of demand, there 

are a number of market participants that 

do not operate reactors at all. These 

include traders, brokers, and investment 

funds. These entities may purchase 

uranium when prices are low and resell 

it to reactor operators under future 

delivery contracts or hold uranium 

inventory until prices increase. 

These activities mostly involve only 

uranium concentrates. However, some 

purchases in excess of requirements 

involve natural UF6 or EUP. Thus, this 

behavior typically affects demand for 

uranium concentrates much more than 

it affects conversion and enrichment 

demand. 

Finally, changes in optimal tails assay 

can affect demand in a given year. 

Estimates of future reactor requirements 

typically assume a specific tails assay 

for enrichment. However, if enrichment 

prices change relative to uranium 

concentrate and conversion prices, some 

purchasers may have flexibility to 

specify a different tails assay for 

enrichment. This changes the amount of 

uranium concentrates, conversion, and 

SWU that are necessary to produce a 

given amount of fuel. 

4. Price Elasticity of Demand 

Price elasticity of demand is an 

economic measure that shows how the 

quantity demanded of a good or service 

responds to a change in price. If 

purchasers are highly responsive to 

changes in price, demand is relatively 

elastic. If purchasers are weakly 

responsive to changes in price, demand 

is relatively inelastic. If purchasers 

demand the same amount regardless of 

the price, demand is perfectly inelastic. 

In general, demand for uranium, 

conversion, and enrichment are 

relatively inelastic. Since requirements 

are largely fixed, changes in price have 

a weak effect on demand. However, 

uranium markets exhibit different 

degrees of elasticity on different time 

frames. 

a. Short Term 

In the short term, DOE expects that 

demand is more elastic than in the 

medium and long terms. Some of the 

behaviors discussed in the previous 

section are responsive to short term 

changes in price. Traders and 

investment funds are more likely to 

make speculative purchases when 

prices are low. Similarly, large-scale 

strategic buying, as China is doing, has 

corresponded with a period of very low 

prices. It seems likely that these 

purchases would decrease if short term 

uranium prices increased substantially. 

These practices may be somewhat 

counteracted by the behavior of utilities. 

Although some utilities choose to build 

inventories when prices are low, others 

do the opposite. Somewhat 

counterintuitively, some reactor 

operators actually purchase less 

strategic inventory when prices are low. 

This appears to be related to perceptions 

about long-term security of supply. 

When prices are high, it may suggest 

scarcity in long term supplies. When 

prices are low, this may signal that long 

term supplies are relatively secure. 

Thus, reactor operators may 

paradoxically purchase more strategic 

inventory when prices are high. 

As mentioned above, these behaviors 

are much more prevalent in the uranium 

concentrates markets. Demand in the 

conversion and enrichment markets 

may therefore exhibit less elasticity in 

the short term than the uranium market. 

b. Medium and Long Term 

DOE expects that demand in the 

medium and long term is less elastic 

than in the short term. Indeed, in the 

medium term, demand for long-term 

contracts may actually increase, relative 

to spot purchases, as prices rise. As 

discussed above, fuel costs represent a 

very small portion of the overall cost of 

nuclear power. 

Conversely, the cost of not having fuel 

can be very high, because the economics 

of nuclear reactors—i.e. large up front 

capital costs and low marginal operating 

costs—incentivize operators to operate 

more or less continuously. Compared to 

the opportunity cost of an extended 

period where the reactor is not 

generating electricity, fuel costs are 

relatively small. Typically, fuel costs are 

about 1 cent per kilowatt hour 

generated, while the market value of the 

electricity is between 5 and 8 cents per 

kilowatt hour. 

An increase in prices generally 

indicates a tightening of supply relative 

to demand. That signal can encourage 

reactor operators to increase, rather than 

decrease, long-term contracting to 

ensure future fuel supplies in the face 

of the anticipated tightening. The 

additional cost of a high-priced contract 

may be less important than the avoided 

risk of not having enough fuel. As a 

possible example of such behavior, 

long-term contracting for uranium 

concentrates increased significantly in 

2005 and remained high in 2006 and 

2007 as prices rose from approximately 

$20 per pounds in 2004 to over $90 in 

2007; long-term contracting activity 

then fell in 2008 and 2009 as term 

prices fell from above $90 to closer to 

$60. 

In the long term, elasticity of demand 

for nuclear fuel would reflect decisions 

about whether to construct new reactors 

or shut down existing reactors in 

response to long-run prices for fuel. 

This contribution to elasticity is likely 

to be small. Because fuel costs are such 

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18 Variable costs are higher for fossil fuel 

technologies by a factor of 4 for natural gas, and by 

a factor of almost 3 for conventional coal. The only 

technologies with lower variable costs are 

geothermal, wind, solar, and hydro. Id. 

19 DOE tasked ERI to assess the potential effects 

on the domestic uranium mining, conversion, and 

enrichment industries of the introduction into the 

market of DOE excess uranium inventory. ERI’s 

analysis of these effects is contained in the 2015 ERI 

Report. ERI’s analysis is based in part on 

information it collects to develop its forecasts for 

annual reactor requirements, uranium demand, and 

uranium production. ERI develops these forecasts 

for various customers. The references to 

information from ERI in Section II are generally 

based on this type of information rather than on 

ERI’s economic analysis of these data specifically 

for DOE. Because of ERI’s expertise in the uranium 

markets and contacts with market participants, DOE 

believes ERI’s general market information is 

reliable. 

20Louisiana Energy Services, LLC, now a 

subsidiary of URENCO, submitted a license 

a small portion of the overall cost of 

nuclear power, even a large increase in 

fuel price would be unlikely to 

significantly affect decisions about new 

reactor construction. Meanwhile, for 

existing reactors the capital costs are 

‘‘sunk.’’ And ongoing variable fuel costs 

for nuclear power are, at current prices, 

lower than for most other types of 

generation.18 Thus, among existing 

plants, it would take a very large 

increase in the cost of fuel to influence 

a decision about whether to shut down 

a reactor early. 

As noted above, plans for reactor 

construction do change over time, so 

that uranium requirements will evolve 

over time. Demand for uranium is not 

constant. However, the changes in longterm demand are unlikely to be 

responses to uranium price signals. For 

these reasons, the analysis below will 

assume that medium- and long-term 

demand has low elasticity. 

D. The Nature of Uranium Supply 

1. Primary Versus Secondary Supply 

As explained above, supply of 

uranium concentrates, conversion, and 

enrichment includes both primary and 

secondary supply. According to charts 

developed by uranium market 

consultancy ERI, total production of 

uranium concentrates in 2015 and 2016 

will be approximately 190 million 

pounds U3O8. 2015 ERI Report, 9.19

Secondary supply is expected to total 

approximately 40 million pounds, about 

20% of the total. Over half of secondary 

supplies of uranium concentrates come 

from enricher underfeeding and tails reenrichment. Other sources of secondary 

supply include DOE inventory, 

plutonium/uranium recycle (MOX), and 

other commercial inventories. 2015 ERI 

Report, 80. Prior to 2014, the natural 

uranium component of LEU delivered 

under the Russian HEU Agreement 

represented a significant source of 

secondary supply. This program ended 

in 2013. Consequently, natural uranium 

from Russian HEU is no longer a 

significant source of secondary supply. 

For conversion services, ERI expects 

that primary supply in 2015 and 2016 

will total approximately 65 million kgU 

as UF6, with secondary supply 

representing between 15 and 16 million 

kgU or about 25%. 2015 ERI Report, 14. 

As with uranium concentrates, over half 

of secondary supplies of conversion 

come from enricher underfeeding and 

tails re-enrichment. Other sources of 

secondary supply include DOE 

inventory, plutonium/uranium recycle 

(MOX), and other commercial 

inventories. Id. 

For enrichment services, ERI expects 

that primary supply in 2015 and 2016 

will total approximately 63 million 

SWU, with secondary supply 

representing between 4 and 5 million 

SWU or about 8%. 2015 ERI Report, 16. 

Unlike uranium concentrates and 

conversion services, underfeeding and 

tails re-enrichment do not constitute a 

secondary supply of enrichment 

because those processes utilize 

enrichment capacity. Sources of 

secondary supply of enrichment include 

DOE inventory, plutonium/uranium 

recycle (MOX), and other commercial 

inventories. Id. 

2. Price Elasticity of Supply 

Price elasticity of supply measures 

how the quantity supplied of a good or 

service responds to a change in price. If 

suppliers are highly responsive to 

changes in price, supply is relatively 

elastic. If suppliers are weakly 

responsive to changes in price, supply 

is relatively inelastic. 

Enrichment services are relatively 

inelastic, and conversion services are 

complicated by pricing phenomena 

described below. With respect to 

uranium concentrates, the level of 

elasticity in the uranium markets varies 

depending on the time frame, just as 

demand elasticity does. 

a. Short Term 

In the short term, supplies of uranium 

concentrates from primary producers 

are relatively inelastic. There is some 

limited capability for mines to decrease 

production. Conventional mines may 

choose to continue operation and 

stockpile uranium ore without milling it 

into yellowcake. ISR mines require 

constant development of new wellfields; 

these mines may slow production 

gradually by slowing wellfield 

development. These measures may take 

many months. Thus, in the short term, 

mines will be weakly responsive to 

changes in price. In contrast, secondary 

sources of uranium concentrates may 

respond more to changes in price. 

Underfeeding and tails re-enrichment, 

for example, depend on the relationship 

between SWU and uranium concentrate 

prices. In the short-term, enrichers 

cannot increase or decrease capacity, 

but they can quickly shift how much 

capacity is devoted to underfeeding 

versus primary enrichment. 

Primary supply of conversion services 

is relatively inelastic in the short term. 

Conversion plants typically have high 

fixed production costs. Thus, there is 

relatively little incentive to change 

production in response to changes in 

price. (As discussed below, conversion 

supply has fluctuated in recent years; 

but those changes were not necessarily 

caused by price changes.) Secondary 

supplies of conversion, however, are 

more able to respond to changes in 

price. Underfeeding and tails reenrichment results in natural UF6, 

which includes both uranium 

concentrates and conversion services. 

Since the price of uranium concentrates 

is a larger proportion of the value of that 

UF6, secondary supplies of conversion 

from these two sources can be expected 

to respond more strongly to the uranium 

concentrates price than to the 

conversion price. 

Primary supply of enrichment is also 

relatively inelastic in the short term. As 

discussed above, enrichers typically 

cannot remove machines from 

production due to technical concerns. 

Enrichers also cannot bring additional 

machines online in the short term to 

respond to changes in price because it 

takes several years to add new 

machines. Secondary supply of 

enrichment is a smaller proportion of 

the total supply than for uranium 

concentrates or conversion services. In 

addition, enrichers can change the 

amount of capacity devoted to primary 

enrichment as opposed to underfeeding. 

These supplies are more able to respond 

to changes in price. 

b. Medium and Long Term 

In the medium and long term, primary 

supplies of uranium concentrates and 

enrichment should be more elastic than 

in the short term. Producers can develop 

and install additional capacity in 

response to projections that prices will 

increase. These decisions, however, 

typically involve very long time frames. 

It may take several years of active 

development before a new mine may 

begin production. New enrichment and 

conversion capacity may take on the 

order of ten years.20 Alternatively, 

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application for a gas centrifuge enrichment plant in 

late 2003. The facility, known as Urenco USA 

(UUSA), began operation in mid-2010, almost seven 

years after the license application was submitted. 

Given the licensing process, planning for the 

facility would have had to have begun well before 

the license application was submitted. Similarly, 

the timeline for AREVA’s COMURHEX II 

conversion project included feasibility and design 

studies taking place between 2004 and 2007, with 

full production capacity reached in 2015. AREVA, 

‘‘COMURHEX II: Investing for the Future,’’ Nov. 

2010, available at http://www.areva.com/

mediatheque/liblocal/docs/activites/amont/chimie/

plaket%20CXII%20GB%20MD.pdf. 

21EIA defines these contracts as those having one 

or more deliveries to occur after a year following 

contract execution. 

22The Euratom Supply Agency (ESA) also 

publishes spot and term price indicators for U3O8

based on deliveries to EU utilities. These prices are 

published annually rather than monthly or weekly. 

See ESA, ‘‘ESA Average Uranium Prices,’’ http://

ec.europa.eu/euratom/observatory_price.html 

(accessed Mar. 25, 2015). 23UPC is a publicly traded holding company that 

invests substantially all of its assets in uranium. 

UPC’s stated investment strategy is to buy and hold 

uranium rather than actively trading in response to 

short-term shifts in prices. UPC, Investor Update 

Presentation, 17 (Aug. 2014), available at http://

www.uraniumparticipation.com/i/pdf/ppt/UPCInvestor-Update-August-2014.pdf. 

24 In the nuclear industry, the term ‘‘natural,’’ 

with respect to uranium, ordinarily refers to 

material that contains the various uranium isotopes 

in their naturally occurring concentrations—most 

significantly, U–235 at 0.711 wt-%. Uranium can be 

converted into many different physical or chemical 

forms without necessarily altering the isotopic 

concentrations, and in common usage any physical 

or chemical form with the naturally occurring 

concentrations is called ‘‘natural uranium.’’ 

Although the USEC Privatization Act does not 

define the term, it appears to use ‘‘natural uranium’’ 

in accordance with its customary technical 

meaning. In particular, section 3112(a) refers to 

‘‘natural uranium concentrates’’ and ‘‘natural 

uranium hexafluoride’’ as being species of 

‘‘uranium.’’ This usage indicates that being 

‘‘natural’’ is a characteristic that cuts across 

chemical and physical form, and confirms that 

‘‘natural’’ does not refer to the form in which 

uranium is found in nature (uranium ore). 

Moreover, section 3112(d) establishes prerequisites 

for a transfer of ‘‘natural uranium.’’ If ‘‘natural 

uranium’’ were only a particular physical or 

chemical form, the Department would be permitted 

to transfer other forms of uranium without regard 

to the section 3112(d) conditions. For example, if 

‘‘natural uranium’’ meant uranium concentrates, 

DOE need not make a section 3112(d)(2) 

determination before transferring uranium 

hexafluoride. DOE believes such a limited 

understanding of ‘‘natural’’ would not best serve the 

purposes of section 3112. Accordingly, DOE 

understands ‘‘natural uranium’’ to refer to the 

isotopic concentrations, regardless of the physical 

or chemical form. 

One commenter has argued that section 3112 

does not permit DOE to transfer uranium 

hexafluoride (except pursuant to section 3112(b)). 

According to the commenter, ‘‘natural uranium’’ as 

used in section 3112(d) does not include uranium 

hexafluoride, at any isotopic concentration. For the 

reasons just given, DOE interprets ‘‘natural 

uranium’’ section 3112(d) to encompass transfers of 

uranium hexafluoride with the naturally occurring 

isotopic concentrations. 

producers can reduce production and 

accelerate plans to retire capacity if 

prices are projected to decrease. 

URENCO, for example, has chosen to 

retire enrichment capacity at its 

European facility without replacement. 

See 2015 ERI Report, 16. 

E. Uranium Prices 

Uranium markets function in two 

ways, broadly speaking: Short-term 

deliveries, called the spot market, and 

longer-term commitments, called the 

term market. 

1. Spot and Term Prices 

For all three markets discussed here, 

there is a price for an immediate 

delivery, called the spot price, and a 

price for long-term contractual 

commitments, commonly called the 

term price. The vast majority of 

purchases on these markets are through 

term contracts. According to data from 

EIA, over 80% of purchases of uranium 

by U.S. owners and operators of nuclear 

power reactors in 2013 were through 

term contracts.21 EIA, 2013 Uranium 

Marketing Report, 3 (2014). In addition 

approximately 97% of enrichment 

services purchased by U.S. owners and 

operators in 2013 were through term 

contracts. Id. at 46. EIA does not report 

data on conversion contracts. Ux 

Consulting Company, LLC (UxC), a 

private consulting firm, publishes data 

on spot and term contract volume for 

conversion services. According to UxC, 

deliveries in 2013 under term 

contracts—[REDACTED]. UxC 

Conversion Market Outlook—December 

2014, 36 (2014). In contrast, spot 

contract volume in 2013 [REDACTED]. 

Id. at 26. Thus, term contract deliveries 

represented [REDACTED] of 2013 

deliveries of conversion services. 

Several commenters say that mediumterm futures contracts have increased in 

importance in recent years. Such a 

contract entitles a buyer to delivery of 

material at a future date between one 

and a few years after contract execution. 

The commenters observe that these 

contracts differ from traditional term 

contracts in that they involve one-timeonly deliveries and that buyers 

ordinarily do not use them to secure 

long-term fuel supplies. In a sense, the 

commenters suggest, these contracts 

form an extension of the spot market to 

deliveries up to a few years in the 

future. 

2. Price Information 

Unlike many other commodities, most 

uranium contracts are not traded 

through a commodities exchange. 

Instead, a handful of entities with access 

to the terms of many bids, offers, and 

contracts develop what are called ‘‘price 

indicators’’ based on those transactions. 

Two private consulting firms—UxC and 

TradeTech, LLC (TradeTech)—publish 

monthly spot and term price indicators 

for uranium concentrates, conversion, 

and enrichment. Both also publish 

weekly spot price indicators for 

uranium concentrates.22 Note, however, 

that the UxC and TradeTech indicators 

do not necessarily summarize 

completed transactions. They may be 

based only on offers. The UxC and 

TradeTech price indicators are 

influential; industry practice is 

generally to price sales contracts based 

on one or both of these price indicators. 

There are also a number of related 

published prices for U3O8. These 

include a Broker Average Price (BAP) 

and a Fund Implied Price (FIP), both 

published by UxC. The former is based 

on pricing data from ‘‘commodity style’’ 

brokers that have agreed to provide 

information to UxC and the latter is 

based on the traded value of the 

Uranium Participation Corporation 

(UPC) compared to its uranium 

holdings.23 UxC Uranium Market 

Outlook—Q4 2014, 35–37 (2014). 

Futures contracts for U3O8 are also 

traded through CME/NYMEX. Through 

this platform, futures contracts are 

traded with delivery dates ranging from 

a month to five years. See UxC, ‘‘CME/ 

NYMEX Uranium Futures (UX) 

Contract,’’ http://www.uxc.com/data/

nymex/NymexOverview.aspx (accessed 

Mar. 25, 2015); CME Group, ‘‘UxC 

Uranium U3O8 Futures Quotes,’’ 

http://www.cmegroup.com/trading/

metals/other/uranium.html (accessed 

Mar. 25, 2015). 

III. Analytical Approach 

As noted above, section 3112(d) states 

that DOE may transfer ‘‘natural and lowenriched uranium’’ 24 if, among other 

things, ‘‘the Secretary determines that 

the sale of the material will not have an 

adverse material impact on the domestic 

uranium mining, conversion, or 

enrichment industry, taking into 

account the sales of uranium under the 

Russian HEU Agreement and the 

Suspension Agreement.’’ After 

considering this statutory language, 

DOE has developed a set of factors that 

this analysis considers in the section 

3112(d)(2) assessment. 

A. Overview 

The USEC Privatization Act does not 

clearly indicate what kind or degree of 

effect or influence on an industry would 

constitute an ‘‘adverse material impact.’’ 

As discussed below, these words are 

susceptible of many meanings. 

Contextual clues provide some guidance 

in understanding the phrase, but DOE 

has not identified context (such as a 

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25Some commenters objected that the meaning of 

‘‘adverse material impact’’ cannot change 

depending on circumstance. DOE did not suggest 

that it would alter its interpretation of the statutory 

language over time. But statutory interpretation is 

not simply a matter of supplying for one word, like 

‘‘material,’’ a longer recitation drawn from a 

dictionary. Applying a statute to a given factual 

circumstance inevitably involves an exercise in 

interpretation, and no verbal formula developed ex 

ante can answer all questions that may arise. 

Indeed, some phrases are, by their nature, best 

‘‘given concrete meaning through a process of caseby-case adjudication.’’ INS v. Cardoza-Fonseca, 480 

U.S. 421, 446 (1987). ‘‘Adverse material impact’’ is 

such a phrase. 

26 In passing the USEC Privatization Act, 

Congress recognized that DOE would have a 

substantial uranium inventory after privatization. 

Congress included section 3112(d) to ensure that 

DOE could continue to use sales or transfers from 

its uranium inventory as a management tool. See S. 

Rep. 104–173, at 16–17; see also 141 Cong. Rec. 

S6106–07 (daily ed. May 3, 1995) (statement of Sen. 

Domenici). 

statutory definition) that would 

unambiguously settle what an ‘‘adverse 

material impact’’ is. 

Moreover, the meaning of the phrase 

is likely to depend in part on the factual 

context in which it is to be applied.25

Uranium transactions can take myriad 

forms, and the effect of any given 

transaction on any one or all of these 

industries will depend on the facts and 

circumstances at the time of the 

transaction. DOE’s inventory of uranium 

is changing over time, and Congress 

could not have anticipated the specific 

characteristics of every potential 

transaction. Thus, it would be 

unsurprising for the statute to describe 

DOE’s mandate in open-ended terms, 

leaving DOE to elaborate details as and 

when DOE applied the statute over time. 

Thus, the Department will need to 

exercise judgment to develop an 

understanding of ‘‘adverse material 

impact,’’ in its statutory context, as 

applicable to a given potential transfer 

or sale of uranium. Part of that task 

involves establishing an analytical 

framework to form the basis of and 

reach a determination about the impacts 

of DOE’s transfers. The Department is 

responsible for analyzing relevant 

information in light of the statutory text 

and purposes to determine whether a 

particular sale or transfer will have an 

‘‘adverse material impact’’ on the 

domestic uranium mining, conversion, 

or enrichment industry. 

To make that assessment, DOE must 

first articulate what is the ‘‘domestic 

industry’’ for each of these markets. 

DOE interprets the word ‘‘domestic’’ to 

refer to activities taking place in the 

United States, regardless of whether the 

entity undertaking those activities is 

itself foreign. Hence, a facility operating 

in the United States would be part of 

‘‘domestic industry’’ even if the facility 

is owned by a foreign corporation. DOE 

believes that the phrase ‘‘uranium 

mining, conversion or enrichment 

industry’’ includes only those activities 

concerned with the actual physical 

processes of mining, converting, and/or 

enriching uranium. Thus, acting solely 

as a broker for material mined, 

converted, or enriched by other entities 

does not constitute part of the domestic 

‘‘industry.’’ The relevant purpose of 

section 3112(d) is to help preserve, to 

the degree possible, viable mining, 

conversion, and enrichment capacity in 

the United States. That purpose 

depends on the actual operation of 

facilities. To that end, DOE believes 

‘‘domestic industry’’ should also 

include, to some extent, activities to 

develop and activate a facility in the 

United States, even if the facility has not 

yet entered production. 

One commenter suggested that DOE 

should interpret ‘‘domestic . . . 

industry’’ to include secondary 

suppliers and supply chain companies, 

including remediation, reclamation, 

decontamination, decommissioning, 

and waste management. NIPC Comment 

of Fluor B&W Portsmouth (FBP), at 2– 

3. DOE believes that these other entities 

should not be included because doing 

so would not be necessary for the 

purpose noted above of preserving 

viable mining, conversion, and 

enrichment capacity in the United 

States. Participants in those industries 

need various services and supplies to be 

available, but they need not as a general 

matter obtain those services or supplies 

from domestic suppliers. 

Next, DOE elaborates what it means 

for transfers to ‘‘have’’ an ‘‘impact.’’ 

DOE believes that it can appropriately 

fulfill the purpose of the statute by 

reading this phrase to refer to ‘‘impacts’’ 

that have a causal relationship to DOE 

transfers. The overall thrust of section 

3112 is to permit transfers and sales of 

uranium to the degree consistent with 

various policy considerations set forth 

in various paragraphs.26 Section 3112(d) 

calls for the Secretary’s predictive 

judgment, before DOE engages in a 

transaction, whether the transaction will 

have an adverse material impact on the 

domestic uranium industries. The 

notion of causation is implicit in this 

structure. If domestic industries would 

experience a given negative condition 

regardless of whether DOE made a 

particular transfer, it would ill serve the 

purposes of the USEC Privatization Act 

for section 3112(d) to block the transfer. 

Thus, in assessing a given transfer, 

DOE will essentially evaluate two 

forecasts: One reflecting the state of the 

domestic uranium industries if DOE 

goes forward with the transfer, and one 

reflecting the state of the domestic 

uranium industries if DOE does not go 

forward with the transfer. DOE will then 

compare these two forecasts to 

determine the relevant impacts on the 

domestic uranium industries. 

Some commenters agreed that DOE’s 

approach is reasonable. But other 

commenters believed DOE’s approach 

amounted to saying DOE could justify a 

transfer solely on the basis that it has 

less impact than other factors. These 

commenters appear to have 

misunderstood DOE’s analytical 

approach. DOE has not suggested that it 

will compare the impact of its transfers 

to the impact of other factors and 

consider an impact from its transfers 

‘‘material’’ only if it is larger than 

others. Rather, DOE simply believes that 

if a given state of affairs would exist 

whether or not DOE made a certain 

transfer of uranium, that status should 

not be regarded as an ‘‘impact’’ that the 

transfer ‘‘ha[s],’’ for purposes of section 

3112(d). Other comments argued that it 

should not be relevant whether a given 

negative outcome for domestic industry 

would occur independent of DOE’s 

transfers. DOE disagrees. If, for example, 

a set of industry participants have 

halted plans to invest in production, 

and they would maintain that position 

with or without DOE transfers, it is 

appropriate under section 3112(d) to 

conclude that the transfers do not 

‘‘have’’ the abandoned investments as 

an ‘‘impact.’’ 

Commenters also suggested that DOE 

should not try to ‘‘justify’’ transfers on 

the ground that DOE transfers ‘‘are not 

the driver of the current negative state’’ 

of domestic uranium industries. 

Whether DOE’s transfers are the 

‘‘driver’’ of an industry’s current state is 

not directly at issue. The statute uses 

the future tense; it directs DOE to 

determine, before a transfer, that the 

transfer ‘‘will not have an adverse 

material impact.’’ Thus, DOE’s task is to 

make a prediction, before engaging in a 

transfer, about what consequences will 

flow from that transfer in the future. 

What contribution past transfers have 

made to the existing situation can be 

important for informing DOE’s 

predictive judgment, and this analysis 

appropriately considers such matters. 

But whether or how DOE’s past transfers 

caused or contributed to current 

circumstances is not, itself, the question 

that section 3112(d) poses. 

DOE recognizes that causation can be 

difficult to determine, especially with 

respect to something as complex as a set 

of three interlocking markets and 

industries being possibly affected by 

DOE transactions that may vary over 

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27Sales under the Russian HEU Agreement 

ceased at the end of 2013. 

time. It will often not be possible to 

have certainty that past transfers did or 

did not cause a present state of affairs, 

and it will be less certain that a possible 

future outcome was actually the result 

of DOE transfers. Accordingly, DOE 

does not interpret the statute to require 

certainty about what impacts its 

transfers will or will not have. DOE will 

regard its transfers as having as impacts, 

for purposes of section 3112(d), the 

consequences that can reasonably be 

attributed to the transfers. 

DOE also notes that the statute directs 

DOE’s attention to the ‘‘impact’’ on 

‘‘industry.’’ Consistent with common 

understandings of these words, DOE 

believes a section 3112(d) analysis 

should address the actual effects on 

each industry. A set of transfers may 

have various influences on a given 

market (for uranium, conversion, or 

enrichment), but section 3112(d) does 

not instruct DOE to assess effects on the 

markets. Of course, market effects will 

be the most common mechanism 

through which transfers have impacts, if 

any, on domestic industry. But DOE will 

focus ultimately on the impacts to 

industry, rather than the market effects 

in the abstract. For example, if a 

hypothetical domestic company had 

locked in prices for the next ten years 

in long-term contracts, a decrease in 

prices during that time would not have 

an adverse impact on that company. 

Indeed, the price decrease could 

ultimately be beneficial to that 

company, if competitors were more 

exposed to and thus suffered greater 

harm from the price change. 

With respect to assessing whether the 

adverse impacts of a transfer would be 

‘‘material,’’ DOE observes that the word 

‘‘material’’ is used to denote situations 

‘‘of real importance or great 

consequence.’’ See Webster’s Third New 

International Dictionary 31, 1392 

(1961). How large consequences must be 

to qualify as ‘‘material’’ varies in 

different legal contexts. In light of the 

overall goals and structure of the USEC 

Privatization Act, DOE takes ‘‘adverse 

material impact’’ to mean harms that go 

beyond the effects of normal market 

fluctuations, such as those that threaten 

the viability of an industry. 

As noted above, one purpose of the 

USEC Privatization Act was that DOE 

should manage and eventually dispose 

of the large legacy inventory that the 

privatization of USEC would leave it. In 

privatizing the United States 

Enrichment Corporation, Congress 

recognized that DOE would have 

uranium inventory left over and that 

this inventory would have substantial 

economic value. By including section 

3112(d), Congress preserved the 

Secretary’s discretion to utilize uranium 

transfers as a tool in managing the 

uranium inventory, and the substantial 

value embodied therein. If Congress had 

not wanted DOE to make productive use 

of its inventory, it could have prohibited 

all sales by the Department with or 

without a determination. Instead, the 

USEC Privatization Act explicitly 

directed DOE to transfer various 

quantities of uranium to market 

participants and permitted certain other 

transfers. 42 U.S.C. 2297h–10(b)(2), (c) & 

(e). 

Section 3112 also provides helpful 

context that indicates the magnitude of 

industry impact that Congress 

considered acceptable. The statute 

specifically authorized material 

delivered under the Russian HEU 

Agreement to enter the U.S. market 

notwithstanding a preexisting 

suspension agreement limiting the entry 

of this material. 42 U.S.C. 2297h– 

10(b)(3), (5)–(7). The act contained 

annual limits on deliveries of the 

natural uranium content of the Russian 

material. The limits started at 2 million 

pounds U3O8 equivalent in 1998, and 

increased by 2 million pounds each year 

reaching a maximum of 20 million 

pounds U3O8 equivalent in 2009 and 

each year thereafter. 42 U.S.C. 2297h– 

10(b)(5).27 For comparison purposes, 

this last figure represented over four 

times the volume of U3O8 produced at 

U.S. mines in 1996, the year the statute 

was passed. EIA, Domestic Uranium 

Production Report (2005). The size of 

this explicit authorization informs 

DOE’s understanding of what impacts 

Congress would have regarded as 

‘‘material.’’ It seems unlikely that 

Congress would have authorized in 

section 3112(b) transfers that would 

have been inconsistent with the policy 

goals of section 3112(d). 

Indeed, the structure and legislative 

history of section 3112(b) confirm that 

the schedule for Russian material’s 

entering domestic markets reflects 

Congress’s balancing of concerns similar 

to those that motivated section 

3112(d)(2). Congress could have simply 

allowed all Russian material into the 

United States without limitation. 

Instead, Congress provided a schedule 

that ramped up over a period of 20 

years. Congress evidently balanced the 

competing concerns of providing a 

market for down-blended Russian HEU 

and protecting the domestic uranium 

industries from large-scale disruption. 

The schedule outlined in section 

3112(b) reveals the level of market 

interference that Congress believed 

struck that balance. This notion is 

further confirmed by the legislative 

history of this provision, which 

specifically states that Congress was 

trying to balance the interests in 

maintaining the Russian HEU 

Agreement with the interests of the 

domestic uranium industries. See S. 

Rep. 104–173, at 14. Further, the 

legislative history explains that the 

schedule of maximum deliveries was 

designed to protect against disruptions 

to the uranium markets by providing a 

‘‘reasonable, predictable, and measured 

introduction of this Russian material 

into the domestic uranium market.’’ Id. 

at 28. 

The preceding discussion is not 

intended automatically to support 

transfers of up to 20 million pounds 

under section 3112(d). DOE must 

exercise judgment as to whether a given 

set of transfers would cause an adverse 

material impact, in light of market and 

industry conditions today. However, 

DOE believes that this provision 

provides some insight into what scale of 

market interference Congress considered 

acceptable and expected would not 

cause ‘‘adverse material impact.’’ 

B. Comments on DOE’s Interpretation of 

Section 3112(d)(2) 

Several commenters stated their belief 

that DOE’s understanding of ‘‘material’’ 

sets an impermissibly high bar and 

would make the section 3112(d)(2) 

restriction meaningless. NIPC 

Comments of ConverDyn, at 3; NIPC 

Comment of UPA, at 3. DOE clarifies 

that it does not read section 3112(d)(2) 

to mean that an impact must threaten 

the viability of an industry to be 

‘‘material.’’ That example illustrates a 

type of impact that would be material, 

but other impacts could, depending on 

the circumstances, also be material. 

Exactly what impacts would rank as 

‘‘material’’ cannot be specified in 

advance; as noted above, ‘‘adverse 

material impact’’ is a phrase the 

meaning of which is best developed by 

applying it to specific situations, as in 

the analysis below. DOE does believe 

that ‘‘adverse material impact,’’ in 

section 3112(d)(2), should be taken to 

mean harmful effects of great 

consequence, and it adheres to the view 

that effects comparable to what would 

result from ordinary market fluctuations 

will usually not qualify as ‘‘material.’’ 

As the example of the Russian uranium 

supply authorized by section 3112(b) 

illustrates, Congress contemplated that 

the government would affect uranium 

markets to a substantially greater extent 

than do commercial market participants. 

In addition, the USEC Privatization Act 

left DOE with a large inventory of 

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28 DOE has identified one type of transfer for 

which the impacts, if any, may truly be de minimis, 

namely the transfers of high-assay LEU for research 

reactors mentioned above in section I.D.2.e. The 

rarity of this circumstance demonstrates the point. 

surplus uranium. Section 3112 reflects 

an intent to enable DOE to reduce that 

inventory—and the associated storage 

costs the government bears—while 

making productive use of the uranium, 

so long as the domestic industries are 

adequately protected from harm. That 

framework does not suggest that DOE 

should be limited to the scale of 

participation of a typical commercial 

market participant. 

Some commenters also stated that 

‘‘material’’ should mean any impact that 

is greater than de miminis. NIPC 

Comment of ConverDyn, at 4; NIPC 

Comment of UPA, at 3–4. This 

suggestion is at odds with ordinary 

methods of statutory interpretation. 

Because an effect that was only de 

minimis would not really be an adverse 

impact at all, the word ‘‘material’’ 

would add little if it simply reinforced 

the point that section 3112(d) is 

concerned only with non-trivial effects. 

In addition, the suggested interpretation 

would make section 3112(d) largely 

irrelevant to DOE transfers as a practical 

matter. Nearly every transfer has some 

nontrivial impact on some segment of 

the industry; if DOE could transfer 

uranium pursuant to section 3112(d) 

only when the forecast impacts were de 

minimis, it would make use of section 

3112(d) rarely if at all.28 DOE believes 

section 3112(d) was meant to be a 

practical mechanism for managing the 

uranium inventory subject to certain 

constraints, not a restriction so severe it 

becomes a virtual dead letter. Consistent 

with that view, section 3112(e)(2) 

permits DOE to transfer enriched 

uranium in any quantity to any person 

‘‘for national security purposes.’’ It 

would be odd for Congress to commit 

such open-ended authority to DOE, with 

such extensive discretion, for one type 

of transfer, while simultaneously 

constricting section 3112(d) transfers to 

essentially zero. For these reasons, DOE 

rejects the suggestion that any impact 

that is more than de minimis is material. 

Commenters also cited examples of 

other meanings of ‘‘material,’’ 

particularly in statutes that include 

definitions for the term. There is no 

such definition in the USEC 

Privatization Act, however. These 

examples confirm that ‘‘material’’ can 

have a variety of meanings, depending 

on context, but are of little help for 

identifying a specific meaning for the 

phrase ‘‘adverse material impact’’ in the 

particular context of section 3112(d)(2). 

Commenters also contended that 

DOE’s transfers would have material 

impacts because they would affect 

prices or profits by a given percentage. 

To the extent commenters tied these 

claims to specific arguments why the 

given numerical effects are material in 

current circumstances, DOE addresses 

those arguments below. However, some 

commenters appear to believe that a 

change in price or profits is material 

solely because it exceeds some 

threshold percentage. DOE does not 

believe such rigid formulas are 

appropriate. First, as discussed above, 

DOE’s task under section 3112(d)(2) is 

to predict impacts on the domestic 

industries, not just market effects. How 

much a given change in price affects an 

industry depends on the circumstances, 

including the degree to which industry 

members are exposed to that price 

change. Second, whether a given impact 

is material will generally depend on the 

circumstances as well. As a hypothetical 

example, suppose a transfer had the 

consequence of forcing a production 

facility to close. That outcome might not 

rank as a material impact on the 

industry if the facility were one out of 

fifteen facilities industry-wide and the 

others were in good financial condition. 

With respect to the relationship DOE 

observes between section 3112(d) and 

uranium permitted under the Russian 

HEU Agreement, several commenters 

objected to DOE’s observation, for 

several reasons. NIPC Comments of 

ConverDyn, Uranerz, and UPA. Some 

argued that the language in section 

3112(d)(2) directing DOE to ‘‘take 

account’’ of the Russian HEU Agreement 

was meant only to ensure the viability 

of the Agreement. Under this view, 

section 3112(b) was the more important 

provision because it permitted the 

reduction of weapons stockpiles. 

Congress knew that section 3112(b) 

sales might severely disrupt domestic 

industries, and, the argument continues, 

it did not want section 3112(d) transfers 

to interfere with the process by 

disrupting them further. To that end, 

these commenters say, the statute 

directed DOE to bear the section 3112(b) 

sales in mind in making section 3112(d) 

determinations, so that DOE transfers 

would not ‘‘get in the way’’ of the 

Russian HEU Agreement. 

The commenters’ interpretation of the 

‘‘taking account’’ language seems 

unduly constrained. Section 3112(d)(2) 

does not, by its terms, indicate that 

DOE’s goal in taking account of Russianorigin uranium sales should be to 

facilitate or preserve those sales. To be 

sure, as commenters note, the successful 

implementation of the Russian HEU 

Agreement was an important policy goal 

of section 3112. However, the ‘‘taking 

account’’ clause also covers sales under 

the Suspension Agreement. Congress is 

unlikely to have had as strong an 

interest in ensuring the success of the 

Suspension Agreement, because it was 

simply the settlement of a trade dispute 

regarding Russian uranium producers. 

The mention of the Suspension 

Agreement supports DOE’s view that it 

should ‘‘tak[e] account’’ of the two 

categories of Russian-origin uranium in 

various ways that depend on the 

circumstances. When sales of uranium 

under the two Agreements are high, that 

contribution to supply should be an 

important consideration when DOE 

makes a determination under section 

3112(d)(2). When sales under the 

Agreements decrease, that decrease in 

supply can also be important to a 

determination. 

Some commenters pointed out that 

market participants took steps to 

mitigate the effects of section 3112(b) 

sales, for example by committing the 

uranium on long-term contracts. DOE 

recognizes that the practical 

consequences of section 3112(b) were 

not as significant as section 3112(b) 

would have permitted. In addition to 

the mitigation efforts commenters 

described, the actual amounts delivered 

have generally been lower than the 

section 3112(b) caps. But as DOE 

stressed in the Notice, it does not 

believe the comparison to section 

3112(b) leads to the conclusion that any 

transfers short of 20 million pounds per 

year would be permissible under section 

3112(d). Section 3112(d) directs DOE to 

predict the actual impacts of transfers, 

in current conditions; DOE does not 

seek to rely on a numerical trigger like 

20 million pounds. Rather, the 

comparison to section 3112(b) informs 

DOE’s understanding of what degree of 

impact is ‘‘material’’ in the section 

3112(d) sense. 

It also bears mention that DOE’s use 

of the section 3112(b) caps to inform 

interpretation of section 3112(d)(2) is 

not the mechanism by which DOE 

‘‘tak[es] account of the sales of 

uranium’’ under the two Russian 

Agreements. As commenters point out, 

the sales that have actually occurred 

under the Russian HEU Agreement were 

smaller than what section 3112(b) 

permitted. DOE takes account of these 

sales—as well as those under the 

Suspension Agreement—in its analysis, 

below, of impacts on the domestic 

uranium industries. Apart from that 

analysis and the amounts of actual sales, 

DOE considers the volumes that 

Congress authorized in section 3112(b) 

to be informative for understanding 

what degree of consequence would 

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29One commenter suggested the possibility of 

waiver of future Secretarial Determinations if DOE 

would maintain such a cap. NIPC Comment of 

Cameco, at 3. The commenter did not suggest who 

might waive DOE’s obligation to perform a 

determination before a transfer pursuant to section 

3112(d). The statute imposes that duty and does not 

seem to provide a mechanism for it to be waived. 

30Commenters argue it was impermissible for 

DOE to eliminate the ‘‘cap’’ they say the 2008 Plan 

imposed. DOE does not regard the 2008 plan as 

having prescribed a strict cap on transfers. The plan 

itself said only that transfers below ten percent of 

annual U.S. reactor requirements would generally 

not be an adverse material impact. It did not 

purport to prohibit DOE from making section 

3112(d) determinations for transfers above that 

amount. Moreover, the 2008 Plan specifically stated 

that DOE may transfer more than the 10 percent 

figure for certain purposes. 2008 Policy Statement, 

at 2. DOE announced in July 2013 that it would no 

longer utilize that guideline. 2013 Plan, at 2. 

constitute an ‘‘adverse material impact.’’ 

The section 3112(b) limits would be 

relevant in that regard even if section 

3112(d) lacked the ‘‘taking account’’ 

clause. But the inclusion of that clause 

confirms DOE’s view because it 

indicates that Congress legislated the 

two provisions congruently. 

Section 3112(b) itself provides further 

evidence in support of that conclusion. 

It directs the President to monitor sales 

under the Russian HEU Agreement and 

report on any actions the President 

proposes to take ‘‘to prevent or mitigate 

any material adverse impact’’ the sales 

might have on the domestic uranium 

industries. But it does not require any 

particular presidential action. Thus, 

Congress evidently intended section 

3112(b) sales not to have material 

adverse impacts but realized that they 

might. Notably, the possibility of 

material impact was uncertain enough 

that Congress deemed it unnecessary to 

mandate any preventative steps. Taken 

together, the structure of section 3112(b) 

suggests that ‘‘material’’ impacts refers 

to consequences of such significance 

that they might or might not result from 

sales at the rates section 3112(b) 

contemplated. 

In general, commenters on this topic 

suggest that by instructing DOE to 

‘‘tak[e] account’’ of sales under the 

Russian HEU Agreement, section 

3112(d) meant to limit DOE’s sales in 

light of the impact of the Agreement. 

These commenters argue that in the past 

DOE implicitly viewed the ‘‘taking 

account’’ clause as such a limit; 

Secretary Richardson placed a 10-year 

moratorium on transfers of Russianorigin uranium hexafluoride in DOE’s 

inventory. DOE agrees that the ‘‘taking 

account’’ language can limit DOE’s 

transfers: To the extent that sales under 

the Russian HEU Agreement are causing 

impacts on an industry, DOE must 

consider those impacts when assessing 

the possible impacts of a transfer it 

contemplates pursuant to section 

3112(d). The discussion above is 

consistent with that view. 

Finally, commenters argued that 

section 3112(b) sales have less impact, 

relative to the amount of uranium, than 

DOE’s section 3112(d) transfers because 

they are capped, predictable, and 

transparent. DOE notes that the cap was 

10 million pounds in 2002 and has now 

increased to 20 million pounds. Neither 

DOE’s section 3112(d) transfers nor the 

section 3112(b) sales have ever reached 

those scales, so it seems unlikely that 

simply having the cap would make a 

difference to the actual economic 

impact of the transactions. DOE does 

recognize that the predictability of 

supply is an important factor, and 

predictability or lack thereof can 

increase or decrease the impact of a 

program of transfers. The analysis below 

considers this factor. With respect to 

transparency, as distinct from 

predictability, DOE believes it provides 

at least as much public notice about 

planned section 3112(d) transfers as was 

available for section 3112(b) sales. The 

Department publicly announces its 

determinations, each of which reflects 

an amount actually to be transferred; 

and the Department has published an 

accounting of the quantities of uranium 

it has available for transfer. By contrast, 

section 3112(b) sales happened through 

a private entity that had no obligation to 

release data publicly about sales. The 

statutory limit on sales, being much 

larger than the sales that actually 

occurred, provided little information 

about how sales of Russian uranium 

would affect the markets in practice. 

One commenter pointed out that 

Russian-origin material continues to be 

available from commercial sources. 

NIPC Comment of ConverDyn, 

Enclosure, at 4. DOE believes this 

commenter was referring to the 2008 

amendment to the Suspension 

Agreement discussed in Section I.D.3.b. 

DOE will take account of any sales 

under the Suspension Agreement in the 

analysis below. 

Several commenters suggested that 

DOE should utilize a quantitative 

annual cap on transfers. Although the 

specific proposals varied, several 

suggested a rate of approximately 5.0 

million pounds U3O8 per year. E.g. RFI 

Comment of UPA, at 9; RFI Comment of 

ConverDyn, at 8; NIPC Comment of 

Cameco, at 2–3.29

These commenters appear to have two 

chief reasons for their proposal. First, 

the commenters seem to think the 

various limits they propose are, in fact, 

the outside bounds of what DOE can 

transfer consistent with section 3112(d). 

Thus they would have DOE keep 

transfers below their preferred limits to 

avoid material impacts. However, DOE 

does not believe a quantitative trigger— 

whether implemented as an annual cap 

or only as a guideline—is a necessary or 

appropriate way to analyze whether 

DOE transfers will cause adverse 

material impacts. In the past, DOE has 

stated that, as a general matter, the 

introduction into the domestic market of 

uranium in amounts that are less than 

ten percent of the annual fuel 

requirements for U.S. nuclear power 

plants should not have an adverse 

material impact on the domestic 

uranium industries.30 See 2008 Policy 

Statement, at 2; 2008 Plan, at ES–1. In 

July 2013, DOE noted that DOE’s 

experience between 2008 and 2013 led 

it to determine that DOE ‘‘can meet its 

statutory and policy objectives in regard 

to DOE uranium sales or transfers 

without an established guideline.’’ In 

addition, DOE noted that in light of the 

two-year limit on the validity of a 

determination under section 3112(d), an 

established guideline was no longer 

necessary. 2013 Plan, at 2. DOE further 

notes that the global nature of the 

markets for uranium concentrates, 

conversion services, and enrichment 

services suggests that a focus on U.S. 

reactor needs will not adequately 

capture the impact on domestic 

industries. DOE therefore adheres to the 

views it expressed in 2013. It further 

notes that what impacts would be 

material will depend on the 

circumstances expected to prevail at the 

time of a transfer, and what impacts a 

transfer has will depend on those 

circumstances as well as on the details 

of the transfer. A simple rule that 

transfers below a certain amount are 

acceptable and those above are not 

would be inaccurate. In some 

circumstances, a transfer below the 

trigger could actually cause an adverse 

material impact to one or more of the 

domestic uranium industries; and in 

some circumstances a transfer above the 

trigger would actually not cause adverse 

material impacts. Rather than commit 

itself to a course that risks both types of 

inaccuracy, DOE prefers to perform the 

relevant analysis for each 

determination. 

Commenters also urge DOE to 

maintain a cap because they believe 

long-term certainty about the maximum 

scale of transfers would mitigate the 

impact of the transfers and help 

industry attract investors. DOE 

recognizes that certainty and 

predictability are important for planning 

investments and industrial activities, 

especially in industries like the uranium 

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31One commenter takes issue with DOE’s 

assertion in the NIPC that many domestic producers 

are part of multiline businesses, so that their share 

prices are not related solely to uranium markets. 

The commenter does not dispute DOE’s related 

observations that share price reflects myriad inputs 

such as the nature of company management, gearing 

ratio (debt vs. equity), inflation, and the particular 

risks associated with the uranium market (such as 

the influence of political changes, like the shift in 

energy policy in Germany, or public responses to 

nuclear accidents). Because of this complexity, it is 

difficult to meaningfully attribute a change in a 

company’s share price to DOE transfers; and it is 

also not fully meaningful to predict how a given 

change in share price will affect investment 

decisions. Indeed, while the commenter contends 

that ERI’s report shows market capitalization to be 

tied to market prices, in fact ERI notes that 

producers’ share prices have not reacted to recent 

price increases as much as could be expected based 

on the rough correlation between share prices and 

market prices in the aftermath of the Fukushima 

disaster. For these reasons, DOE remains convinced 

that analyzing the economic case for investments in 

new production is a more reliable and appropriate 

method for assessing the impact of transfers than 

would be a focus on share prices. 

industries where developing new 

facilities can take many years. At the 

same time, DOE needs some degree of 

flexibility for transferring uranium as 

appropriate—and consistent with 

section 3112—in support of its various 

missions. After balancing the value of 

certainty for fostering industrial 

investment against the mandate to make 

effective use of the excess uranium 

inventory, DOE declines to commit to a 

preset limit on transfers. 

C. Factors Under Consideration 

For these reasons, DOE believes that 

whether the effects of a given transfer 

constitute an ‘‘adverse material impact’’ 

should not depend on a quantitative 

bright-line test, but rather should be 

based on an evaluation of potential 

impacts by examining a number of 

factors. Accordingly, this analysis 

considers the effects of DOE transfers 

using the following six factors: 

1. Prices 

2. Production at existing facilities 

3. Employment levels in the industry 

4. Changes in capital improvement 

plans and development of future 

facilities 

5. Long-term viability and health of the 

industry 

6. Russian HEU Agreement and 

Suspension Agreement 

While no single factor is dispositive of 

the issue, DOE believes that these 

factors are representative of the types of 

impacts that the proposed transfers 

might have on the domestic uranium 

industries. Not every factor will 

necessarily be relevant on a given 

occasion or to a particular industry; 

DOE intends this list of factors only as 

a guide to its analysis. 

DOE notes two ways that these factors 

differ from the list of factors DOE 

provided in the March 2015 Notice of 

Issues for Public Comment. First, DOE 

has combined the first two factors listed 

in the NIPC, ‘‘market price’’ and 

‘‘realized prices of current operators.’’ 

DOE continues to believe that the effect 

of DOE transfers in these two areas is a 

relevant consideration. However, DOE 

recognizes that market prices, in the 

abstract, will not always be directly 

relevant for assessing the impact on an 

industry. More important will be the 

prices that various industry members 

actually receive for their products or 

services, which under most 

circumstances is a function of both the 

change in price and the contours of the 

various contracts through which 

industry members sell their uranium. As 

DOE’s focus is ultimately the effect on 

industry, it is appropriate to consider 

these two aspects of price together. 

Second, DOE has added a factor 

regarding the Russian HEU Agreement 

and Suspension Agreement. Although 

the analysis below, to a certain extent, 

considers these transfers as part of the 

discussion for all of the factors, DOE 

believes it is appropriate to discuss 

these two Agreements separately as 

well. 

Several comments submitted in 

response to the March 2015 Notice of 

Issues for Public Comment refer to some 

or all of these factors. Uranerz Energy 

Corporation expressed its view that the 

six factors listed in the NIPC provide 

significant context for analyzing the 

impacts to the domestic uranium 

industries. NIPC Comment of Uranerz, 

at 1. Similarly, Fluor B&W Portsmouth 

(FBP), contractor to DOE for cleanup 

services at Portsmouth, noted that these 

factors are ‘‘reasonable and indicative of 

the types of impacts that DOE Transfers 

of Excess Uranium could have on the 

domestic industries.’’ NIPC Comment of 

FBP, at 3. Nuclear Fuel Services, Inc. 

(NFS), which conducts down-blending 

services for DOE through a subcontract 

with WesDyne, suggested that DOE 

should consider the potential impact of 

DOE transfers on the ability of DOE to 

meet nonproliferation and defense 

missions. NIPC Comment of NFS, at 2– 

3. While DOE agrees that these policy 

concerns can be significant to DOE’s 

decision whether to undertake a given 

transfers, DOE does not believe these 

concerns are relevant to the prerequisite 

section 3112(d)(2) finding on whether 

DOE transfers will have an adverse 

material impact on the domestic 

uranium industries. 

ConverDyn states that DOE should 

consider ‘‘displaced sales’’ as a separate 

factor. NIPC Comment of ConverDyn, at 

6. DOE disagrees that this should be 

considered separately. DOE believes 

that displaced sales are an aspect of 

production at existing facilities. Thus, 

these considerations fit within that 

category and do not need to be 

considered separately. ConverDyn also 

commented that DOE appears to give 

double weight to prices by considering 

both ‘‘market price’’ and ‘‘realized 

price.’’ Id. at 7. As discussed above, 

DOE has combined these two concepts 

into a single factor, ‘‘prices.’’ However, 

as discussed above, DOE continues to 

believe it is appropriate to consider the 

effect of DOE transfers on ‘‘market 

price’’ and ‘‘realized price.’’ 

In any case, it bears emphasis that 

DOE does not place extra ‘‘weight’’ on 

price or any other individual factor. 

DOE’s analysis considers all the factors 

taken together as a whole. DOE has not 

assigned specific ‘‘weights’’ to the 

factors. To the extent that some 

considerations overlap multiple factors, 

DOE will take this into account in its 

analysis. ConverDyn also argues that the 

long-term viability and health of the 

industry factor should be ‘‘of minimal 

weight’’ because the Secretarial 

Determinations are only valid for two 

years. Id. at 8. As stated above, DOE has 

not assigned any particular weight to 

each factor. DOE agrees that the relevant 

analysis for this factor should focus on 

the impact of DOE transfers on the longterm viability and health of each 

industry, not simply on the long-term 

prospects for each industry in the 

abstract. Finally, ConverDyn suggests 

that DOE should expressly consider the 

need for domestic capacity to produce 

material for national defense needs. Id. 

DOE notes that section 3112 of the 

USEC Privatization Act implements a 

policy of ensuring, to the degree 

consistent with the statute’s purpose, 

that domestic capacity remains within 

the uranium mining, conversion, and 

enrichment industries. DOE believes 

that section 3112(d), which requires the 

Secretary to determine whether DOE 

transfers will have an ‘‘adverse material 

impact’’ on these industries, itself 

addresses, in part, the national security 

concern ConverDyn mentions. 

In addition to the above discussion, 

several comments in response to the 

December 2014 Request for Information 

suggested additional factors that DOE 

should consider. DOE has chosen not to 

consider those factors in the manner 

commenters suggested, for the reasons 

given in the March 2015 Notice of Issues 

for Public Comment.31

Several commenters also inquired 

whether the analytical method DOE is 

now articulating is consistent with the 

analyses supporting prior section 

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32Although some of these transfers have already 

taken place, DOE nevertheless recognizes they can 

affect the uranium industries in future years. DOE 

believes it is reasonable to view these transfers as 

affecting the market in the years and quantities ERI 

analyzes—typically one year prior to the material 

being reloaded into a reactor for uranium 

concentrates and conversion, and six months prior 

for enrichment. 

33This assessment also takes account of sales of 

uranium under the Russian HEU Agreement and the 

Suspension Agreement. However, these transfers 

are considered as part of the background market, 

and are not part of the ‘‘assessed case.’’ 

3112(d) determinations. While today’s 

approach is broadly tracks DOE’s 

analyses of past transfers, DOE 

recognizes that this analysis elaborates 

in much greater detail than DOE has 

provided before. The level of detail with 

which DOE has performed this analysis, 

the set of factors being considered, and 

the process in which DOE has engaged 

are appropriate for this determination 

for several reasons, including the scale 

of the transfers considered in this 

analysis and the rate at which market 

conditions have changed in the recent 

past. Depending on the circumstances, a 

different approach may be warranted for 

subsequent determinations. 

IV. Assessment of Potential Impacts 

This section assesses the potential 

impacts of DOE transfers at the levels 

and for the purposes described above in 

Section I.D.1. The overall volume of 

transfers for cleanup services at 

Portsmouth and down-blending services 

in each year from 2015 to 2024 is 

provided in Table 3. Although this 

assessment focuses on the impacts of 

transfers in the next few years, parts of 

the analysis make assumptions about 

transfers under these programs in future 

years. 

This assessment assumes that DOE 

transfers for cleanup at the Portsmouth 

Gaseous Diffusion Plant will continue at 

the preexisting rates through the first six 

months of 2015. Beginning in July 2015, 

DOE would transfer at a rate of 1,600 

MTU per year of natural uranium 

hexafluoride. DOE has a finite amount 

of natural uranium hexafluoride. DOE 

anticipates that at this rate, this material 

would be exhausted in the year 2020. 

Transfers for down-blending services 

would decrease to a total of no more 

than 60 MTU of enriched uranyl nitrate 

at an assay of 4.95 wt-% in 2015 and 

each year thereafter. DOE assumes 

transfers for down-blending will 

continue at this rate throughout the next 

10 years Together, the natural uranium 

and LEU to be transferred each year are 

the equivalent of 2,100 MTU contained 

in uranium concentrates, 2,100 MTU as 

UF6 in conversion services, and 520,000 

SWU of enrichment services. 

TABLE 3—VOLUME OF TRANSFERS FOR PORTSMOUTH CLEANUP AND HEU DOWN-BLENDING IN THE ‘‘ASSESSED CASE’’ 

Concentrates 

(MTU/million lbs 

U3O8) 

Conversion 

services 

(MTU as UF6) 

Enrichment 

services 

(SWU) 

2015 ........................................................................................................................... 2,500/6.5 2,500 520,000 

2016 ........................................................................................................................... 2,100/5.5 2,100 520,000 

2017 ........................................................................................................................... 2,100/5.5 2,100 520,000 

2018 ........................................................................................................................... 2,100/5.5 2,100 520,000 

2019 ........................................................................................................................... 2,100/5.5 2,100 520,000 

2020 ........................................................................................................................... 992/2.6 992 520,000 

2021 ........................................................................................................................... 500/1.3 500 520,000 

2022 ........................................................................................................................... 500/1.3 500 520,000 

2023 ........................................................................................................................... 500/1.3 500 520,000 

2024 ........................................................................................................................... 500/1.3 500 520,000 

In addition to the transfers listed in 

Table 3, this assessment also includes 

potential impacts associated with 

transfers that are not subject to section 

3112(d). Specifically, this analysis 

includes prior transfers of depleted 

uranium hexafluoride to Energy 

Northwest, prior and continuing 

transfers to the Tennessee Valley 

Authority of blended low-enriched 

uranium, potential future transfers of 

off-specification uranium, and potential 

future transfers of depleted uranium 

hexafluoride to GE-Hitachi Global Laser 

Enrichment.32 These transfers are 

discussed above in Section I.D.2.33

Collectively, this assessment refers to 

the transfers described above as the 

‘‘assessed case.’’ Consistent with the 

analytical approach described above, 

this section reflects comparison of two 

forecasts: one reflecting the state of each 

domestic uranium industry if DOE goes 

forward with transfers at this level, and 

one reflecting the state of each domestic 

uranium industry if DOE does not go 

forward with these transfers. 

A. Uranium Mining Industry 

The domestic uranium mining 

industry consists of a relatively small 

number of companies that either operate 

currently producing mines or are in the 

process of developing projects expected 

to begin production at some point in the 

near future. These projects are mostly 

concentrated in the western states—in 

recent years, there have been producing 

facilities in Arizona, Nebraska, Utah, 

Texas, and Wyoming. Most uranium 

mining facilities are owned and 

operated by publicly traded companies 

based in the United States or Canada. 

According to DOE’s Energy Information 

Agency (‘‘EIA’’), production from 

domestic producers in 2014 totaled 

approximately 4.9 million pounds U3O8. 

EIA, Domestic Uranium Production 

Report Q4 2014, 2 (January 2015). For 

comparison, the World Nuclear 

Association (WNA) reports that 

worldwide production in 2013 was 

approximately 155 million pounds 

U3O8. 

1. Prices for Uranium Concentrates 

The effect of DOE transfers on prices 

is one of the chief vehicles through 

which the transfers can cause impacts 

on an industry. Accordingly, DOE has 

considered numerous inputs to forecast 

how transfers in the assessed case will 

affect prices. DOE analyzes both market 

prices and the prices that, on average, 

industry actually realizes for its 

products. Realized prices may be more 

significant for assessing the impact of 

transfers, but, as discussed below, they 

are not necessarily the same as market 

prices at any given time. 

As described above, market prices for 

uranium concentrates are generally 

described in terms of the spot price and 

the term price. Although there are other 

types of published uranium prices, 

these two prices are the ones most 

frequently used as the basis for pricing 

terms in contracts for the purchase and 

sale of uranium concentrates. This 

section discusses the potential impacts 

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26386 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

34 DOE further notes that several of the other 

published uranium prices described in Section II.E 

appear to be based—either directly or indirectly— 

on either the spot or term price. To the extent there 

are differences between these and other published 

prices, DOE believes that the behavior of the spot 

and term price is representative of changes its 

transfers may cause in other prices. 

35The market clearing price is the price at which 

quantity supplied is equal to quantity demanded. 

36 In other words, ERI assumes that demand for 

uranium will stay the same regardless of variations 

in market price. 

37Office of Management & Budget, Final 

Information Quality Bulletin for Peer Review, (Dec. 

16, 2004), available at https://www.whitehouse.gov/ 

sites/default/files/omb/assets/omb/memoranda/

fy2005/m05-03.pdf. 

of DOE transfers on these two prices.34

For reference, as of March 30, 2015, 

UxC’s spot price indicator was $39.50 

per pound U3O8 and its term price 

indicator was $49.00 per pound U3O8. 

DOE has reviewed several different 

estimates of the effect of DOE transfers 

on the market prices for uranium 

concentrates based on different 

economic models. These estimates 

appear in market analyses from four 

different uranium market consultants: 

ERI, TradeTech, NAC International 

(NAC), and UxC. DOE has reviewed and 

evaluated to the extent possible the 

methodology, assumptions, data 

sources, and conclusions of each of the 

market analyses. 

a. Energy Resources International Report 

DOE tasked ERI with estimating the 

effect of DOE transfers on the market 

prices for uranium concentrates. In the 

2015 ERI Report, as in previous reports, 

ERI estimated this effect by employing 

two different types of model that rely on 

somewhat different assumptions and 

methods: a market clearing price model 

and an econometric model. For its 

market clearing price model, ERI 

constructs individual supply and 

demand curves and compares the 

clearing price with and without DOE 

transfers.35 To develop its supply 

curves, ERI gathers available 

information on the costs facing each 

individual supply source. ERI then uses 

that information to estimate the 

marginal cost of supply for each source 

using a discounted cash flow model. 

2015 ERI Report, 41 n.22. To develop its 

demand curve, ERI assumes a perfectly 

inelastic demand curve based on its 

Reference Nuclear Power Growth 

forecast.36 ERI develops this forecast by 

combining estimates of the needs and 

reload schedules for operating plants 

with projections about future reactor 

retirements and new development. 2015 

ERI Report, 17–18. The second model 

that ERI used to predict the effects of 

DOE transfers on the spot price for 

uranium is an econometric model. ERI 

compared the monthly spot and term 

market prices published by TradeTech 

with published offers to sell uranium for 

delivery within one year of publication 

and published inquiries to purchase 

uranium for delivery within one year. 

Based on this information, ERI 

developed a multivariable correlation to 

estimate how the market prices would 

respond to the availability of new 

supply from DOE. 2015 ERI Report, 50. 

Several commenters requested that 

DOE subject the 2015 ERI Report to peer 

review. E.g. NIPC Comment of UPA, at 

9; NIPC Comment of ConverDyn, 

Enclosure, at 1. DOE is not obligated to 

subject the 2015 ERI Report to peer 

review. DOE also does not believe the 

lack of peer review is a reason to doubt 

the ERI Report. Peer review is not 

appropriate in all circumstances, 

particularly outside of the scientific 

research context; and market analyses 

like ERI’s are commonly not subject to 

peer review. DOE has reviewed the 2015 

ERI Report for completeness and 

evaluated ERI’s methodology, 

assumptions, and conclusions, 

particularly in comparison to other 

reports submitted by commenters. 

Meanwhile, DOE made the 2015 ERI 

Report available for public review 

through the March 2015 Notice of Issues 

for Public Comment. DOE also made 

public in May 2014 an analogous report 

that ERI prepared to assist the 

deliberations for the 2014 

Determination. The analytical methods 

in the 2015 report are largely the same 

as those ERI used in the 2014 report. 

The public has thus had opportunities 

to offer substantive criticisms of ERI’s 

analyses. One commenter points out 

that the Office of Management and 

Budget has advised that notice-andcomment procedures for agency 

rulemaking would not be considered an 

adequate substitute for peer review. 

DOE notes, however, that the concern 

motivating this advice was that the 

relevant experts may not file comments 

in such a process.37 This concern seems 

less significant here, because 

commenters on the RFI submitted 

reports that three expert uranium 

market consultancies prepared 

specifically to address DOE’s proposed 

transfers. To the extent commenters 

offered critiques of ERI’s work, DOE has 

considered that input in its evaluation 

of the 2015 ERI Report. 

After reviewing the 2015 ERI Report 

and ERI’s explanation of its 

methodology, as well as comments such 

as those that provided additional or 

alternative forecasts of market prices, 

DOE believes that ERI’s first 

methodology described above is 

reasonable for estimating the impact of 

DOE transfers in the long-term. The 

methodology is consistent with common 

economic principles applicable to a 

competitive market. In general in such 

a market, competition from DOEsourced uranium can be expected to 

displace units of supply that have the 

highest marginal cost. Given buyers that 

demand uranium at the lowest price 

available, the displacement of those 

supplies would cause the price to 

decrease towards the highest marginal 

cost of the remaining supplies. 

However, some producers with 

relatively high marginal cost have 

entered into long-term contracts based 

at least partially on fixed price 

mechanisms. Under such 

circumstances, DOE-sourced uranium 

might not immediately displace units of 

supply with the highest marginal cost. 

Over the longer term, these fixed price 

contracts will eventually expire and the 

higher marginal cost producers would 

have to enter into new contracts at the 

then-prevailing market prices. 

Therefore, DOE believes the price for 

uranium concentrates reflects an 

ordinary price-setting mechanism over 

the long term. 

In a market with elastic demand, 

calculating the effect of an addition to 

supply would be more complicated than 

ERI’s analysis. ERI assumes a perfectly 

inelastic demand curve, and in that case 

the ERI analysis is consistent with the 

pricing mechanism just described. As 

stated above, it appears that the 

uranium concentrate market exhibits 

behavior suggesting that demand is 

relatively inelastic, but perhaps not 

completely inelastic. To the extent that 

demand is at all elastic, this would tend 

to dampen the price effect of DOE 

material. However, given that ERI’s 

assumption about the market is 

conservative, in that it will tend to 

produce overestimates of the effect of 

DOE’s transfers on prices, DOE believes 

it is reasonable for achieving the 

purposes of this analysis. 

ERI relies upon an extensive 

collection of data about the production 

costs for various aspects of supply. ERI 

has explained the various sources from 

which it collects data about the different 

primary producers. ERI then applies a 

discounted cash flow analysis to 

determine an expected production cost. 

Where information is not available 

publicly, ERI makes assumptions based 

on information from similar production 

facilities. DOE believes that this 

approach would yield reasonably 

accurate data because most of the 

uranium producers are publicly traded 

companies that must disclose company 

financial and production information to 

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38One commenter suggests that DOE should not 

have tasked ERI to consider specific scenarios; 

instead the commenter states that DOE should have 

asked ERI to evaluate the ‘‘optimal conditions for 

transfers, including how to minimize the adverse 

impact of the transfers on domestic industry while 

also maximizing the benefit to DOE.’’ NIPC 

Comment of ConverDyn, Enclosure, at 9. As the 

impact of DOE transfers depends heavily on the 

specific circumstances, it is unlikely that there is a 

single ‘‘optimal’’ level of transfers. DOE believes a 

more appropriate approach is for DOE to seek out 

information regarding how its uranium transfers 

will affect the domestic uranium industries— 

including through tasking ERI to analyze these 

effects—and then for DOE to assess whether those 

effects amount to an adverse material impact on one 

or more of the domestic uranium industries. 

39Under each of the three scenarios analyzed by 

ERI and the assessed case, the annual rate listed in 

Table 4 represents the rate only until uranium 

available for the Portsmouth cleanup is exhausted. 

Under scenarios 1 and 2 and the assessed case, this 

will occur by 2019, 2021, and 2020, respectively. 

The rates transferred for down-blending are the 

same throughout the study period. 

40Note that to infer the price effect, DOE has not 

simply interpolated the 2,100 MTU figure between 

the annual rate for Scenarios 1 and 2. As discussed 

above, the appropriate time for assigning a price 

effect to a quantity of transferred uranium is the 

time at which it would displace commercial supply. 

In addition, both Scenario 2 and the assessed case 

involve transferring natural uranium more slowly 

than Scenario 1, yet DOE assumes (as ERI did) that 

it will continue transferring natural uranium until 

it exhausts its current inventory. Thus, in Scenario 

2 and the assessed case, the Department will be 

transferring uranium in later years when, under 

Scenario 1, natural-uranium transfers would have 

ceased. The Department’s interpolation reflects 

these calculations. 

regulatory agencies. DOE also notes that 

this approach to data collection about 

the industry appears to be standard 

among similar consulting firms. DOE is 

aware of no errors that would call ERI’s 

data and methodology into question. In 

addition, the cost curve that ERI 

constructed from its data is comparable 

to analogous curves published by its 

industry peers. 

DOE tasked ERI with estimating the 

effects of DOE transfers under three 

scenarios.38 Under Scenario 1, DOE 

would transfer 2,055 MTU per year in 

the form of natural UF6 and 650 MTU 

natural uranium equivalent per year of 

LEU for a total of no more than 2,705 

MTU per year. Under Scenario 2, DOE 

would transfer 1,410 MTU per year in 

the form of natural UF6 and 445 MTU 

natural uranium equivalent per year of 

LEU for a total of no more than 1,855 

MTU per year. Under Scenario 3, DOE 

would transfer no uranium under these 

two programs. The transfer rates in 

these scenarios refer only to the level of 

uranium transfers for cleanup at the 

Portsmouth Gaseous Diffusion Plant and 

down-blending of LEU. For each 

scenario, ERI also analyzes the impacts 

of transfers under the following 

programs: TVA BLEU, Energy 

Northwest depleted uranium, potential 

future transfer of off-specification 

uranium, and a possible future sale of 

depleted uranium currently under 

negotiation. 2015 ERI Report, 21–32. 

The level of transfers across these three 

programs is the same in all three 

scenarios, and ERI’s predictions about 

market price reflect these transfers as 

well as the cleanup services and downblending transfers. 

ERI notes that uranium transfers do 

not necessarily impact the market at the 

time of transfer. In general, the market 

impact will take place at the point in 

time where the transfers displace 

commercial supply. This can be 

estimated based on the expected 

schedule for delivery as reactor fuel. 

Thus, even though most of the TVA 

BLEU and all of the Energy Northwest 

transfers have already taken place, ERI 

estimates that these transfers will affect 

the market at various times in the future 

based on the expected delivery 

schedule. 2015 ERI Report, 21–22. 

Given that these transfers are targeted 

for specific reactors on predictable timeframes, DOE believes it is reasonable to 

assume that these transfers affect the 

market at the point when they displace 

commercial supply. 

The transfer rates analyzed by ERI for 

down-blending services and cleanup at 

the Portsmouth Gaseous Diffusion Plant 

are summarized in Table 4. The 

assessed case is included for reference. 

Transfers under the other three 

programs mentioned above are included 

in ERI’s analysis but are not included in 

this table because they are the same 

under any of the scenarios.39

TABLE 4—DIFFERENT SCENARIOS CONSIDERED IN THIS ANALYSIS

MTU natural uranium equivalent 

Portsmouth 

cleanup Down-blending Total 

ERI Scenario 1 .......................................................................................................... 2,055 650 2,705 

ERI Scenario 2 .......................................................................................................... 1,410 445 1,855 

ERI Scenario 3 .......................................................................................................... 0 0 0 

Assessed Case (2016 and after) ............................................................................... 1,600 500 2,100 

Using its market clearing approach, 

ERI estimates that DOE transfers will 

have the effects listed in Table 5. For 

each year ERI included (2015–2024), the 

relationship between the amount of 

transfers under each scenario and the 

price effect is essentially linear. 

Compare Table 3.6 to Table 4.1 of 2015 

ERI Report, 25–26, 45. This linearity is 

unsurprising, because the slope of ERI’s 

cost curve does not change much as a 

function of supply at the levels of 

current supply. Therefore, the price 

effect of DOE transfers under the 

assessed case can be interpolated from 

ERI’s estimates. Table 5 presents ERI’s 

estimates of the price effect of DOE 

transfers for all three scenarios and 

DOE’s interpolation of the price effect 

for the assessed case.40

TABLE 5—ERI’S ESTIMATE OF EFFECT OF DOE TRANSFERS ON URANIUM CONCENTRATE SPOT AND TERM PRICES IN $ 

PER POUND U3O8

[Market clearing approach] 

2015 ERI Report 

ERI Scenario 1 ERI Scenario 2 ERI Scenario 3 Assessed case 

(interpolated) 

2015 ......................................................................................... $3.00 $2.10 $0.30 $2.80 

2016 ......................................................................................... 2.80 1.90 0.10 2.20 

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26388 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

41As noted above, the majority of uranium 

production is sold on long-term contracts. While 

DOE has been transferring at a rate at or below 

2,800 MTU per year since 2012, contract terms may 

run 10 years. Thus, the market may not have fully 

equilibrated in response to continued transfers at 

the current rate. 

42See note 40 above for details of how DOE 

performs the interpolation. 

TABLE 5—ERI’S ESTIMATE OF EFFECT OF DOE TRANSFERS ON URANIUM CONCENTRATE SPOT AND TERM PRICES IN $ 

PER POUND U3O8—Continued 

[Market clearing approach] 

2015 ERI Report 

ERI Scenario 1 ERI Scenario 2 ERI Scenario 3 Assessed case 

(interpolated) 

2017 ......................................................................................... 2.70 1.80 0.00 2.10 

2018 ......................................................................................... 3.30 2.50 0.60 2.70 

2019 ......................................................................................... 2.50 3.00 1.20 3.20 

2020 ......................................................................................... 2.80 4.00 2.10 3.10 

2021 ......................................................................................... 3.00 3.20 2.40 2.90 

2022 ......................................................................................... 2.70 2.50 2.10 2.60 

2023 ......................................................................................... 3.20 3.00 2.50 3.10 

2024 ......................................................................................... 2.60 2.40 2.00 2.50 

Average (2015–2024) .............................................................. 2.80 2.60 1.30 2.70 

It is important to emphasize that this 

is not a prediction that prices will drop 

by the specified amount once DOE 

begins transfers following a new 

determination. A level of price 

suppression consistent with the 

estimate for Scenario 1 would, in this 

model, already be roughly reflected in 

the current market price because DOE is 

currently transferring uranium at that 

rate. 2015 ERI Report, 44. The price 

suppression that ERI estimates would 

persist under Scenario 3 is largely 

attributable to past DOE transfers, from 

which some of the uranium is still 

expected to be entering the market in 

future years. Similarly, if DOE begins 

transferring at the level of the assessed 

case, instead of at current rates, a 

positive effect on market prices of $0.60, 

compared to existing prices, could be 

expected in 2016, the first full year of 

DOE transfers at the rate of 2,100 MTU 

per year. 

One commenter argues that the price 

effect described by ERI under Scenario 

1 is not already built into current market 

prices and suggests that the price effect 

described by ERI should be cumulative. 

NIPC Comment of UPA, at 9. This 

commenter appears to misunderstand 

the nature of ERI’s analysis. ERI’s 

market-clearing approach is based on 

the economic principle that the market 

price will tend toward the competitive 

equilibrium price, i.e. the price at which 

the demand curve intersects the supply 

curve. The existing supply and demand 

curves include DOE transfers at the 

existing rates. Thus, the current market 

price should reflect, in part, this level of 

supply.41 The price effect estimated by 

ERI is based on a calculation of where 

the two curves would intersect in the 

absence of DOE-sourced material. ERI 

uses its production data to estimate the 

amount of U3O8 that will be supplied 

each year over the next ten years, and 

uses these annual supply curves to 

estimate the price effect. 2015 ERI 

Report, 42. Since ERI is comparing the 

volume of DOE transfers in each year to 

the expected amount of supply in that 

year, these estimates take account of 

future changes in supply. For these 

reasons, it would be inappropriate to 

add the estimated price effect in 

separate years together, as the 

commenter proposes to do. In addition, 

the commenter’s argument that adding 

2,705 MTU to a market will necessarily 

cause a further price decrease does not 

take account of the fact that material is 

continually produced and consumed 

over time. Transfers at a rate of 2,705 

MTU per year would be at the same rate 

as (or slightly below) transfers in the 

past few years. It is appropriate to assess 

the effect of that rate of transfers in light 

of the ongoing rates of production and 

consumption. DOE notes that the 

commenter’s suggestion is also contrary 

to the forecasts of the three other market 

reports discussed below. 

ERI also used its econometric model 

to estimate the effect of DOE transfers 

on the spot market price. As with ERI’s 

market clearing price analysis, the 

relationship between the average 

volume of DOE transfers and ERI’s 

estimated price effect over each time 

period is roughly linear. Thus, the price 

effect of transfers at the levels in the 

assessed case can be interpolated.42

ERI’s predictions based on its 

econometric model and the interpolated 

price effect for the assessed case are 

summarized in Table 6. By comparison 

to the market clearing analysis, the 

econometric model deals with shortterm supply and demand and spot 

prices. Existing market prices should 

reflect already ongoing transfers at the 

levels of Scenario 1. Thus, on ERI’s 

analysis prices already exhibit a level of 

price suppression similar to the level 

predicted in the near term under 

Scenario 1. 2015 ERI Report, 52–53. 

Thus, ERI’s econometric model 

estimates suggest that if DOE begins 

transferring at the lower level 

represented by the assessed case, a 

positive influence on market prices 

approximately $0.40 would be expected 

in the near term. 

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43ERI’s report includes tables laying out how 

much DOE-sourced material will enter each spot 

market—uranium, conversion, and enrichment—in 

coming years. These tables would be relevant for 

comparing the scale of DOE’s transfers to the 

volume of uncommitted supply and demand in the 

various markets. However, as explained in the 

NIPC, DOE does not consider such a comparison, 

on its own, as useful for assessing the impact of 

transfers as forecasts about price. 

44Commenters suggest that sometimes a seller of 

a future-delivery contract will ‘‘forfeit’’ its contract. 

They do not claim Traxys does so with DOEsourced material. 

45 In the analysis ERI prepared for the 

Department’s deliberations on the 2014 

Determination, it made a similar assumption that 

around 50% of the material transferred for cleanup 

services at Portsmouth would only affect term 

markets. If in fact those sales have essentially been 

one- to three-year spot sales, the material 

transferred in 2012 through 2014 could be affecting 

spot markets at present and in the near term. The 

Continued 

TABLE 6—ERI’S ESTIMATE OF EFFECT OF DOE TRANSFERS ON URANIUM CONCENTRATE SPOT PRICE IN $ PER POUND

U3O8

[Econometric model] 

2015 ERI Report 

Estimated 

price effect 

(2015–2017) 

Estimated 

price effect 

(2018–2024) 

ERI Scenario 1 ........................................................................................................................................................ $2.40 $5.10 

ERI Scenario 2 ........................................................................................................................................................ 1.70 4.80 

ERI Scenario 3 ........................................................................................................................................................ 0.30 2.00 

Assessed Case (Interpolated) ................................................................................................................................. 2.00 4.80 

DOE notes that certain assumptions in 

the model seem relatively uncertain 

over the longer term. The basic nature 

of the model is that ERI calculated a 

functional relationship between 

published prices and certain supply and 

demand variables representing, in 

essence, uncommitted supply and 

demand. ERI established this 

relationship by means of statistical 

correlations between past prices and 

past supply and demand variables. The 

model then predicts future prices based 

on the future course of the supply and 

demand variables. However, forecasts of 

uncommitted supply and demand 

require assumptions not only about how 

supply and uranium requirements will 

evolve, but also about how suppliers 

and purchasers will vary their mix of 

long-term and short-term purchasing. In 

the short-term, the mix of long- and 

short-term purchasing can be predicted 

based on the mix in recent years and on 

the estimates of uncovered supply. Such 

forecasts become significantly less 

reliable for later years. Thus, for 

example, market consultant UxC 

provides only limited future projections 

of future contracting activity in its 

annual Uranium Market Outlook— 

[REDACTED]. UxC Uranium Market 

Outlook—Q4 2014, 63, 66 (2014). 

Consequently, while DOE believes that 

ERI’s econometric model provides a 

reasonable estimate of the response of 

the spot price to DOE transfers in the 

near term, it believes estimates of this 

response in future years will be 

increasingly less reliable the further out 

in time the estimate. 

Commenters urge DOE to distinguish 

between spot sales, term sales, and other 

types of ‘‘forward sales.’’ Cameco 

Corporation (Cameco) states that 

forward delivery contracts are ‘‘simply 

contracts along the forward price curve, 

which is essentially the spot price with 

a minor adjustment for carrying costs.’’ 

NIPC Comment of Cameco, at 3. 

Similarly, ConverDyn states that a new 

market has arisen for ‘‘buy and hold’’ or 

‘‘carry trade’’ sales that should be 

characterizes as ‘‘an extension of the 

spot market to approximately a 3-year 

term.’’ NIPC Comment of ConverDyn, 

Enclosure, at 5. DOE recognizes that 

market participants use a range of 

contracts with characteristics that fall 

somewhere between the ‘‘traditional’’ 

term contracts and spot contracts 

described by commenters. EIA defines a 

‘‘spot contract’’ to call for delivery of the 

entire contracted amount within one 

year. A ‘‘term contract’’—of short, 

medium, or long term—involves one or 

more deliveries after one year. A 

contract that would be a ‘‘term contract’’ 

under this definition may influence 

either the spot market or the term 

market (as defined by UxC and 

TradeTech) more or less depending on 

various contractual terms such as length 

of time before initial delivery, number 

of deliveries, and the pricing 

mechanism. Consistent with this notion, 

and as noted above in Section II.E.2, 

sources other than the UxC and 

TradeTech offer price indicators for 

future-delivery contracts that appear to 

be similar to what commenters describe. 

With respect to DOE transfers 

affecting the spot market, ERI assumes 

that 50% of DOE transfers for cleanup 

at Portsmouth are introduced through 

term contracts. 2015 ERI Report, 34. 

ERI’s assumption relies in part on 

statements by Traxys North America 

LLC (Traxys), the entity that currently 

purchases the material that DOE 

transfers to Fluor B&W Portsmouth for 

cleanup work at the Portsmouth 

Gaseous Diffusion Plant. Traxys has 

stated it sells as much as 90% of the 

material it purchases from Fluor under 

forward delivery contracts that do not 

affect the spot market. Declaration of 

Kevin P. Smith, ConverDyn v. Moniz, 

Case no. 1:14–cv–01012–RBW, 

Document 17–7, at ¶ 14 (July 7, 2014); 

RFI Comment of Traxys, at 1. Some of 

the commenters that made observations 

about the difference between forward 

delivery contracts and term contracts 

also rejected ERI’s assumption because, 

these commenters say, the Traxys sales 

are actually spot sales even if they are 

for future delivery. 

DOE notes that ERI’s assumption that 

only 50% of these sales enter the term 

market is conservative, in that Traxys 

claims this figure is closer to 90%. In 

any case, if in fact more or less than 

50% of DOE transfers for Portsmouth 

cleanup in fact are not sold through 

term contracts—in that they do not 

affect the term price indicators 

published by UxC and TradeTech—such 

an error in ERI’s assumptions would 

simply decrease the reliability and 

certainty of ERI’s econometric forecast 

in the mid- to long-term.43 As described 

above, DOE concludes that this analysis 

is likely to be less reliable over the 

longer term anyway, because 

predictions about uncommitted supply 

and demand in future years are 

uncertain. Comments about the nature 

of Traxys’s sales do not call into 

question the utility of ERI’s econometric 

analysis for near-term forecasting, 

because commenters do not dispute that 

Traxys sells at least 50% of its material 

on contracts with deliveries more than 

a year in the future.44 Even if those 

deliveries would affect future spot 

prices, it is appropriate for ERI’s 

econometric model not to include the 

material in present supply.45

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26390 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

econometric analysis of future transfers need not 

account for that material explicitly, because existing 

uncommitted supply and demand already reflect 

those quantities. 

ERI assumed that the other past transfers 

included in the assessed case—such as the blended 

LEU provided to the TVA—are effectively on term 

contracts. Commenters do not contest that 

characterization, and DOE believes it is reasonable 

to assume these materials are not appearing on spot 

markets. 

46TradeTech states that the uranium markets are 

relatively illiquid and are characterized by periods 

of high price volatility. TradeTech Report, at 2–5. 

It does not appear that TradeTech is suggesting that 

DOE transfers significantly affect these 

characteristics of the market. Instead, it appears that 

TradeTech believes these are mechanisms by which 

DOE transfers impact the market price. DOE 

assumes that TradeTech’s prediction of the price 

effect of DOE transfers reflects these market 

characteristics that TradeTech highlights. 

47Figures 16–19 of the TradeTech Report show 

TradeTech’s estimates for the price impact at a 

range of different transfer rates. Although these 

charts and the related text refer to ‘‘Transfers at [25, 

50, or 75] Percent of Established 2014 Volumes,’’ it 

appears that these charts actually reflect an estimate 

for a 25%, 50%, or 75% decrease relative to current 

levels, rather than transfers at the specified 

percentage of current levels. 

48 In addition, TradeTech has assumed that 50% 

of the uranium that DOE transfers ultimately goes 

on the term market. As noted above, commenters 

suggest that assumption is incorrect because, they 

say, the material is actually sold on spot-like futuredelivery contracts. As explained above with respect 

to ERI, this argument simply serves to decrease 

further the reliability of medium- and long-term 

price forecasts based on these econometric models. 

Furthermore, ERI’s market clearing 

approach forecasts how prices will 

respond to changes in supply over the 

longer term and depends on the overall 

level of supply rather than on the 

specific mix of spot versus term 

contracts in a given year. Accordingly, 

ERI’s market-clearing analysis did not 

use the assumption about Traxys’s mix 

of spot and term deliveries of DOEsourced uranium. 

b. TradeTech Report 

The Uranium Producers of America 

(UPA) attached to its comment in 

response to the RFI a market analysis it 

commissioned from TradeTech, LLC, a 

uranium market consultant. RFI 

Comment of UPA, Attachment, 

TradeTech, ‘‘UPA DOE Material 

Transfer Study’’ (2015) (hereinafter 

‘‘TradeTech Report’’). A summary of 

TradeTech’s estimates appears in Table 

7. TradeTech explains that it estimated 

the price effect of DOE transfers using 

its proprietary Dynamic Pricing Model. 

This model uses an econometric 

forecasting approach to estimate the 

equilibrium between two dimensions 

TradeTech calls ‘‘active supply’’ and 

‘‘active demand.’’ 46 In its estimates, 

TradeTech assumes that 50 percent of 

DOE transfers enter the spot market and 

50 percent enter the term market. 

TradeTech Report, 14. Using its model, 

TradeTech estimates that DOE’s transfer 

reduced the spot price by an average of 

$3.55 per pound between January 2012 

and December 2014. TradeTech Report, 

15. TradeTech also estimates that 

continued DOE transfers at current rates 

would reduce the spot price by an 

average of $2.43 per pound between 

January 2015 and December 2016. 

TradeTech Report, 20. 

DOE understands this ‘‘reduction’’ to 

mean, as with ERI’s analysis, not an 

additional decrease in prices beginning 

in January 2015, but a continued price 

suppression. In other words, TradeTech 

suggests that if DOE ceased transferring 

at current rates then prices could be 

higher by an average of $2.43 per pound 

in 2015 and 2016. 

TradeTech also provides estimates for 

the effect of DOE transfers at several 

decreased transfer rates. If DOE transfers 

decreased to 75% of current levels, 

TradeTech estimates that the spot price 

would increase by an average of $0.53 

per pound between January 2015 and 

December 2016. TradeTech Report, 

26.47 Based on TradeTech’s estimate of 

the price suppression of DOE transfers 

at current levels, it appears that 

TradeTech is estimating that price 

suppression at 75% of current levels 

would be $1.90. If DOE transfers 

decreased to 50% of current levels, 

TradeTech estimates that the spot price 

would increase by an average of $1.10 

per pound between January 2015 and 

December 2016. TradeTech Report, 25. 

This corresponds to a price suppression 

of $1.33. If DOE transfers decreased to 

25% of current levels, TradeTech 

estimates that the spot price would 

increase by an average of $1.73 per 

pound between January 2015 and 

December 2016. TradeTech Report, 24. 

This corresponds to a price suppression 

of $0.70. The TradeTech Report does 

not state the numerical volumes that 

correspond to these decreased transfer 

rates. However, DOE notes that the 

2,100 MTU rate is slightly above 75% of 

the level included in the May 2014 

Determination. Thus, DOE believes that 

TradeTech’s ‘‘75%’’ figure is roughly 

equivalent to, although slightly below, 

that level. 

TABLE 7—TRADETECH’S ESTIMATE OF

EFFECT OF DOE TRANSFERS ON

URANIUM CONCENTRATE SPOT

PRICE IN $ PER POUND U3O8

TradeTech Report 

Transfer rate 

(compared to current) 

Estimated 

price effect 

(2015–2016) 

100% ..................................... $2.43 

75% ....................................... 1.90 

50% ....................................... 1.33 

25% ....................................... 0.70 

TradeTech’s forecast for the scenario 

in which DOE continues transferring 

uranium at current rates is fairly similar 

to the forecast ERI generated for that 

scenario using its econometric model. 

This apparent agreement could be taken 

as confirmation that the forecasts are 

reasonable. Alternatively, the agreement 

between the two could just indicate that 

TradeTech and ERI have applied similar 

mathematical tools to similar inputs and 

modeling assumptions. It does not 

necessarily validate either the 

assumptions or the choice of 

mathematical model. 

As with ERI’s econometric model, 

DOE notes that TradeTech’s 

assumptions about the amounts of 

uncommitted supply and demand seem 

relatively uncertain over the longer term 

because they depend on the actions of 

individual market participants that may 

reflect economic influences about which 

little information is available. For 

example, a strategic buyer or seller of 

uranium does not have to buy uranium 

at a given time; that participant may or 

may not contribute to uncommitted 

supply and demand depending on 

current prices, the participant’s 

expectations of prices, and other factors. 

In responding to the possibility of such 

effects, ERI assumes that uncommitted 

supply and demand will repeat their 

courses of recent years. Meanwhile 

TradeTech introduces a ‘‘quadratic 

coefficient to capture market 

exuberance, which measures market 

momentum.’’ TradeTech Report, 14. 

Although the mix of long- and shortterm purchasing can likely be predicted 

in the short-term based on prior 

contracting activity, forecasts based on 

this type of data would be significantly 

less reliable in the long-term.48

For reasons like these, although 

TradeTech’s forecast based on 

uncommitted supply and demand may 

provide a reasonable estimate of the 

price response of DOE transfers in the 

short term, DOE believes the price 

response over the medium- and longterm is most appropriately estimated 

and forecast using information and 

assumptions about overall demand and 

supply. ERI’s ‘‘market-clearing’’ model 

is a reasonable implementation of this 

approach. 

c. NAC International Report 

Fluor-B&W Portsmouth attached to its 

comment in response to the RFI an 

April 2014 market analysis from NAC 

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Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 26391 

49As this report was prepared in April 2014, it 

does not contain updated information on 

developments in the markets since that time. The 

level of uranium transfers that it analyzes is based 

on the levels specified in the May 2012 Secretarial 

Determination, which is roughly similar to, though 

slightly higher than, the current rate of transfers. 

NAC Report, A–1 to A–3. 

Some commenters expressed concern that DOE’s 

2014 Determination relied on information from 

Fluor-B&W that was outdated and that, because 

Fluor-B&W is not a regular participant in uranium 

markets, warranted no reliance. DOE recognizes 

that the NAC Report is based on data that are now 

more than one year old. DOE’s analysis relies on 

information from myriad sources, described 

throughout, and uses the data currently available. 

Data from EIA and other sources may lag the market 

by as much as several months, but given the rate 

at which these markets change, it is appropriate to 

rely on data after such a limited delay. 50Note that NAC states that it believes it is 

appropriate to apply a multiplier [REDACTED]. See 

NAC Report, 3–22 to 3–24. 

51NAC also provides estimates based on Total 

Supply and Demand at Table 3.4. NAC Report, 3– 

22. Given that the report states that NAC believes 

this approach is inaccurate, these estimates are not 

reproduced in this table. 

52NAC explains that its estimate of uncommitted 

demand consists of uncommitted utility demand 

plus supplier delivery commitments in excess of 

estimated production capability. This second aspect 

may refer to some of the demand created by brokers 

and traders. However, it is not clear whether this 

includes strategic or discretionary purchases by 

utilities or other entities. 

International (NAC). RFI Comment of 

Fluor-B&W Portsmouth, Attachment A, 

NAC International, ‘‘Impact of DOE 

Excess Uranium Sales on the U3O8

Market’’ (April 2014) (hereinafter ‘‘NAC 

Report’’).49 In its analysis, NAC based 

its production cost estimates on its 

Uranium Supply Analysis System 

(USAS). NAC updates this model each 

year based on a review of various 

published reports and presentations. 

NAC then applies cost models to derive 

specific cost estimates for individual 

properties. NAC Report, C–1. 

Specifically, NAC applies a discounted 

cash flow rate of return model based on 

both full cost (including sunk costs) and 

forward costs for each property. NAC 

Report, C–2 to C–3. NAC also utilized 

an estimate of reactor requirements and 

uncommitted demand developed from 

its Fuel-Trac database. NAC Report, 

D–1. 

NAC developed a range of estimates 

of the impact of DOE transfers utilizing 

its production cost estimates at three 

different rates: 2,800 MTU per year, 

2,400 MTU per year, and 10% of U.S. 

reactor requirements. NAC Report, 3–21 

to 3–22. First, NAC applied a 

methodology it believes approximates 

ERI’s approach to its own cost estimates. 

Specifically, NAC identified the 

incremental cost of the last property 

needed to meet demand in a given year 

based on total supply and demand. NAC 

Report, 3–22. NAC then explains that 

because long-term contracts with fixed 

pricing mechanisms have allowed some 

high-cost producers to produce ahead of 

lower cost supply, it believes a better 

approach is to base the model on 

uncommitted supply and demand. NAC 

then applies a multiplier to these 

estimates to account for additional 

incremental costs not included in its 

site forward production costs estimate. 

These additional costs include 

increased site forward costs due to 

operation at less than nominal capacity, 

taxes, corporate overhead, and 

variations in the required rate of return. 

NAC Report, 3–23. NAC also applies a 

time shift to the cost trend to account 

for the fact that producers need a price 

signal before investing in a new 

production center—i.e. producers need 

to have prices that justify an investment 

before actually making the investment. 

NAC Report, 3–24. The specific 

quantitative impact projected by NAC is 

summarized in Table 8. 

TABLE 8—NAC ESTIMATES OF PRICE EFFECT OF DOE TRANSFERS ON URANIUM CONCENTRATE SPOT PRICE IN $ PER

POUND U3O8 51

NAC Report 

Uncommitted supply demand Uncommitted supply demand adjusted by 

[REDACTED] 50

2400 MTU 2800 MTU 10% of US Req. 2400 MTU 2800 MTU 10% of US Req. 

2014 

2015 

2016 

2017 [REDACTED] 

2018 

2019 

Average (2014–2018) 

DOE has considered NAC’s forecast, 

but does not place much weight on 

these estimates for the reasons 

explained below. DOE notes that NAC 

estimates a price effect from DOE 

transfers that is much smaller than what 

other experts (including ERI) conclude. 

While, as noted above, an agreement 

between two similar models does not 

necessarily increase the credibility of 

either, a substantial difference like that 

between NAC’s model and others 

creates some doubt. Some important 

input, either of data or of modeling 

assumption, must have caused the 

departure; the difference in predictions 

thus represents a disagreement between 

the modeler and other experts. That is 

not to say that NAC’s model is 

necessarily incorrect. But in this 

context, where an error would mean 

substantially misestimating the 

potential impact of DOE’s transfers, 

DOE would only rely on the estimate if 

the difference from other forecasts were 

well understood and justified. 

In addition, DOE does not agree that 

it is appropriate to focus on 

uncommitted supply and uncommitted 

demand, as opposed to total supply and 

demand, in the manner described by 

NAC. Entities other than primary 

producers and reactor owners/operators 

participated in the uranium 

concentrates market. NAC’s estimate of 

uncommitted supply and demand 

appears not to incorporate these other 

participants. See NAC Report, 3–20.52

Given this uncertainty, DOE does not 

believe relying on NAC’s conclusions 

would be justified. 

d. UxC Report 

Cameco Corp. attached to its comment 

in response to the RFI a market analysis 

it commissioned from UxC, another 

uranium market consultant. RFI 

Comment of Cameco Corp., Attachment, 

UxC Special Report, ‘‘Impact of DOE 

Inventory Sales on the Nuclear Fuel 

Markets’’ (January 2015) (hereinafter 

‘‘UxC Report’’). A summary of UxC’s 

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53ERI’s market clearing price analysis, for 

example, includes material from underfeeding as 

‘‘Secondary Supply.’’ However, ERI does not 

consider how a change in uranium concentrate and/ 

or conversion prices would affect the price of SWU 

or the level of underfeeding present in secondary 

supply. In effect, ERI assumes that secondary 

supply based on enrichment services has a marginal 

cost lower than any primary producer in the 

market, so that this source would contribute the 

same amount of supply at any price level among 

those likely to be attained. TradeTech’s and NAC’s 

reports do not mention accounting for enrichmentbased secondary supply. 

estimates of the effect of DOE transfers 

on future prices appears in Table 9. UxC 

explains that it estimated the price 

effect of DOE transfers using two 

proprietary econometric models: The U– 

PRICE model and the SWU–PRICE 

model. UxC explains that these models 

were developed using historical data on 

the nuclear fuel markets collected and 

compiled by UxC. These two models 

take into account and quantify the 

impact of ‘‘key factors influencing the 

markets.’’ UxC also explains that the 

two models can be linked to simulate 

the interrelationship between uranium 

concentrates and enrichment. UxC 

Report, 3. 

Using these two models, UxC 

estimates the effects of DOE transfers on 

prices during the period between 2012 

and 2014. UxC provides two estimates. 

It derived the first, which it labels the 

‘‘incremental approach,’’ by running its 

models from 2011 onwards, with and 

without DOE transfers. It prepared the 

second, which it calls the ‘‘total impact 

approach,’’ by running its models from 

2008 onwards. UxC’s models generally 

ascribe to DOE’s transfers an 

accumulating effect on price, because, 

according to UxC, past transfers ‘‘have 

a longer-term effect on market 

perceptions among both buyers and 

sellers.’’ UxC Report, 5. Thus, by 

running its models from 2008 onwards, 

UxC produces 2012 estimates that 

reflect cumulative effects it ascribes to 

transfers between 2008 and 2011. UxC’s 

‘‘incremental’’ estimate is that between 

2012 and 2014 DOE’s transfer reduced 

the spot price by an average of $4.50 per 

pound and the term price by an average 

of $2.88 per pound. UxC’s ‘‘total 

impact’’ estimate is that between 2008 

and 2014 DOE’s transfers reduced the 

spot price by an average of $7.11 per 

pound and the term price by an average 

of $5.10 per pound. UxC Report, 6–7. 

UxC also forecasts the effect of 

continued DOE transfers at current rates 

for the period 2015 to 2030. UxC 

predicts that such transfers in the near 

and medium terms would reduce the 

spot price by an average of $5.78 per 

pound. UxC projects that this effect will 

change slightly in the medium term as 

market prices start to recover. 

Specifically, DOE transfers (at current 

rates) would reduce the spot price 

between 2018 and 2030 by an average of 

$4.47 per pound. UxC also notes that 

the former number is larger relative to 

the expected price of uranium than the 

latter number (14.1% versus 7.1%). UxC 

Report, 10. UxC forecasts that DOE 

transfers (at current rates) in the near 

and medium terms would reduce the 

term price by an average of $4.86 per 

pound. Between 2018 and 2030, DOE 

transfers are predicted to reduce the 

term price by an average of $5.30 per 

pound. Again, the near and medium 

term impact is larger in relation to the 

expected price (9.0% versus 7.1%). UxC 

Report, 11. 

TABLE 9—UXC’S ESTIMATE OF EFFECT OF DOE TRANSFERS ON URANIUM CONCENTRATE SPOT AND TERM PRICES IN $ 

PER POUND U3O8

UxC Report 

Near- & midterm price 

effect 

Percent of 

expected price 

Long-term 

price effect 

Percent of 

expected price 

Spot Price ........................................................................................................ $5.78 14.1% $4.47 7.1% 

Term Price ....................................................................................................... 4.86 9.0% 5.30 7.1% 

UxC puts particular emphasis on the 

interrelationship between the uranium 

and enrichment markets. UxC states that 

uranium and SWU are ‘‘substitutes.’’ 

Thus, UxC uses enrichment prices as an 

input into its uranium concentrate price 

forecast, and vice versa. UxC Report, 5, 

8, 17. As described in Section II.A.5, 

DOE understands that this interplay can 

take several forms. First, to the extent 

that enrichers have unsold enrichment 

capacity, they may apply that excess 

capacity to underfeeding and/or reenriching DUF6 tails. This essentially 

allows enrichers to generate additional 

natural uranium hexafluoride, which 

could then be sold on the open market. 

Second, if the price of enrichment 

decreases relative to the price of 

uranium concentrates, the optimum 

tails assay decreases, so that customers 

may deliver less natural uranium feed to 

get the same amount of enriched 

uranium output. 

The other market analyses do not 

appear to take these interactions into 

account.53 DOE has carefully considered 

UxC’s analysis. However, DOE does not 

believe UxC’s consideration of the 

above-referenced interactions is a reason 

to place greater weight on UxC’s 

modeling for the following reasons. 

Among other things, the contribution of 

enrichment price changes to the 

uranium price, in the conditions 

relevant here, is quite small, even 

compared to the effect of DOE’s 

transfers, particularly in the short term. 

Assuming an enriched product assay of 

4.5% and a tails assay of around 0.25%, 

applying one SWU of additional 

enrichment can generate roughly one 

kilogram of additional natural uranium. 

Thus, if the price for one SWU 

decreases by 4% and the price for one 

kilogram of uranium decreases by 7%, 

as UxC forecasts to be the average effect 

of continued transfers at current rates, 

the comparative value of using spare 

capacity to provide enrichment or for 

underfeeding would change by only 3%. 

ERI forecasts that underfeeding will 

supply about 8 million kg of natural 

uranium per year in the medium term, 

about 11–12% of predicted world 

requirements. Changing that supply by 

3% would mean a change of about 200 

MTU, much less than the 2,705 MTU of 

DOE transfers that UxC assumed. 

Furthermore, UxC’s forecast for the 

price effect attributed to DOE transfers 

in coming years is substantially higher 

than what any of the other reports 

predict. That difference may be a reason 

to scrutinize UxC’s predictions. In 

addition, aspects of UxC’s models, as 

explained below, appear to make them 

less reliable in this regard, especially for 

the task of attributing price effects to a 

discrete element of supply, specifically 

DOE’s transfers. UxC uses several 

exogenous variables to account for 

subjective, unquantifiable phenomena 

such as ‘‘market participants’ general 

perception of the industry outlook’’ and 

‘‘changes in market psychology.’’ These 

exogenous variables appear to play key 

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54Two commenters contended that DOE’s 

forecast of the price effect is implausibly low 

because, they said, the spot price has in the past 

changed by almost $6 per pound in response to 

volume changes less than 2% of DOE’s transfers. 

DOE notes that 2% of DOE’s transfers would 

amount to around 54 MTU per year. It seems highly 

unlikely that a change in supply by 54 MTU per 

year would cause a price change of $6 per pound, 

and the commenters cited no specific examples. 

55Commenters describe a variety of different 

market effects that will affect market prices in 

future years, including currency exchange rates, 

changes in demand due to Fukushima, high nearterm production. UxC’s appears to take these 

various factors into account in developing its price 

projections. Given these considerations, and given 

that UxC’s projections of prices are in general 

agreement with the other models, DOE has noted 

UxC’s price projections in the above discussion, 

although, for the reasons discussed above, DOE 

does not take the same view with respect to UxC’s 

forecast of the price effect attributable to DOE 

transfers. Forecasts of the overall trend of prices 

ultimately reflect predictions about total 

requirements and total supply, which are less 

susceptible to some of the uncertainties that arise 

for the econometric models discussed in this 

analysis. 

56As this figure was published in December 2014, 

it does not include contracting activity for the 

balance of 2014. UxC projects that spot purchases 

by utilities in the remainder of [REDACTED]. UxC 

Uranium Market Outlook—Q4 2014, 63 (2014). 

57UxC also reports that purchases by traders, 

brokers, and entities other than utilities 

[REDACTED]. UxC Uranium Market Outlook—Q4 

2014, 27 (2014). UxC projects that purchases by 

non-utilities [REDACTED]. Id. at 63. 

58EIA defines the spot market to include 

contracts for delivery in less than one year. UxC 

appears to use the same definition. 

59This figure refers to the aggregate volume 

purchased under all term contracts entered into 

during each year. However, actual deliveries would 

not take place for several years. For example, a 

hypothetical term contract entered into in 2010 

might provide for a specified amount of U3O8—say 

200,000 pounds—to be delivered in each year 

beginning in in 2012 and ending in 2019. The 

number included in the 2010 total volume figure for 

this contract would be 1.6 million pounds. 

roles at certain steps in the models. UxC 

assigns values for the variables prior to 

running its model in order to define the 

scenario that the model will forecast. 

Thus, the outputs depend in part on 

UxC’s subjective decisions about input 

factors such as ‘‘market sentiment.’’ 

Perhaps that characteristic does not 

impair UxC’s ability to forecast prices in 

the near future, because it might be 

possible to choose appropriate values 

for these variables by finding those for 

which the model best reproduces the 

recent past. But to assign a price change 

to DOE’s transfers, UxC necessarily ran 

its models with counterfactual 

scenarios, namely the markets without 

DOE transfers, and it made different 

assumptions about future markets. 

While UxC has not said whether it used 

the same values for its exogenous 

variables in running the model with and 

without DOE transfers, DOE must 

presume it used different values because 

the report stresses that DOE’s transfers 

have a long-term effect on ‘‘market 

perceptions,’’ the type of unquantifiable 

factor the variables are meant to 

represent. For all these reasons, DOE 

concludes that a model reliant on 

subjective exogenous variables is likely 

to be less reliable than those used by the 

other reports. 

e. Effect of DOE transfers on market 

price 

In light of these market analyses and 

its review of them, DOE concludes that 

transfers under the assessed case will 

continue to exert some downward 

pressure on the market price for 

uranium concentrates. DOE believes 

$2.70 per pound is a reasonable estimate 

of how much downward price pressure 

transfers under the assessed case will 

contribute on average over the next 

decade. In 2016 and 2017, the price 

impact will be even lower, between 

$2.10 and $2.20 according to ERI’s 

market clearing analysis, and 

approximately $1.90–$2.00 according to 

ERI and TradeTech’s econometric 

forecasts. To be cautious, DOE will base 

its analysis on the full amount of 

$2.70.54

The significance of price suppression 

at this level depends, at least in part, on 

market price. Recent spot and term price 

indicators published by UxC on March 

30, 2015, were $39.50 per pound U3O8

on the spot market and $49.00 per 

pound U3O8 on the term market. The 

forecast price effect reasonably 

attributable to DOE transfers represents 

6.8% and 5.5% of these values, 

respectively. But comparing future price 

changes to current prices provides at 

most a sense of scale. DOE believes it is 

more appropriate to compare the price 

effect in future years to forecasted 

market prices in those years. 

Several sources generally predict an 

increase in market prices over the next 

several years. ERI notes that term prices 

are expected to increase in the future, 

but does not provide a specific forecast. 

2015 ERI Report, 46. ERI’s econometric 

model, however, does show an increase 

in the spot price. Specifically, ERI 

forecasts that spot prices will recover 

over the course of 2015–2018 eventually 

settling in the $52–57 range after 2019. 

2015 ERI Report, 52. TradeTech’s 

Exchange Value spot-price forecast 

increases to approximately $50 as early 

as June 2016, even with DOE transfers. 

TradeTech Report, 20. UxC’s estimates 

of the effect of DOE transfers assume 

that market conditions will improve in 

the medium term. [REDACTED]. Figures 

5 & 6, UxC Report, 11. In its annual 

Uranium Market Outlook, UxC provides 

a more detailed explanation of its price 

forecast, which generally predicts an 

increase in price over the next 10 years. 

UxC Uranium Market Outlook—Q4 

2014, 111–19 (2014). [REDACTED]. Id. 

at 119.55

Using these price forecasts, it is 

possible to project the estimated price 

effect in future years as a percentage of 

the expected market price. ERI’s market 

clearing price model predicts that the 

price effect will remain relatively stable 

over the next years. As prices increase, 

this price effect will represent a smaller 

proportion of the then-prevailing market 

prices. As spot prices increase above 

$50, which DOE expects will happen by 

2019 or 2020, the long-term price effect 

attributable to DOE transfers would 

represent approximately 5.4% of the 

spot price. 

f. Effect on realized prices 

A principal mechanism through 

which a change in market price could 

impact the domestic uranium mining 

industry is through the effect on the 

prices that various production 

companies actually receive for the 

uranium they sell—the ‘‘realized price.’’ 

The market prices published by 

TradeTech and UxC are based on 

information about recent offers, bids, 

and transactions. Thus, the market price 

is a snapshot of contracting activity at 

the time of the publication. It includes 

activity that does not involve the 

domestic uranium producers—i.e. 

transactions involving international 

producers, traders, and brokers. In 

addition, the current market prices do 

not reflect the fact that many uranium 

producers actually achieve prices well 

above the market prices due to the 

prevalence of long-term contracts that 

lock in pricing terms over a period of 

several years. 

Most deliveries of uranium 

concentrates take place under term 

contracts. According to contracting data 

published by UxC, utilities made spot 

purchases of [REDACTED].56 UxC 

Uranium Market Outlook—Q4 2014, 27 

(2014). UxC projects that spot purchases 

in 2015 and 2016 [REDACTED]. Id. at 

63.57 These figures indicate that utilities 

met approximately [REDACTED] of their 

requirements in 2014 through contracts 

greater than one year in duration.58

It is also significant that long-term 

contracting volume has not been 

uniform in recent years. [REDACTED].59

[REDACTED]. Id. at 29. [REDACTED]. 

Id. at 28, 61, 66. [REDACTED]. Id. at 28. 

Based on this information, DOE notes 

that the vast majority of current term 

contracts were entered into when 

market prices were significantly higher, 

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60These two figures do not differentiate between 

U.S.-origin versus foreign material. However, EIA 

reports that the weighted average price of U.S. 

origin material is higher than the average for all 

foreign material. EIA, 2013 Uranium Marketing 

Report, 20 (2014). 

61As calculated according to monthly price 

indicator data from UxC. 

62Note that EIA’s figure includes purchases of 

U.S.-origin uranium as well as purchases from a 

firm located in the United States. Therefore, this 

number includes uranium from sources other than 

the domestic uranium industry. EIA reports that 

approximately 9.5 million pounds of U.S. origin 

uranium was delivered to U.S. reactor operators in 

2013. EIA, Uranium Marketing Report, 20 (2014). 

i.e. when term prices were above 

$60.00. 

These observations are particularly 

significant because uranium prices have 

declined in recent years and only 

recently began to recover. In 2014, the 

spot price reached a low of $28.25, after 

decreasing from a high of $136.00 in 

2007. Compared to the low of $28.25, a 

price effect from DOE transfers of $2.70 

per pound would represent 9.6%. 

However, the actual effect experienced 

by a primary producer would be the 

proportionate change in its realized 

prices. As mentioned above, several of 

the market analyses that DOE reviewed 

forecast that prices will be increasing 

substantially in the next few years and 

should reach $50 by 2019 or 2020. 

Consistent with those forecasts, spot 

prices are currently 16–20% higher than 

they were one year ago. Because the low 

prices of 2013–2014 were only 

temporary, realized prices for most 

producers can be expected to be more in 

line with the longer-term trend of 

prices. Consequently, the price effect of 

DOE’s transfers should be regarded in 

comparison to the longer-term trend 

rather than to the recent past of 

especially low prices. Furthermore, 

based on current trends in term 

contracting, there will be relatively few 

new term contracts entered into on the 

basis of current prices and they will 

likely have a shorter average duration 

than in years past. Thus, although the 

price effect attributable to DOE transfers 

in the term market would have an effect 

that would persist through the life of 

any new term contracts, this effect is 

likely to be limited in the near term. 

ERI estimates the prices realized by 

U.S. producers by gathering information 

from public filings representing 

approximately 95% of U.S. production. 

2015 ERI Report, 60–61. Realized prices 

declined for most primary producers in 

2014, an outcome that presumably 

reflects the fact that market prices had, 

by 2014, been declining continually for 

several years. 2015 ERI Report, 61. Still, 

ERI estimates that several producers 

achieved realized prices in 2014 well 

above the average spot price over the 

course of the year. At least one producer 

achieved a realized price well above the 

average term price for 2014. 2015 ERI 

Report, 61. 

ERI reports that some mining 

companies have negotiated contracts 

that base the price paid at least partially 

on a fixed or base-escalated pricing 

mechanism. As an example, Cameco has 

reported that the price sensitivity of its 

current contract portfolio is about 50% 

of any change in spot market price. ERI 

estimates that less than 30% of U.S. 

production currently comes from 

companies that are effectively unhedged 

against changes in spot price. 2015 ERI 

Report, 60–61. 

TradeTech also provides its estimates 

of the decline in realized price for 

several producers—both U.S. and 

foreign. Although TradeTech does not 

provide specific figures, it provides 

information on several firms in chart 

form. It appears from the chart that 

among the firms for which TradeTech 

provides estimates, realized prices in 

2013 varied from as low as about $38 to 

as high as about $57. For most 

producers, there was a decline in 

realized price between 2011 and 2013. 

The magnitude of that decline ranges 

from approximately $12 to as low as $2 

or $3. TradeTech Report, 13. TradeTech 

notes that one reason for declining 

realized prices is the expiration of longterm contracts signed when prices were 

substantially higher. TradeTech Report, 

12. 

NAC similarly notes that some higher 

cost suppliers have locked in higher 

prices through fixed price contracts that 

allow them to realize prices greater than 

current market prices. NAC Report, 3– 

22. Although NAC estimates the effect 

of DOE transfers on market price, as 

described above, NAC does not provide 

specific estimates of the effect on the 

price realized by individual producers. 

EIA reports several figures that are 

relevant to the prices realized by current 

producers. EIA reports that the weighted 

average price in sales directly from U.S. 

producers in 2013 was $44.65. EIA, 

2013 Uranium Production Report, 7 

(2014). Similarly, EIA reports that the 

weighted average price paid by U.S. 

reactor operators in 2013 was $51.99 per 

pound U3O8 equivalent. Id. at 4. 

Although EIA does not provide a 

complete range of prices paid by U.S. 

reactor operators, it does report that the 

bottom 7.1 million pounds U3O8

equivalent (approximately 1⁄8th of 

uranium delivered in 2013) purchased 

by U.S. operators had a weighted 

average price of $34.34. The top 7.1 

million pounds had a weighted average 

price of $72.62.60 Id. at 26. EIA also 

provides average prices broken down by 

origin—foreign vs. U.S.—and by seller— 

U.S. producer, U.S. brokers and traders, 

other U.S. suppliers (i.e. other reactor 

operators, converters, enrichers, or 

fabricators), and foreign suppliers. The 

weighted average price in 2013 for U.S. 

origin uranium was $56.37 per pound 

U3O8. The weighted average price in 

2013 from U.S. brokers and traders was 

$50.44. For 2013, EIA does not report 

the weighted average price of uranium 

purchased by U.S. reactor operators 

directly from U.S. producers to avoid 

disclosure of individual company data. 

However, in recent years when that 

value is reported, it has been above the 

average price paid for U.S. origin 

uranium. Id. at 4. For comparison, DOE 

notes that the 2013 average spot price 

was around $39.00 and the average term 

price was around $54.00.61

EIA provides data about sales using 

different pricing mechanisms. EIA 

reports that of the approximately 23.3 

million pounds U3O8 equivalent 

purchased by U.S. reactor operators 

from domestic sources 62 and delivered 

in 2013, 14.5 million pounds were 

purchased based on fixed or baseescalated pricing—approximately 

62.3%—with a weighted-average price 

of $54.95. Approximately 3.6 million 

pounds were purchased based purely on 

spot-market pricing—approximately 

15.6%—with a weighted-average price 

of $42.55. The remaining 5.1 million 

pounds—approximately 22%—was sold 

based on some other pricing mechanism 

with a weighted average price of $52.68. 

EIA, Uranium Marketing Report, 24 

(2014). 

Many companies report their realized 

prices in public filings. Based on 

average market prices over the timeframe these filings cover, this 

information can be used to infer the 

extent to which each firm is exposed to 

market price fluctuations. DOE has 

reviewed public filings with the SEC 

and other public financial information 

for several U.S. producers. This 

information is summarized in Table 10. 

Based on this information, it appears 

that only two producers sell U3O8

exclusively at the spot price. Although 

ERI estimates that less than 30% of U.S. 

producers are currently unhedged 

against changes in the spot price, data 

from public filings, many of which were 

released after publication of the 2015 

ERI Report, indicate that producers 

selling exclusively at the spot price 

represented less than 15% of reported 

production in 2014. 

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63These figures represent sales only through Sept. 

30, 2014. Uranium One operates the Willow Creek 

mine in Wyoming. Uranium One Inc., 

Management’s Discussion and Analysis, Quarter 

Ending September 30, 2014, at 2, 17 (Nov. 14, 

2014), http://www.uranium1.com/index.php/en/

component/docman/doc_download/926-q3-2014- 

managements-discussion-a-analysis. 

64UR-Energy operates the Lost Creek ISR mine in 

Wyoming. UR-Energy Inc. Form 10–K, Securities 

and Exchange Commission, at 50 (Mar. 2, 2015) 

https://www.sec.gov/Archives/edgar/data/1375205/

000155837015000251/urg-20141231x10k.htm 

(accessed Mar. 27, 2015). 

65Cameco operates the Smith Ranch-Highland 

(Wyoming) and Crow Butte (Nebraska) ISR mines. 

Cameco, Management’s Discussion and Analysis, 

Quarter Ending December 31, 2014, at 40, 69–70 

(Feb. 9, 2015), http://s3-us-west-2.amazonaws.com/ 

assets-us-west-2/quarterly/CCO_2014_Q4_MDA_

and_Financial_Statements.pdf. 

66Uranerz Energy Corp., which operates the 

Nichols Ranch ISR mine in Wyoming, reports that 

it sold 175,000 pounds of uranium oxide in 2014 

for a revenue of $10,006,673. Uranerz Energy Corp. 

Form 10–K, Securities and Exchange Commission, 

at 50 (Mar. 16, 2015) https://www.sec.gov/Archives/ 

edgar/data/1162324/000106299315001350/

form10k.htm (accessed Mar. 27, 2015). 

67Energy Fuels, which operates the White Mesa 

conventional mill in Utah, reports that its realized 

price in 2014 averaged $57.19. Energy Fuels Inc., 

Management’s Discussion and Analysis, Year 

Ending December 31, 2014, at 4 (Mar. 18, 2015), 

https://www.sec.gov/Archives/edgar/data/1385849/

000106299315001408/exhibit99-2.htm. 

68Uranium Energy Corp. (UEC) operates the 

Hobson/Palanga ISR mine in Texas. UEC reports 

that it had no sales during the fiscal year ending 

July 31, 2014, although it continued to produce 

uranium concentrates. UEC states that future 

uranium concentrates sale are expected to occur at 

the spot price. Uranium Energy Corp. Form 10–K, 

Securities and Exchange Commission, at 72 (Oct. 

10, 2014) https://www.sec.gov/Archives/edgar/data/ 

1334933/000106299314005923/form10k.htm 

(accessed Mar. 27, 2015). 

69 In addition to the companies listed in text, 

DOE’s EIA also reports one additional operating 

mine at the end of Q4 2014: Alta Mesa in Texas. 

The parent company for this mine, Mestena 

Uranium LLC, is closely held and publishes little 

information publically. UxC reports [REDACTED]. 

UxC Uranium Suppliers Annual—December 2014, 

225–26 (2014). 

70For example in 2014—[REDACTED]— 

producers worldwide contracted to deliver 

[REDACTED] through term contracts, but only 

[REDACTED] on the spot market. UxC Uranium 

Market Outlook—Q4 2014, 126–127 (2014). In 2012, 

[REDACTED], producers contracted to deliver 

approximately [REDACTED] through term 

contracts, but only [REDACTED] on the spot 

market. Id. 

TABLE 10—REPORTED SALES AND REALIZED PRICE BY U.S. PRODUCERS 69

Information from public filings 

Producer 2014 Sales 

(lbs U3O8) Realized price 

Uranium One 63 ............................................................................................................................................ 410,800 $32 

Ur-Energy 64 ................................................................................................................................................. 90,000 55 

Cameco 65 .................................................................................................................................................... 2,700,000 48 

Uranerz 66 .................................................................................................................................................... 175,000 57 

Energy Fuels 67 ............................................................................................................................................ 800,000 57 

Uranium Energy Corp 68 .............................................................................................................................. N/A N/A 

Contracting decisions are specific to 

the buyer and the particulars related to 

these decisions are not routinely made 

public. However, from the information 

that is available, DOE notes the 

following key points related to the effect 

of DOE transfers on realized prices in 

the domestic uranium mining industry. 

Most high cost suppliers hold fixed 

price contracts that allow them to 

realize prices significantly greater than 

current market prices. These fixed price 

contracts insulate the producers from 

changes in market price and tend to 

dampen the short-run effect of DOE 

transfers. To be sure, new long-term 

contracts expected to be signed in the 

next few years, would reflect any 

continued suppression of market prices 

resulting from DOE transfers. However, 

as mentioned above, term contract 

activity is expected to remain low in the 

near term. In addition, prices have 

already increased from recent lows and 

are expected to increase substantially in 

the next few years. Given that the vast 

majority of uranium is purchased from 

producers under term contracts,70 DOE 

believes the effect on future term 

contracts will be small compared to the 

effect on existing contractual deliveries. 

In light of all these factors, DOE 

concludes that the anticipated effect of 

its transfers on market prices will tend 

to overstate the effect on the domestic 

uranium mining industry in terms of 

actual realized price. Although public 

filings suggest that only 15% of 

producers are unhedged against 

fluctuations in the spot price, DOE will 

conservatively assume that 30% of the 

industry is not insulated from these 

fluctuations due to preexisting longterm contracts as ERI suggests. Further 

assuming that this insulation is 

equivalent to 50% exposure to the 

changes in market price, the average 

price effect on the domestic uranium 

industry’s realized prices in the near 

term would be closer to $1.75. DOE 

notes that this price effect is relatively 

small when compared to the market 

prices forecasted for the next several 

years—between 3.5% and 4.5% of 

expected spot market prices. That said, 

consideration of the effect on realized 

prices on its own is not sufficient to 

determine whether the impacts will be 

material. The implications of transfers 

for the factors discussed in the next four 

sections have also been considered. 

2. Production at Existing Facilities 

DOE believes that primary producers 

consider a range of different inputs in 

determining whether to decrease, 

continue, or increase production at 

currently operating facilities. Market 

prices are certainly one element of this 

calculation, but producers also consider 

contractual obligations (and what these 

contracts may mean for realized prices), 

projections about future prices, and the 

various costs associated with changing 

production levels. In order to forecast 

how DOE transfers will affect 

production levels, DOE has considered 

how producers have responded to price 

changes in the past. Some of the 

primary inputs in these decisions are 

the relationship between market prices 

and production costs, and expectations 

about future price trends. 

EIA reports data on production levels 

in the domestic uranium industry on a 

quarterly and annual basis. EIA’s most 

recent quarterly report provides 

preliminary data for 2014. U.S. primary 

production in 2014 stood at 4.9 million 

pounds U3O8. This is about 5% higher 

than in 2013 and 15% higher than in 

2012. In fact, this represents the highest 

production total in any calendar year 

since 1997. EIA, Domestic Uranium 

Production Report Q4 2014, 2 (January 

2015). ERI also notes that U.S. 

production has risen since the recent 

program of DOE uranium transfers 

began in December 2009. In 2014, 

production was 5% higher compared to 

the previous year. However, ERI reports 

that production in 2015 is expected to 

decline to 2013 levels. 2015 ERI Report, 

58. 

Since 2009, four new operations have 

begun production in the United States: 

Willow Creek in 2010, Hobson/

Palangana in late 2010/early 2011, Lost 

Creek in 2013, and Nichols Ranch in 

2014. ERI also reports that one 

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71 Information from this paragraph is collected 

from the two UxC studies mentioned above. The 

price bands come from UxC Uranium Production 

Cost Study, 80–84 (2013), and cost estimates in 

parentheses comes from UxC Uranium Suppliers 

Annual—December 2014 (2014) (except for data on 

[REDACTED] which comes from UxC Uranium 

Production Cost Study, 111–12 (2013). 

72This figure includes information on some 

projects that are not part of the domestic uranium 

mining industry, such as Uranium One’s Kazakh 

projects. 

73UxC’s monthly spot price as of March 30, 2015. 

74One commenter suggests that DOE calculate the 

effect of its transfers on average margins, which it 

claims would be a straightforward calculation. The 

commenter cites as an example a hypothetical 

model included in the TradeTech report. In DOE’s 

view, the TradeTech hypothetical, as discussed 

below, seems to bear little relation to any actual 

additional production center is expected 

to begin operations in 2015. Despite 

these new operations, ERI notes that 

several conventional and in-situ leach 

operations have scaled back operations. 

2015 ERI Report, 57. EIA reports that the 

same number of uranium concentrate 

processing facilities—seven—operated 

in 2014 as in 2013. Specifically, while 

the Nichols Ranch ISR plant began 

operation in the second quarter of 2014, 

the White Mesa conventional mill 

halted production in the fourth quarter 

of 2014. EIA Domestic Uranium 

Production Report Q4 2014, 3–6 

(January 2015). 

ERI presents a chart showing the price 

levels at the time cutbacks were 

announced at various U.S. suppliers. 

ERI reports price points for cutbacks at 

four operations: $45 per pound in the 

spot market for conventional mines in 

Utah; $40 per pound in the spot market 

for two in-situ-leach operations; and $35 

per pound in the spot market for 

additional conventional mines and a 

uranium mill. 2015 ERI Report, 62. 

ERI then estimates average production 

costs for existing mines by referring to 

EIA’s published data on production 

expenditures across the uranium 

industry. Using a three year average to 

smooth out year-to-year differences, ERI 

notes that average production costs have 

remained fairly constant since 2009 at 

about $40 per pound. 2015 ERI Report, 

63. ERI further reports that it estimates 

production costs at U.S. in-situ-leach 

facilities to range from the low $30s to 

the mid $40s per pound. ERI concludes 

that the pattern of cutbacks and 

estimated production costs ‘‘do not 

seem to indicate that adding back the $3 

per pound price effect attributed to all 

DOE inventory material for Scenario 1 

would move current prices enough to 

cause U.S. producers to ramp well field 

development and production activities 

back up.’’ 2015 ERI Report, 64. ERI 

further notes that the spot price would 

remain near $40 per pound and ‘‘may 

still not be sufficient for higher cost ISL 

producers to restart well field 

development or higher cost 

conventional mines to resume mining 

activities, and likely would not have 

prevented the decisions to cut back 

when prices declined to $35/lb in mid 

2013 and then below $30/lb in mid 

2014.’’ 2015 ERI Report, 64. 

The UxC Report does not provide any 

specific estimates of production levels 

or costs at currently operating facilities. 

However, UxC has developed 

production cost data elsewhere in its 

annual report on uranium suppliers and 

a 2013 production cost study. UxC 

Uranium Suppliers Annual—December 

2014 (2014); UxC Uranium Production 

Cost Study (2013). [REDACTED].71

The TradeTech Report predicts a 

‘‘potential reduction in the number of 

market participants.’’ TradeTech Report, 

21. It applies the price effect it estimates 

for DOE transfers to a hypothetical 

uranium producer with a production 

cost of $47.41 per pound. See Figure 15 

of TradeTech Report, 22. TradeTech 

does not apply its estimate to any 

particular producer. TradeTech does, 

however, provide estimates for the 

production costs of several firms in both 

2011 and 2013.72 Although TradeTech 

does not provide numerical cost data, it 

does provide information on several 

firms in chart form. It appears from the 

chart that among the firms TradeTech 

provides estimates for, production costs 

in 2013 varied from as low as $30 to as 

high as $50. TradeTech also notes that 

many producers have been able to 

reduce or stabilize costs in recent years. 

This is also reflected in the difference 

between the producers’ costs in 2011 

and in 2013. TradeTech Report, 13. 

NAC provides estimated production 

cost ranges for segments of current 

supply, but it does not directly estimate 

the effect of DOE transfers on 

production levels. NAC Report, 3–9 to 

3–11. Specifically, NAC provides a chart 

showing the breakdown of worldwide 

operating production capacity 

[REDACTED]. NAC Report, 3–10. DOE 

notes that this chart does not provide 

separate estimates of production from 

U.S. facilities, although NAC does state 

that [REDACTED]. NAC Report, 3–11. 

A commenter noted that production 

in the recent past is not an accurate 

indicator of how DOE’s transfers affect 

the mining industry, because current 

production reflects conditions of three 

or four years ago when the investment 

decisions were made. This commenter 

suggested that exploration data would 

be a better guide for assessing how 

industry is responding to current 

conditions. In addition, the commenter 

submitted information it received from 

Cameco indicating that production at 

Cameco’s two main areas will decline 

from 2.7 million pounds in 2014 to 1.7 

million pounds in 2015. This 

information is generally consistent with 

the data provided by the various reports 

summarized above. 

DOE recognizes that large-scale 

changes in production can take several 

years, and for that reason among others 

it does not base its analysis simply on 

the fact that current production is 

comparable to 2013 production. At the 

same time, DOE notes that declines in 

production in 2015 are not, in their 

entirety, reasonably attributable to 

DOE’s transfers. According to the 

commenter, the effect of market 

conditions takes three to four years to be 

fully manifest in production levels. If 

so, then a decline in production in 2015 

would presumably result primarily from 

the large-scale market changes in the 

second half of 2011 and then in 2012 as 

a result of the Fukushima disaster. To 

forecast the effects reasonably 

attributable to DOE’s transfers, a more 

careful analysis like that described 

below is more appropriate. 

As actual production levels and costs 

are usually proprietary information, 

DOE must generally rely on estimates. 

The production cost estimates from 

TradeTech, NAC, and UxC are all 

generally consistent with ERI’s 

conclusions. Each market analysis 

describes production costs falling 

within a similar range. 

As noted above, based on the current 

spot price of $39.50 73 and ERI’s 

estimates of the price effect of DOE 

transfers, removing DOE-sourced 

material from the market altogether— 

including material already transferred in 

the past as well as the material to be 

transferred under the assessed case— 

could lead to spot prices around $42.50 

and DOE transfers under the assessed 

case could lead to market prices 

between $39.70 and $40.10. Although 

UxC estimates [REDACTED]. 

To summarize, it does not appear that 

the price effect of DOE transfers would 

cause realized prices to be below 

production costs at any particular 

facility. DOE recognizes that receiving 

prices barely above production costs 

would not provide enough return to 

justify investing in production, and a 

producer needs to receive a certain 

amount of margin. The TradeTech 

Report suggests 10% is an appropriate 

margin. But elevating the threshold for 

these mines from production cost to 

production cost plus 10% would not 

alter the conclusions discussed above.74

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mine. To calculate margins, DOE would need to 

know actual realized prices, linked to production 

costs, on a mine-by-mine basis. Absent such details, 

DOE believes the estimation method described 

above is a sufficiently robust approach to 

forecasting the effect on production reasonably 

attributable to DOE’s transfers. 

Accordingly, DOE concludes that 

ceasing transfers entirely—which could 

cause prices to increase by up to $2.70 

per pound—would not cause U.S. 

producers to increase production levels 

substantially in the near term. 

The estimates in the preceding 

paragraph are based on a comparison of 

expected realized prices of specific 

mines and estimates of production cost 

at those mines. However, DOE notes 

that this is a somewhat oversimplified 

comparison. Decisions regarding 

whether to increase or decrease 

production are based on a number of 

considerations, of which the 

instantaneous market price is only one. 

Recent production data provides some 

evidence that market prices are not the 

sole consideration. Despite the fact that 

market prices were at their lowest levels 

in recent memory, EIA’s most recent 

quarterly report states that U.S. primary 

production in 2014 was higher than in 

any calendar year since 1997. Even 

while production ceased at some 

facilities, production began for the first 

time at others. Meanwhile, producers 

with production costs above the average 

spot price in recent years have 

continued operations. One of those 

considerations is included in the above 

discussion, namely the difference 

between realized price and market 

price. In addition, DOE believes that 

this behavior is related to the significant 

cost and time lag involved in ceasing or 

slowing production at an existing 

facility. Due to these facts, DOE believes 

that production decisions are likely to 

be based on future expectations about 

market prices and contracting trends in 

addition to current market prices. 

Given that removing the price effect 

associated with DOE transfers is not 

likely to be enough to materially change 

the relationship between price and cost 

for any particular producer and that 

production decisions are based on 

additional considerations that include 

future expectations about market prices 

and contracting trends, DOE agrees with 

ERI’s conclusion that adding back the 

price effect of DOE transfers would not 

move current prices enough to cause 

U.S. producers to increase production at 

existing facilities. 

Some commenters objected that this 

conclusion is irrelevant. However, it is 

an appropriate implementation of the 

analytical approach discussed above, in 

which DOE assesses the impact 

reasonably attributable to its transfers. 

To do so, DOE compares the likely state 

of affairs with transfers and without 

DOE transfers. The conclusion that 

continuing transfers under the assessed 

case would not result in U.S. 

production’s being markedly lower than 

it would in the absence of DOE transfers 

constitutes such a comparison. 

3. Employment Levels in the Industry 

DOE has considered information from 

EIA reports relating to employment in 

the domestic uranium production 

industry. EIA’s most recent Uranium 

Production Report states that 

employment stood at 1,156 person-years 

in 2013, 1,196 person-years in 2012, and 

1,191 person-years in 2011. EIA, 2013 

Uranium Production Report, 10 (May 

2014). 

In its analysis, ERI compared EIA’s 

employment figures with changes in 

uranium spot and term prices. Based on 

a statistical correlation, ERI infers that 

employment responds to changes in 

price. 2015 ERI Report, 73. ERI then 

uses this correlation to estimate that the 

decrease in uranium prices over the 

course of 2014 resulted in a loss of 114 

person-years from the 2013 value of 

1,156. 2015 ERI Report, 55. ERI then 

estimates that the price effect it 

attributes to DOE transfers lowered 

employment by 41 person years in 2013, 

and 44 person years in 2014. 2015 ERI 

Report, 56. ERI further estimates that 

price effects due to DOE transfers at the 

levels described in Scenario 1 would 

result in an average employment loss of 

42 person years over the next 10 years. 

For Scenario 2 and 3, ERI estimated that 

the average employment loss would be 

39 and 21 person years, respectively. 

Again, it is important to note that this 

estimate is not a prediction that the 

uranium production industry under 

Scenario 1 would shed 42 jobs in 2015 

and each subsequent year. Instead, this 

figure reflects ERI’s estimate that total 

employment in the industry would be 

higher by an average of 42 person-years 

without DOE transfers compared to with 

DOE transfers. 

Several commenters asserted that 

employment has decreased in recent 

years as a consequence of decreases in 

uranium prices. E.g., RFI Comment of 

Mark S. Pelizza, at 1. Some commenters 

stated that the uranium production 

industry has lost half its workforce since 

May 2012. RFI Comment of UPA, at 2; 

RFI Comment of Uranerz, at 2. 

Several uranium producers provided 

data regarding their employment. The 

combined figures from several 

producers come to employment of 845 

in 2012 and 424 in 2014. NIPC 

Comment of UPA, at 7–8. 

DOE nonetheless does not believe that 

employment in the uranium mining 

industry has decreased by half since 

May 2012. That claim runs contrary to 

reporting by EIA that employment was 

1,191 in 2011, 1,196 in 2012, and 1,156 

in 2013. EIA, 2013 Uranium Production 

Report, 10 (May 2014). This is only a 

3% decline between 2011 and 2013. 

Although EIA has not yet reported 

uranium employment in 2014, DOE 

notes that production levels in 2014 

were very close to levels in 2013 and 

that one new facility began operation in 

2014. Thus it seems reasonable to 

assume that employment levels were 

similar as well. EIA Domestic Uranium 

Production Report Q4 2014, 3–6 

(January 2015). 

DOE believes the EIA reports on 

uranium-industry employment are more 

reliable than the commenter’s 

submission on this point. In general, the 

EIA collects its data through a survey, 

responses to which are mandatory. The 

survey terms are well defined and, with 

respect to employment, should capture 

the relevant employment. By contrast, 

the commenter describes its data as 

counting ‘‘current employment 

activities.’’ It is not clear which 

employees are included in the count or 

whether the inclusion criteria are even 

uniform across companies. More 

significantly, the commenter’s 

submission does not encompass the 

whole domestic industry. A number of 

the companies represented did decrease 

production, but the commenter’s figures 

appear not to include some mines that 

have increased production. 

Even if industry employment had 

decreased by half since 2012, for 

predicting the effect of DOE’s transfers 

in the assessed case it is important to 

understand what portion of recent 

employment decreases is reasonably 

attributable to past transfers. No 

commenter attempted such an 

estimation. While it is difficult to infer 

causal connections between 

employment and any particular market 

phenomenon, DOE thinks it is likely 

that most if not all of the reduction in 

employment in the mining industry 

since 2011 can reasonably be attributed 

to the downturn in the demand for 

uranium, primarily due to the 

Fukushima events. 

DOE believes that ERI’s method for 

attributing an employment effect to DOE 

transfers is reasonable. ERI’s method is 

based on an empirical observation that 

prices (particularly the two-year moving 

average of price) have been strongly 

correlated with employment over the 

last decade. This correlation exists 

despite the remarkable fluctuations in 

market conditions that have taken place 

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75NAC defines ‘‘under development’’ as a 

property for which ground breaking has begun. 

Note that NAC considers ten properties worldwide 

to be ‘‘under development’’; they are not limited to 

U.S. properties. NAC Report, 3–11. 

76 Information from this paragraph is collected 

from the two UxC studies mentioned above. The 

price bands come from UxC Uranium Production 

Cost Study, 80–84 (2013), and cost estimates in 

parentheses comes from UxC Uranium Suppliers 

Annual—December 2014 (2014) (except for data on 

[REDACTED], which come from UxC Uranium 

Production Cost Study, 111–12 (2013). 

in that period. The relatively small price 

effects likely to result from DOE’s 

transfers—even the price effects that 

UxC forecasts—are much smaller than 

the variations of the past decade. 

Therefore, the correlation ERI observes 

should hold true for these small price 

effects. In addition, it is reasonable to 

expect that prices and employment will 

continue to correlate in such a way, 

because the correlation reflects 

persistent market phenomena. DOE 

expects that a producer increases or 

decreases employment in order to 

increase or decrease production, and it 

does so in response to increases or 

decreases in the price it will receive. For 

any given producer the relationship 

between employment and price will 

depend on multiple factors such as the 

producer’s cost of production and its 

cost structure (e.g. what proportion of 

cost depends on employee numbers) 

and the producer’s sales structure and 

realized prices. Aggregated over 

producers, the result would be the sort 

of correlation between prices and 

employment that ERI observes. 

ERI forecasts that employment will be 

persistently lower by 42 person-years 

over the next decade if DOE transfers 

uranium at the rates specified in 

Scenario 1. While the assessed case 

involves significantly lower rates, DOE 

uses the Scenario 1 forecast in order to 

forecast employment effects 

conservatively. A decrease of 42 personyears is relatively small—approximately 

4%—compared to overall employment. 

Notably, the industry has weathered 

significantly larger changes in 

employment in the past. Between 1998 

and 2001, the industry went from 

employment at 1120 to 423. EIA, 

Domestic Uranium Production Report 

(2005). Similarly, from 2008–2009, the 

industry went from 1563 to 1096; a drop 

of 467 in a single year. EIA, 2013 

Uranium Production Report, 10 (May 

2014). Additionally, ERI points out that 

employment for 2014 likely declined by 

114 person-years, even though DOE 

transfers did not change appreciably 

from 2013 to 2014. These comparisons 

indicate that the small change 

attributable to DOE’s transfers will be 

well within the range of employment 

fluctuations that independent market 

conditions produce. 

Some comments in response to the 

RFI, mentioned above, warn that 

employment losses may lead to a loss of 

intellectual capacity. The relevant 

employees have technical skills that can 

take time to acquire. If the lost 

employees have retired or moved into 

other fields, it may not be possible to 

restore them even as demand increases. 

While in principle replacements could 

be trained, these commenters argued 

that employment losses have been so 

severe that the industry is losing the 

capability to train replacements. 

Commenters provided no evidence to 

support these claims. Moreover, these 

commenters’ suggestion is inconsistent 

with the industry experience of the past 

20 years. The industry has more than 

once in the last 20 years experienced 

decreases in employment an order of 

magnitude above what ERI attributes to 

recent DOE transfers, and has 

maintained and, when appropriate, 

increased production. Thus, DOE does 

not expect its transfers in the assessed 

case will cause employment losses that 

threaten the intellectual reserves of the 

industry. DOE believes that the current 

levels of employment (and the expected 

future levels of employment) adequately 

protect against loss of this resource. 

4. Changes in Capital Improvement 

Plans and Development of Future 

Facilities 

As stated above, ERI reports that four 

new production centers began operation 

since 2009: One in 2010, one in late 

2010/early 2011, one in 2013, and one 

in 2014. In addition, one new 

production center—Peninsula’s Lance 

project—is expected to begin operations 

in 2015. 2015 ERI Report, 57. ERI 

explains that the new production 

centers may have been able to begin 

operations only because they were 

supported by fixed price term contracts 

that were signed when prices were 

substantially higher than they are 

currently—i.e. $55 to $70 per pound 

term price. At least one of these 

companies has directly stated that its 

project would not have been able to 

proceed at current price levels—$45 to 

$50 per pound term price. ERI also 

reports that some owners of proposed 

conventional mines outside the U.S. 

have stated that prices in the range of 

$60 to $70 per pound would be 

necessary for further development. 2015 

ERI Report, 61. 

Based on the above, ERI concludes, 

‘‘[i]t does not appear that removing the 

DOE inventory from the market and 

adding back the $2 to $3 per pound 

price effect attributed to the DOE 

inventory material . . . would 

necessarily increase current prices 

enough to change the situation 

regarding the viability of new 

production centers in the U.S.’’ 2015 

ERI Report, 62. However, ERI reports 

that some lower cost ISL projects in the 

U.S. may be able to move forward at 

current prices. 2015 ERI Report, 62. 

NAC provides estimates of the site 

forward cost, including rate of return, 

for ten properties it considers to be 

under development.75 [REDACTED]. 

NAC Report, 3–11. NAC does not 

directly apply its estimate of the price 

effect of DOE transfers to the production 

costs for these specific properties. 

The UxC Report does not provide any 

specific estimates of production levels 

or costs at planned facilities. However, 

UxC has developed production cost data 

elsewhere in reports cited. UxC 

Uranium Suppliers Annual—December 

2014 (2014); UxC Uranium Production 

Cost Study (2013). [REDACTED]. UxC 

Uranium Production Cost Study, 62, 

(2013). [REDACTED]. 

As with existing production centers, 

UxC [REDACTED].76 [REDACTED]. Id. 

at 82–83. 

EIA reports that production 

expenditures were $168.8 million in 

2011, $187 million in 2012 and $168 

million in 2013—when spread across 

annual production, these numbers 

represent approximately $41 per pound 

in 2011, $43 per pound in 2012, and $36 

per pound in 2013. EIA, 2013 Domestic 

Uranium Production Report, 7, 11 

(2014). Including costs related to 

drilling between 2011 and 2013 raises 

this figure by about $56 million per year 

per pound, and including land, 

exploration, and reclamation costs in 

those years increases these figures by a 

further $96 million per year. EIA, 2013 

Domestic Uranium Production Report, 

11 (2014). Some commenters argued 

that the average cost for a U.S. producer 

is $67.10 per pound—apparently the 

sum of the EIA figures for all costs, 

divided by the total of recent 

production. NIPC Comment of UPA, at 

7. DOE is not convinced that this simple 

aggregation provides an accurate 

estimate of production costs. For one 

thing, some expenses, like reclamation, 

occur after production and therefore 

should be attributed to past production 

(sometimes long-past production) rather 

than current production. Some 

expenses, like exploration costs, relate 

to future production. U.S. production 

has varied over time, and will continue 

to do so. So accounting for past and 

future production costs as part of the 

cost of current production can lead to 

error. DOE believes a more reliable 

method for estimating the cost of 

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Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 26399 

77UPA and others also stated that DOE should 

consider the fact that total drilling, exploration, and 

development expenditures decreased in 2013 

compared to 2012 according to EIA. They also state 

that it is reasonable to expect that these 

expenditures were even lower in 2014. RFI 

Comment of UPA, at 3; RFI Comment of Uranerz, 

at 3. Since uranium prices decreased over this 

period, it is not surprising that producers reduced 

their activities to develop new resources. However, 

consistent with the analytical approach described 

above, the relevant question is what will be the 

effect on these activities of DOE transfers. DOE 

believes that a more reliable approach is to compare 

the expected market price with and without DOE 

transfers to estimated production costs at potential 

new production centers. 

78That figure is well below what some 

commenters argued DOE should use—$67.10 per 

pound, based on the aggregate of EIA-reported costs 

and the amount of 2014 production. 

production, for purposes of forecasting 

the consequences of DOE uranium 

transfers, is to use industry reports such 

as UxC’s, which provide data about the 

expected costs of actual projects.77

As with production at existing mines, 

DOE believes that production decisions 

are more likely to be based on future 

expectations about market prices and 

contracting trends than on a 

straightforward comparison of current 

market prices to production cost. The 

comments received were consistent 

with DOE’s understanding. New 

production centers are a long-term 

investment, and new facilities require 

several years of lead-time before 

production can begin. Since market 

prices fluctuate over time, many 

producers are unwilling to bring a new 

facility into production without longterm supply contracts in place. 

TradeTech’s report included an 

estimate that DOE’s transfers, at the 

2,705 MTU per year rate, ‘‘could be the 

deciding factor’’ in whether a 

hypothetical miner continues 

production. TradeTech Report, at 22. 

The hypothetical mine has a marginal 

production cost of $47.41 per pound, a 

50% exposure to the spot market price, 

and a long-term component to its 

realized price of $50. In addition, 

TradeTech assumes that the 

hypothetical mine requires a 10% 

margin to justify production. Observing 

that prices in the next couple years are 

forecast to range from $40 to $55 per 

pound, and that DOE transfers at 2,705 

MTU per year would in TradeTech’s 

estimate reduce prices by on average 

$2.43 per pound, TradeTech concludes 

that the $2.43 per pound difference 

‘‘could’’ matter for the hypothetical 

mine. 

Some commenters characterized the 

TradeTech report as ‘‘overwhelming 

evidence’’ that DOE’s transfers are 

‘‘threatening the very existence of 

several U.S. producers.’’ NIPC Comment 

of UPA, at 4. These commenters urged 

DOE to rely on TradeTech’s 

hypothetical example for assessing the 

consequences of DOE transfers for 

future production. NIPC Comment of 

UPA, at 7. DOE does not consider this 

example appropriate for that purpose, 

and does not think it constitutes 

evidence that DOE’s transfers actually 

threaten the viability of U.S. producers, 

for several reasons. The analysis appears 

to compare current production costs at 

the hypothetical mine to near-term spot 

prices. DOE believes a producer would 

actually make its long-term investment 

decisions on the basis of expectations 

about prices over the longer term and 

the availability of long-term contracts at 

an acceptable price. TradeTech’s 

example does not reflect either of these 

factors. In addition, the hypothetical 

example uses assumptions that do not 

appear well justified. The hypothetical 

mine has average production costs of 

$47.41 per pound.78 There also appear 

to be only one or two projects, out of the 

number being developed in the United 

States, that have expected production 

costs near the assumed figure. The 

hypothetical producer also has longterm contracts at an average price of $50 

per pound, just 5.5% higher than the 

producer’s assumed average cost. Yet, 

according to TradeTech’s hypothetical, 

this producer needs a 10% margin to 

justify production. This hypothetical 

producer would have needed spot 

prices to be not just 10% higher than its 

costs, but even higher ($54.30 per 

pound) to compensate for the low price 

of its long-term contracts. It seems 

unlikely a producer would actually have 

developed such a speculative project. In 

short, the hypothetical example as a 

whole is inconsistent with DOE’s 

understanding of how producers decide 

whether and when to invest in 

production resources. 

Consistent with the analytical 

approach outlined above, DOE’s task is 

to assess what the state of affairs would 

be with and without transfers in the 

assessed case. DOE agrees with ERI’s 

conclusion that whether DOE makes 

these transfers is not likely to affect the 

economic viability of new U.S. 

production centers in development. The 

production cost estimates from NAC 

and UxC are consistent with ERI’s 

conclusions. ERI reports that there may 

be some low-cost ISR production 

centers that can move forward at current 

market prices. This is consistent with 

estimates from NAC and UxC’s of 

production costs at specific facilities 

that are currently under development. 

The only production center expected to 

begin operations in the near future is 

Peninsula’s Lance. Both NAC and UxC 

estimate [REDACTED]. For such a 

project, DOE transfers may affect overall 

revenues but seem unlikely to change 

whether the project proceeds. 

[REDACTED]. Compared to current term 

market prices, one or two projects have 

production costs that are close to or just 

above the current market price, but in 

light of the low rate of term contracting 

activity in the next one or two years, 

these projects are unlikely to settle on 

contracts at the current term price. 

DOE recognizes that, as some 

commenters explained, there has been 

limited investment in uranium projects 

in recent years. E.g., RFI Comment of 

Uranerz, 4; RFI Comment of Energy 

Fuels, 4–5. However, although 

commenters attribute the decrease in 

investment to DOE’s transfers of 

uranium, DOE believes that investment 

decisions reflect market conditions 

overall, primarily current market prices 

and expectations of future market price. 

The analysis described above identifies 

the amount of decrease that can 

reasonably be attributed to DOE’s 

transfers. Ultimately, DOE must assess 

what the effect of future transfers will 

be. Prices have increased since the lows 

of the past two years, and future prices 

are now expected to be higher. As prices 

increase in the coming few years, term 

contracts will become available that 

would justify one or more additional 

projects with higher costs. A persistent 

$2–3 per pound price effect, as DOE 

forecasts for the assessed case, may 

delay investment on a given project for 

a time. But it does not appear that 

eliminating the effects of DOE transfers, 

would markedly change decisions 

whether to develop future production 

centers. 

5. Long-Term Viability and Health of the 

Industry 

As described above, ERI notes that 

U.S. industry production has risen since 

the start of DOE uranium inventory 

transfers for Portsmouth cleanup in 

December 2009. ERI also notes that four 

new operations began production since 

2009, and one additional production 

center is expected to begin operations in 

2015. 2015 ERI Report, 57. 

ERI also presents its future 

expectations regarding demand for 

uranium. ERI’s most recent Reference 

Nuclear Power Growth forecasts project 

global requirements to grow to 

approximately 182 million pounds 

annually between 2018 and 2020, 

approximately 15% higher than current 

requirements. Global requirements are 

expected to continue to rise to a level 

of 203 million pounds in 2025, 

approximately 28% higher than current 

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26400 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

79ERI assumes that China’s discretionary strategic 

inventory building will taper off by 2023. 2015 ERI 

Report, 10. This is generally consistent with other 

projections regarding Chinese strategic inventory 

purchasing behavior. See TradeTech Report, 41–42; 

NAC Report, at 3–4. 

80 DOE notes that uranium ‘‘demand’’ and reactor 

‘‘requirements’’ are different. Requirements refers to 

an estimate of the amount of uranium needed to 

support operating reactors in a particular year. 

Demand includes additional purchased quantities 

for strategic or discretionary purposes. For example, 

in recent years China has purchased quantities of 

uranium far in excess of its reactor requirements. 

2015 ERI Report, 10–11; TradeTech Report, 41–42; 

NAC Report, 3–2 to 3–5. 

81TradeTech also appears to assume China’s 

stock building purchases will cease to outpace 

Chinese requirements around 2023. TradeTech 

Report, 41–42. TradeTech also notes that most 

Japanese reactors are expected to resume operation 

by 2020 while around 70% of contracted deliveries 

continue to be made. Id. at 35. TradeTech projects 

that this will lead to decreased demand from Japan 

after 2020 as Japanese reactors utilize excess stocks 

that were delivered while the reactors were not 

operating. Id. at 36. Despite decreased demand 

during this period from Japan, China, and other 

countries, TradeTech still predicts that uranium 

demand will grow by approximately one percent 

per year between 2015 and 2030. Id. at 33. 

82Converted from metric tons uranium in U3O8

(MTU) using a conversion rate of 2,599.79 pounds 

U3O8 per MTU. 

83This represents OECD–IAEA’s low growth 

scenario. The high growth scenario anticipates 

growth of almost 90 million pounds, approximately 

50% above the high-growth scenario for 2015. Id. 

requirements. 2015 ERI Report, 6–7. ERI 

presents a graph comparing global 

requirements, demand, and supply from 

2013–2035. Global secondary supply 

and supply from current mines are 

expected to exceed global reactor 

demand until approximately 2018. 

However, if China’s practice of 

purchasing amounts of uranium well in 

excess of its current reactor demand is 

included—what ERI terms 

‘‘Discretionary Strategic’’ demand— 

global demand approximately equals 

supply from secondary supply and 

currently operating mines. 2015 ERI 

Report, 9–10. If planned expansions and 

new mines under development are 

included, supply is expected to exceed 

demand until approximately 2024, 

regardless of whether ‘‘Discretionary 

Strategic’’ demand is included.79 In the 

time period following 2025, ERI 

forecasts that demand will significantly 

exceed supply. 2015 ERI Report, 9. In 

order to meet this demand, ERI 

anticipates that mines it terms 

‘‘planned’’ and ‘‘prospective’’ will need 

to begin operations. 2015 ERI Report, 

11. 

A variety of other sources predict 

substantial increases in reactor 

requirements and/or demand.80

TradeTech forecasts reactor-only growth 

at 3.52% per year through 2024. Total 

uranium requirements growth is much 

slower during this period due to stock 

building purchases which taper 

downward.81 TradeTech Report, 34. The 

OECD and IAEA expect reactor 

requirements to grow by at least 35.4 

million pounds 82 by 2025— 

representing approximately 21% of 

2015 requirements.83 OECD–IAEA, 

Uranium 2014: Resource, Production, 

and Demand, 105 (2014). In its Uranium 

Market Outlook for the 4th quarter of 

2014, UxC similarly predicts significant 

increases in both requirements and 

demand in the long-term. UxC Uranium 

Market Outlook—Q4 2014, 56–60 

(2014). Specifically, [REDACTED]. Id. at 

60. [REDACTED]. Id. at 57. 

Other sources also generally agree 

with ERI’s forecast for supply. UxC’s 

annual Uranium Market Outlook 

projects [REDACTED]. UxC Uranium 

Market Outlook—Q4 2014, 68 (2014). 

[REDACTED]. Id. at 69. 

In addition to a predicted increase in 

demand, several sources predict a 

recovery in either spot or term uranium 

prices—or both. These forecasts are 

discussed above in Section IV.A.1, but 

they generally predict an increase in 

spot price to $50 by 2019 or 2020, and 

to $55.00 or $60.00 in the years 

thereafter. 

Finally, DOE recognizes that the 

predictability of transfers from its excess 

uranium inventory over time is 

important to the long-term viability and 

health of the uranium industries. ERI 

has noted the importance of 

predictability ‘‘for long-term planning 

and investment decisions by the 

domestic industry.’’ 2015 ERI Report, 

100; 2014 ERI Report, 60–61. Some 

commenters also stated that DOE 

transfers should be predictable. RFI 

Comment of UPA, at 2; RFI Comment of 

Cameco, at 2. Other comments stressed 

the importance of predictability to 

permit the industry to engage in longterm planning. NIPC Comment of 

Cameco, at 4; NIPC Comment of UPA, 

at 5. DOE notes that the upper scenario 

considered by ERI would represent 

continued transfers at rates consistent 

with the May 2014 determination and 

roughly similar to the May 2012 

determination. Compare 2015 ERI 

Report, 25, with 2014 ERI Report, 28. 

Thus, DOE’s section 3112(d) transfers 

have been stable for three years: DOE 

has transferred at essentially the rate 

identified in the May 2012 

determination. The series of Secretarial 

Determinations has, DOE believes, made 

these transfers predictable. While the 

assessed case involves a lower rate of 

transfers, DOE does not believe a 

reduction of this magnitude will cause 

harmful uncertainty for the industry. 

DOE recognizes that, as with any 

prediction, the future course of events 

may differ from forecasts. But section 

3112(d) itself instructs DOE to predict 

the impact of its transfers, in that the 

statute requires a determination that a 

transfer ‘‘will not’’ have adverse 

material impacts on the domestic 

industries. Forecasts of reactor 

requirements should be fairly reliable, 

because constructing a nuclear reactor is 

a major investment requiring years to 

come to fruition and a reactor then 

operates for decades. A reactor that will 

need uranium in the next decade must 

either exist now or be at least in the 

planning stages now. Conversely, if a 

reactor is operating now, its operator 

has strong incentives to keep it running 

as long as possible, and the licensed 

lifetimes for reactors are known. 

Therefore, barring extreme events such 

as the Fukushima disaster and various 

large-scale policy responses to it, DOE 

believes it is possible to forecast reactor 

requirements with a fairly high degree 

of precision. The various sources DOE 

has consulted, including the ERI report, 

offer similar forecasts, and DOE 

concludes it is appropriate to rely on 

those forecasts. 

Forecasts of production may be 

somewhat more uncertain, for several 

reasons. Developing a new mining 

project does not take as long as building 

a new reactor, and the process differs 

also in terms of when money is spent 

over the course of the development. If 

a new reactor would be running in 2020, 

a significant amount of investment will 

already have been made by this point. 

So it is likely that, while schedules 

might slip, the reactor would indeed 

begin operating. Mines that might be 

operating in 2020 include projects that 

are still in a more speculative phase of 

development. A producer might halt 

development for various reasons, 

including market conditions or a 

discovery that the uranium resource was 

smaller than expected. These factors 

could make the eventual supply smaller 

than forecasted. 

Nonetheless, the rough course of 

future supply can be predicted with a 

reasonable degree of reliability. 

Producers know the amount of uranium 

available at their existing resources. 

Technology might improve to permit 

more uranium to be recovered at a given 

price—a phenomenon that has reshaped 

the oil industry. But DOE is not aware 

of any technology in development that 

would significantly alter mine 

economics in the next few years. 

Consequently, DOE believes it can rely 

on forecasts about the depletion of 

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84Following the end of the Russian HEU 

Agreement, Tenex signed a commercial agreement 

to provide EUP to customers in the United States. 

Commenters appear to suggest that this material is 

equivalent to a continuation of the Russian HEU 

Agreement. NIPC Comment of ConverDyn, 

Enclosure, at 4. DOE notes that this material is not 

produced from down-blended HEU; it is from 

commercial primary supply. Thus, it is covered 

under the Suspension Agreement and included 

within ERI’s estimates of worldwide supply, as 

described in text. 

existing production centers. Forecasts 

about the amount of uranium available 

at a mine still in the planning phase are 

necessarily more uncertain. Any given 

mine might prove to have more or less 

capacity than currently forecasted. In 

aggregate, these differences should 

average out to some degree, so that 

overall forecasts of aggregate supply are 

appropriate predictions of the likeliest 

course of events. The various sources 

DOE has consulted offer similar 

forecasts on this point, and DOE 

concludes it is appropriate to rely on 

them. 

Even if existing production centers 

continued producing uranium at their 

current rates, prices could be expected 

to increase because requirements will 

increase. Consistent with the ordinary 

operation of supply and demand, higher 

prices would be necessary to bring 

additional supplies into the market. In 

fact, as existing production centers are 

depleted, the predicted replacements 

will have slightly higher production 

costs. Thus, higher prices will be 

necessary in the future even to maintain 

production at current levels. For these 

reasons the price of uranium is likely to 

increase over the coming decade. 

Most sources DOE has reviewed agree 

that there will be an increase, although 

the specific estimates of that increase 

vary. This price increase is expected to 

take place even with DOE transfers. See 

Figures 5 & 6, UxC Report, 11. 

The effect of DOE transfers on this 

process is not certain. UxC projects that 

DOE transfers will essentially slow the 

rate of this price increase. For example, 

[REDACTED]. Id. Even if this projection 

is correct, DOE transfers would only 

have the effect of slightly delaying the 

development of future production 

facilities. Significantly, DOE transfers 

will not prevent new facilities from 

coming online, and is not expected to 

permanently affect the viability of any 

new production centers. At worst, the 

effect of DOE transfers in the long run 

is equivalent to the difference in present 

value based on earnings beginning later 

in time. DOE does not believe that this 

difference is significant enough to 

appreciably affect the long-term 

viability and health of the industry. 

6. Russian HEU Agreement and 

Suspension Agreement 

Section 3112(d) of the USEC 

Privatization Act requires DOE to ‘‘take 

into account’’ the sales of uranium 

under the Russian HEU Agreement and 

the Suspension Agreement. Consistent 

with this instruction, DOE believes this 

assessment should consider any sales 

under these two agreements that are 

ongoing at the time of DOE’s transfers. 

Under the Russian HEU Agreement, 

upon delivery of LEU derived from 

Russian HEU, the U.S. Executive Agent, 

USEC Inc., was to deliver to the Russian 

Executive Agent, Technabexport 

(Tenex), an amount of natural uranium 

hexafluoride equivalent to the natural 

uranium component of the LEU. The 

USEC Privatization Act limited the 

volume of that natural uranium 

hexafluoride that could be delivered to 

end users in the United States to no 

more than 20 million pounds U3O8 in 

each year after 2009. ERI has in the past 

analyzed material from the Russian HEU 

Agreement as part of worldwide 

secondary supply. DOE notes that the 

Russian HEU Agreement concluded in 

December 2013. Thus, there are no 

ongoing transfers under this 

agreement.84

The current iteration of the 

Suspension Agreement, described above 

in Section I.D.3.b, sets an annual export 

limit on natural uranium from Russia. 

73 FR 7705 (Feb. 11, 2008). That 

agreement provides for the resumption 

of sales of natural uranium and SWU 

beginning in 2011. While the HEU 

Agreement remained active (i.e. 2011– 

2013), the annual export limits were 

relatively small—equivalent to between 

0.4 and 1.1 million pounds U3O8. After 

the end of the Russian HEU Agreement, 

restrictions range between an amount 

equivalent to 11.9 and 13.4 million 

pounds U3O8 per year between 2014 and 

2020. 73 FR 7705, at 7706 (Feb. 11, 

2008). Material imported from Russia in 

accordance with the Suspension 

Agreement is not derived from downblended HEU; thus, this material is part 

of worldwide primary supply as 

analyzed by ERI in the 2015 ERI Report. 

This material is also presumably 

accounted for in the various projections 

and models developed by TradeTech, 

UxC, and NAC International. Thus, 

DOE’s analysis takes sales of uranium 

under the Suspension Agreement into 

account as part of overall supply 

available in the market. 

7. Mining Industry Conclusion 

After considering the factors 

discussed above, DOE concludes that 

transfers under the assessed case will 

not have an adverse material impact on 

the domestic uranium mining industry. 

As explained above, DOE transfers 

under the assessed case will continue to 

exert some downward pressure on the 

market price for uranium concentrates. 

DOE forecasts that about $2.70 of price 

suppression will be reasonably 

attributable to DOE transfers; this is 

somewhat smaller than the effect 

attributable to transfers in the past few 

years. 

Because the vast majority of deliveries 

of uranium concentrates take place 

under long-term contracts that allow 

producers to realize prices based on 

term prices prevailing at the time the 

contracts were entered, DOE concludes 

that the average effect on the realized 

price of U.S. producers under current 

contracts is closer to $1.75. For future 

term contracts, price suppression 

associated with DOE transfers would 

decrease the base price for these 

contracts, potentially decreasing the 

average realized price over the life of 

each contract. However, DOE concludes 

that this type of effect will be minimal 

because term contracting activity is 

expected to remain low during the next 

few years. 

DOE transfers are expected to have a 

small effect on employment in the 

domestic industry, but the magnitude of 

this effect is well within the range of 

employment fluctuations the industry 

has experienced in the past due to 

market conditions unrelated to DOE 

transfers. 

Even focusing on the entities most 

likely to be impacted—i.e. producers 

that sell primarily on the spot market 

and are thus not protected from 

fluctuations in the spot price—it is not 

likely that removing the $2.70 price 

effect attributable to DOE transfers 

under the assessed case would be 

enough to materially change the 

relationship between price and cost for 

any producer with respect to production 

levels at currently operating facilities or 

decisions whether to proceed with 

developing new production centers. 

Both types of decisions involve 

considerations beyond current spot 

prices, and they likely will be based on 

expectations about future trends in 

market price. DOE concludes that, given 

the expected increases in future demand 

for uranium concentrates and, more 

importantly, the expected increases in 

market prices, the price effect 

attributable to DOE might delay 

decisions to expand or increase 

production capacity but would not 

change the eventual outcomes. DOE 

does not believe that these effects have 

the substantial importance that would 

make them ‘‘adverse material impacts’’ 

within the meaning of section 3112(d). 

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26402 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

85As noted above, the transfer rates for these 

scenarios refer only to the level of uranium transfers 

for cleanup at Portsmouth and down-blending of 

LEU. The level of transfers for other DOE programs 

is the same in all three scenarios. 

86The LEU that DOE transfers is in the form of 

uranyl nitrate, which must be converted to uranium 

oxide in the fuel fabrication process. Analogously, 

enriched uranium hexafluoride must also be 

transformed into uranium oxide. If there were a 

difference in cost between these two chemical 

processes, buyers might be willing to pay more (or 

less) for the enriched nitrate than for enriched 

hexafluoride, and the market effect of LEU transfers 

would be somewhat more complicated to predict. 

However, DOE is not aware of any substantial 

difference in these costs. 

B. Uranium Conversion Industry 

The domestic uranium conversion 

industry consists of a single facility, the 

Metropolis Works (MTW) in Metropolis, 

Illinois. This facility is owned and 

operated by Honeywell International 

Inc. MTW has a nameplate capacity of 

15,000 MTU as UF6. ConverDyn, Inc., 

(‘‘ConverDyn’’) is the exclusive 

marketing agent for MTW and submitted 

comments in response to DOE’s notices. 

In what follows, DOE will refer to MTW 

or ConverDyn, interchangeably, because 

the two appear to have essentially the 

same interests in uranium markets. 

1. Prices for Conversion Services 

Like market prices for uranium 

concentrates, conversion market prices 

are generally described in terms of the 

spot price and the term price. This 

section discusses the potential impacts 

of DOE transfers on these two prices. 

For reference, as of March 30, 2015, 

UxC’s spot price indicator was $7.50 per 

kgU as UF6 and its term price indicator 

was $16.00 per kgU as UF6. 

Three of the market analyses 

discussed above—those by ERI, 

TradeTech, and UxC—contain estimates 

of the effect of DOE transfers on the 

market prices for conversion services: 

ERI, TradeTech, and UxC. This section 

begins with a summary of each report 

and then discusses DOE’s review of the 

reports’ methodologies and conclusions. 

This section concludes with a 

discussion of how a change in 

conversion market prices would affect 

the domestic uranium conversion 

industry. A principal mechanism 

through which such a change in market 

price could impact individual producers 

is through the effect on the realized 

price of primary converters. 

a. Energy Resources International Report 

DOE tasked ERI with estimating the 

effect of DOE transfers on the market 

prices for conversion services. To 

estimate this effect, ERI employed a 

market clearing price model very similar 

to what is described above for the 

uranium market. As with uranium 

concentrates, ERI constructed 

individual supply and demand curves 

for conversion services and estimated 

the clearing price with and without DOE 

transfers. 2015 ERI Report, 44. 

DOE tasked ERI with estimating the 

effects of DOE transfers under the same 

three scenarios described in Section 

IV.A.1. The levels of the different 

scenarios are outlined above in Table 4 

in terms of natural uranium 

equivalent.85 All the transfers in the 

assessed case have the potential to 

displace conversion services. The 

natural uranium hexafluoride that DOE 

transfers could displace conversion 

services directly, in that this material is 

the ordinary output of a conversion 

facility. The low-enriched uranium that 

DOE transfers could also displace 

conversion services because natural 

uranium must be converted into 

uranium hexafluoride before it can be 

enriched. A purchaser of low-enriched 

uranium from DOE transfers would 

purchase correspondingly less 

conversion services.86 As conversion 

services are denominated in kgU as UF6, 

the figures reported in Table 4 also refer 

to the amount of conversion services 

embodied in the DOE inventory. As 

with uranium concentrates, the assessed 

case falls between Scenarios 1 and 2. 

Using its market clearing approach, 

ERI estimates that DOE transfers will 

have the effects listed in Table 11. As 

with uranium concentrates, the 

relationship between the amount of 

transfers under each scenario and the 

price effect is essentially linear for each 

year ERI analyzed (2015–2024). 

Compare Table 3.7 to Table 4.2 of 2015 

ERI Report, 25–26, 45. Therefore, the 

price effect of DOE transfers in the 

assessed case can be interpolated from 

ERI’s estimates. 

TABLE 11—ERI’S ESTIMATE OF EFFECT OF DOE TRANSFERS ON CONVERSION PRICES IN $ PER kgU AS UF6

[Market clearing approach] 

2015 ERI Report 

ERI Scenario 

1 

ERI Scenario 

2 

ERI Scenario 

3 

Assessed 

case 

(interpolated) 

2015 ................................................................................................................. $0.90 $0.70 $0.10 $0.90 

2016 ................................................................................................................. 0.90 0.60 0.00 0.70 

2017 ................................................................................................................. 0.80 0.60 0.00 0.70 

2018 ................................................................................................................. 1.00 0.80 0.20 0.90 

2019 ................................................................................................................. 0.80 0.90 0.40 1.00 

2020 ................................................................................................................. 0.90 1.30 0.70 1.00 

2021 ................................................................................................................. 1.00 1.00 0.80 1.00 

2022 ................................................................................................................. 0.90 0.80 0.70 0.80 

2023 ................................................................................................................. 1.00 0.90 0.80 0.90 

2024 ................................................................................................................. 0.80 0.80 0.60 0.80 

Average (2015–2024) ...................................................................................... 0.90 0.80 0.40 0.90 

As with uranium concentrates, it is 

important to emphasize that this is not 

a prediction that prices will drop by the 

specified amount once DOE begins 

transfers following a new determination. 

A level of price suppression consistent 

with the estimate for Scenario 1 would, 

on ERI’s analysis, already be reflected to 

some degree in the current market price 

because DOE is currently transferring 

uranium at that rate. 2015 ERI Report, 

44. The price suppression that ERI 

estimates would persist under Scenario 

3 is largely ERI’s estimate of the 

consequence of past DOE transfers, from 

which some of the uranium is still 

expected to be entering the market in 

future years. 

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Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 26403 

87Figures 21–24 of the TradeTech Report show 

TradeTech’s estimates for the price impact at a 

range of different transfer rates. Although these 

charts and the related text refer to ‘‘Transfers at [25, 

50, or 75] Percent of Established 2014 Volumes,’’ it 

appears that these charts actually reflect an estimate 

for a 25%, 50%, or 75% decrease relative to current 

levels, rather than transfers at the specified 

percentage of current levels. 

88See generally DOJ/FTC Horizontal Merger 

Guidelines, chapter 7. Depending on the calculation 

basis, the Herfindahl–Hirschman Index of the 

conversion services market is between 1200 and 

2800. The former is near the threshold of what, 

under the Guidelines, would be considered an 

unconcentrated market in which, absent additional 

circumstances, uncompetitive behavior would not 

likely be a concern. The latter figure would qualify 

the market as highly concentrated. 

b. TradeTech Report 

In addition to its estimate of the price 

effect of DOE transfers on the uranium 

concentrate market, TradeTech 

estimates the effect on the price of 

conversion services. A summary of 

TradeTech’s estimates appears in Table 

12. It appears that TradeTech developed 

this estimate using its econometric 

Dynamic Pricing Model. TradeTech 

Report, 14. Using its model, TradeTech 

estimates that DOE’s transfer reduced 

the spot price by an average of $2.13 per 

kgU as UF6 between January 2012 and 

December 2014. TradeTech Report, 17. 

TradeTech also forecasts that continued 

DOE transfers at current rates would 

reduce the spot price by an average of 

$0.91 per kgU as UF6 between January 

2015 and December 2016. TradeTech 

Report, 21. 

TradeTech also provides predictions 

for the effect of DOE transfers at several 

decreased transfer rates. If DOE transfers 

decreased to 75% of current levels, 

TradeTech estimates that the spot price 

would increase by an average of $0.21 

per kgU as UF6 between January and 

2015 and December 2016. TradeTech, 

31.87 Based on TradeTech’s estimate of 

the price suppression caused by DOE 

transfers at current levels, it appears 

that TradeTech is forecasting that price 

suppression given transfers at 75% of 

current levels would be $0.70. If DOE 

transfers decreased to 50% of current 

levels, TradeTech predicts that the spot 

price would increase by an average of 

$0.43 per kgU as UF6 between January 

and 2015 and December 2016. 

TradeTech, 30. This corresponds to a 

price suppression of $0.48. If DOE 

transfers decreased to 25% of current 

levels, TradeTech forecasts that the spot 

price would increase by an average of 

$0.66 per kgU as UF6 between January 

and 2015 and December 2016. 

TradeTech, 29. This corresponds to a 

price suppression of $0.25. As with 

uranium concentrates, the TradeTech 

Report does not state the numerical 

volumes that correspond to these 

decreased transfer rates. However, DOE 

notes that the 2,100 MTU rate is slightly 

above 75% of the level included in the 

May 2014 Determination. Thus, DOE 

believes that TradeTech’s ‘‘75%’’ figure 

is roughly equivalent, although slightly 

below, that level. 

TABLE 12—TRADETECH’S ESTIMATE

OF EFFECT OF DOE TRANSFERS ON

CONVERSION SPOT PRICE IN $ PER

kgU AS UF6

TradeTech Report 

Transfer rate 

(compared to current) 

Estimated 

price effect 

(2015–2016) 

100% ..................................... $0.91 

75% ....................................... 0.70 

50% ....................................... 0.48 

25% ....................................... 0.25 

c. UxC Report 

UxC’s U–PRICE and SWU–PRICE 

econometric models predict the 

markets’ reaction to changes in supply 

for the uranium concentrate and 

enrichment industries. UxC does not 

directly model the conversion services 

market. Instead, UxC relies on other 

evidence to conclude that the price 

effect of DOE transfers on spot 

conversion prices have been ‘‘at least 

equal to, if not greater than, the impact 

on spot uranium prices.’’ Specifically, 

UxC notes that much of the world’s spot 

conversion is sold in conjunction with 

uranium through contracts for UF6. UxC 

also notes that over the past few years 

the UF6 price has fallen as much as the 

U3O8 price has on a percentage basis. 

Finally, UxC notes that the Ux North 

American UF6 Price has been below the 

Ux NA UF6 value (i.e. the sum of spot 

uranium and spot conversion prices for 

a given quantity of UF6) over most of the 

period of DOE transfers. UxC Report, 15. 

With respect to the future effect of DOE 

transfers, UxC expects that DOE 

transfers will continue to have a similar 

effect on spot conversion prices and a 

somewhat less but still ‘‘noticeable’’ 

effect on term conversion prices. UxC 

Report, 16. 

d. Effect of DOE Transfers on Market 

Price 

DOE has reviewed each of the market 

analyses described above. Each report 

uses a somewhat different methodology 

in estimating the effects of DOE’s 

uranium sales. ERI’s approach is likely 

to greatly overestimate the effect of 

DOE’s transfers on term conversion 

prices because it rests on the 

assumption that conversion prices arise 

from a competitive market price-setting 

mechanism. While the analysis would 

be reasonable if the term price for 

conversion had a competitive pricesetting mechanism, DOE believes that it 

does not. The market includes only five 

significant suppliers, one of which 

provides services almost exclusively to 

Chinese purchasers. This market 

structure could, on its own, make the 

market susceptible to parallel pricing in 

which rational pricing decisions by 

individual firms could lead the market 

price to be unresponsive to supply and 

demand changes.88 Conversion services 

are also homogeneous from the market’s 

point of view; converters take in 

uranium concentrates meeting industry 

standards and produce uranium 

hexafluoride meeting industry 

standards. The main buyers of 

conversion services, nuclear utilities, 

are relatively insensitive to the price of 

conversion. As noted above, mediumterm demand is generally inelastic 

because a utility must supply fuel for its 

reactors and the price of fuel is a 

relatively small part of its generation 

cost. Conversion is an even smaller 

fraction of that cost, because (using 

current term prices) conversion 

accounts for only seven to nine percent 

of the total cost of enriched uranium 

product. Meanwhile, conversion is a 

necessary step in the fuel cycle, and 

conversion facilities operate with a 

relatively high degree of investment 

compared to their variable costs. To 

ensure that conversion capacity remains 

available, it could be rational for 

utilities to accept and commit to higher 

prices than a free price mechanism 

reflecting available supply and demand 

would produce. In short, the 

insensitivity of buyers to conversion 

prices in the medium term, combined 

with the market structure, would make 

it likely that market-based pricing 

mechanisms would not function freely 

in the medium-term conversion market. 

Consistent with this expectation, the 

term price for conversion has not 

reacted to fairly large market shocks, 

much less changes in the rate of DOE’s 

transfers. In 2010, when term prices 

were around $11–13 per kgU, 

ConverDyn announced that it would no 

longer enter long-term contracts for less 

than $15 per kgU. 2014 ERI Report, 12; 

Michael Schwartz & Julian Steyn, 

‘‘Supply Margins Erode,’’ Nuclear 

Engineering International (Oct. 6, 2011), 

available at http://

www.neimagazine.com/features/

featuresupply-margins-erode/. This 

behavior would be surprising if the 

medium-term conversion market were a 

competitive market in which the lowest 

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26404 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

89ConverDyn states that DOE should recognize 

the limits of an economic model in a market with 

low liquidity. TradeTech’s forecast explicitly takes 

the liquidity of these markets into account in 

modeling active supply and active demand. 

TradeTech Report, at 2–4. 

90 DOE does not place much weight on UxC’s 

rough estimate of conversion spot prices based on 

a premise that the effect of DOE transfers on spot 

prices should be about the same, proportionally, as 

the effect on uranium prices. UxC’s U–PRICE and 

SWU–PRICE models appear not to be designed to 

forecast conversion prices, and UxC’s premise is not 

well justified. The conversion and uranium markets 

are distinct in many ways. Uncommitted 

conversion supply is different from uncommitted 

uranium supply, among other reasons because 

conversion providers have much higher ratios of 

fixed to variable costs than do uranium producers. 

91ConverDyn argues that DOE and ERI have 

confused sales on the ‘‘term market’’ with ‘‘buy and 

hold’’ or ‘‘carry trade’’ sales. NIPC Comment of 

ConverDyn, Enclosure, at 5. DOE notes that ERI’s 

market clearing model does not depend on whether 

DOE sales are made under spot contracts, term 

contracts, or some other type of contract. 

92ERI notes that ConverDyn’s realized price has 

increased over the last decade. Even in the absence 

of publicly available data about ConverDyn’s 

pricing, this conclusion seems nearly inevitable 

because term prices have increased from $10 to $16 

per kgU. ERI also suggests that ConverDyn may 

have an average realized price, at present, of around 

$14 per kgU. While ConverDyn’s average realized 

price is probably lower than current term prices 

because some proportion of its long-term contracts 

date from a time of lower prices, ERI’s particular 

figure seems to be based mainly on ConverDyn’s 

claim to be operating at a loss. It is thus not a very 

precise estimate. In any case, DOE’s analytical task 

is to understand how ConverDyn’s realized price 

would be different with and without transfers under 

the assessed case. As the discussion below 

indicates, DOE can perform that task without 

necessarily having a precise figure for ConverDyn’s 

current average realized price. 

price attracts the most business. By 

contrast, it is consistent with the notion 

that this market is prone to parallel 

pricing decisions. Furthermore, the term 

market price increased shortly after 

ConverDyn’s announcement to $15 per 

kgU, and then to $16.50 per kgU after 

ConverDyn made another 

announcement that it would not enter 

into long-term contracts for less than 

$16.50 per kgU. See Kevin P. Smith, 

ConverDyn v. Moniz, Case no. 1:14–cv– 

01012–RBW, Document 17–7, at ¶ 16 

(July 7, 2014). It remained at $16.50 per 

kgU even as the Fukushima disaster led 

to a 25% decrease in demand for 

conversion, and while the uranium term 

price decreased by 50% and the 

conversion spot price decreased by 

50%. The price also did not respond 

when DOE announced in May 2012 that 

it would increase transfers for 

Portsmouth cleanup to 2,400 MTU per 

year, or when the much larger-scale 

sales of Russian-origin uranium ceased 

in 2013. 

In sum, the conversion term price has 

not responded in recent years to major 

market disruptions. It appears that 

conversion providers are able to 

command roughly $16 per kgU 

regardless of the level of demand or of 

secondary supply. While it remains 

conceivable that some very small price 

effect could be attributed to DOE’s 

transfers, DOE concludes that ERI’s 

forecast of $0.90 per kgU is a very 

substantial overestimate. 

By contrast, the spot market in 

conversion would be more likely to 

have a competitive price-setting 

mechanism. In the spot market, 

conversion providers are in full 

competition with sources of secondary 

supply, many of which might not 

participate on the medium-term market. 

For example, enrichers that engage in 

underfeeding depending on spot prices 

of uranium and enrichment are unlikely 

to enter into long-term contracts to 

supply the resulting excess uranium. 

Meanwhile, demand on the spot market 

includes some buyers, like brokers, that 

purchase relatively little on the longterm market and may be more sensitive 

to price. Indeed, conversion spot prices 

do fluctuate by amounts comparable to 

the fluctuations in uranium 

concentrates spot prices. And 

conversion spot prices appear to 

respond to disruptions in supply or 

demand. For example, spot prices 

decreased by 50% in the months 

following the Fukushima disaster, and 

they also increased by 50% after MTW 

announced an extended shutdown in 

2012. For these reasons, DOE concludes 

that market-based economic modeling 

like what ERI and TradeTech performed 

for uranium spot prices is also an 

appropriate method to forecast 

conversion spot prices in the near term. 

TradeTech provides an econometric 

model that is based roughly on 

uncommitted supply and demand. For 

that reason, and reasons like those 

discussed above with respect to the 

analogous models for uranium prices, 

DOE relies on TradeTech’s forecast for 

near-term conversion spot prices.89 It 

bears emphasis that as with uranium 

prices, forecasts of conversion spot 

prices in the medium term are highly 

uncertain because uncommitted supply 

and demand are only a small portion of 

the overall market.90

As mentioned above, the assessed 

case is similar to the 75% scenario that 

TradeTech analyzed. TradeTech 

forecasts that in the near term, DOE 

transfers at that rate would produce a 

persistent price suppression of about 

$0.70 per kgU, on average, or about 

8.7% of current spot prices. In addition, 

ERI employs its market clearing model 

to predict a very similar price effect, 

approximately $0.90 in 2015 and $0.70 

in 2016 and 2017.91 For these reasons, 

DOE concludes that $0.70–$0.80 is a 

reasonable, although somewhat 

conservative, estimate of the effect of 

DOE transfers in the spot market over 

the next several years and notes that, 

given that the market price currently 

reflects DOE transfers at a rate of 2,705 

MTU, conversion spot prices will be 

subject to a smaller price suppression 

than at present. DOE concludes that its 

transfers have had essentially no effect 

on the term price for conversion and 

will continue not to affect the term 

price. 

e. Effect on Realized Price 

As with uranium concentrates, market 

prices would affect MTW chiefly 

through their effect on the price it 

actually realizes for its services. Since 

the domestic conversion industry 

consists of only one producer, the effect 

of DOE transfers depends on the mix of 

contracts on which MTW’s services are 

sold: The proportion of spot and term 

contracts, and the extent to which these 

contracts lock in prices higher (or lower) 

than current market prices or conversely 

expose MTW to spot prices. 

No commenter provides specific 

information about the current realized 

prices achieved in the conversion 

industry, and no commenter directly 

estimates the effect of DOE’s transfers 

on realized prices. ConverDyn is not a 

publicly traded company, and neither it 

nor Honeywell routinely make public 

information about contracting strategies 

and realized prices for MTW.92

However, DOE believes that the 

following information is relevant to 

ConverDyn’s contracting practices and 

its realized price. 

ConverDyn has stated in the past that 

the conversion market generally relies 

on long-term contracts. Declaration of 

Malcolm Critchley, ConverDyn v. 

Moniz, Case no. 1:14–cv–01012–RBW, 

Document 7–3, at ¶ 37 (June 23, 2014). 

ConverDyn has also stated that these 

long-term contracts are generally 

‘‘linked, at least in part, to market prices 

at the time of the contract.’’ Id. 

ConverDyn’s March 10, 2014 letter to 

DOE [REDACTED]. See Letter from 

Malcolm Critchley, ConverDyn, to Peter 

B. Lyons, DOE, 6 (Mar. 10, 2014). In that 

same letter, ConverDyn explained 

[REDACTED]. Id. at 7. ConverDyn then 

states, [REDACTED]. Id. 

Traxys, a brokerage and trading firm 

active in the uranium markets, has 

stated that ConverDyn specifically sells 

conversion services ‘‘almost 

exclusively’’ on long-term contracts. 

Declaration of Kevin P. Smith, 

ConverDyn v. Moniz, Case no. 1:14–cv– 

01012–RBW, Document 17–7, at ¶ 16 

(July 7, 2014). Because Traxys is a 

frequent participant in the markets in 

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93 [REDACTED]. UxC Conversion Market 

Outlook—December 2014, 34–36 (2014). 

94The converters are typically divided into two 

groups, the ‘‘Western’’ converters and the ‘‘nonWestern’’ converters in Russia and China. The 

Western converters consist of MTW, Cameco’s Port 

Hope facility in Ontario, Canada, AREVA’s 

Comurhex facility in France, and the former 

Springfield-Westinghouse plant in the UK (closed 

in 2014). There is also a very small conversion 

facility in Sao Paulo, Brazil, with a capacity of 

approximately 100,000 kgU as UF6. For comparison, 

the nameplate capacity of MTW is 15 million kgU 

as UF6. 

which ConverDyn sells, and because 

this statement appeared in a declaration 

filed in court, DOE considers Traxys’s 

observation reliable. Traxys has also 

stated that ConverDyn exercises 

significant pricing power in the market. 

Traxys refers to a 2011 letter from 

ConverDyn to its customers notifying 

them that it would not sell conversion 

services for less than $16.50 per kgU. Id. 

Since then, the term price indicator for 

conversion services has remained 

remarkably stable, even as spot prices 

for conversion have fluctuated. 2015 ERI 

Report, 12. UxC’s annual conversion 

outlook [REDACTED]. UxC Conversion 

Market Outlook—December 2014 

(2014). [REDACTED]. Id. at 32. 

[REDACTED]. Id. at 36.93 UxC also 

estimates that primary production 

totaled approximately [REDACTED], 

about [REDACTED] of which was from 

MTW. Id. at 45. Assuming the spot 

contracting activity from primary 

producers was divided proportionately 

by production among the Western 

converters,94 ConverDyn’s share would 

be [REDACTED]. Id. Conducting the 

same calculation using [REDACTED]. Id. 

To the extent that ConverDyn engages 

in spot sales, they represent no more 

than 5% of its total sales, and likely 

represent significantly less. Considering 

this in combination with ConverDyn’s 

statements about its contracting 

practices, namely that ConverDyn’s 

long-term contracts are priced at the 

prevailing term price (with some 

escalation for inflation), DOE concludes 

that ConverDyn has virtually no 

exposure to the spot price. 

This conclusion is somewhat 

counterintuitive. ConverDyn evidently 

has a high proportion of fixed costs. If 

variable costs are low, then the marginal 

cost of an additional unit of production 

should be very low, likely below the 

current spot price. In addition, 

ConverDyn states that it has excess 

capacity at its facility. NIPC Comment of 

ConverDyn, Enclosure, at 7. One would 

expect a facility with low marginal cost 

and excess capacity to sell any 

additional capacity on the spot market. 

However, the conversion market is 

characterized by a very small number of 

primary producers, and ConverDyn has 

demonstrated that it has significant 

influence over the price. Furthermore, 

the vast majority of contracting activity 

in conversion services continues to take 

place on the term market. DOE believes 

that this can be explained by utilities’ 

preference for security of long-term 

supply. As ConverDyn explains, the 

term price for conversion is set based on 

the price necessary to include all costs 

of operations, capital recovery, and a 

return on investment. NIPC Comment of 

ConverDyn, Enclosure, at 5. Although 

utilities obviously have an interest in 

keeping variable costs for fuel as low as 

possible, paying prices that are not 

sufficient to cover a conversion 

providers’ costs may, over time, 

jeopardize the continued operation of 

primary conversion facilities. By paying 

the premium associated with the term 

price, utilities can help prevent this 

outcome by paying a price that allows 

these facilities to cover their full 

operation and capital costs. UxC’s 

reports regarding industry concerns 

support this concept, reflecting 

[REDACTED]. UxC Conversion Market 

Outlook—December 2014, 73 (2014). 

Based on the above, it is unsurprising 

that ConverDyn is unwilling to enter 

into contracts at the spot price. A 

rational producer of conversion services 

with high fixed cost may be willing to 

reduce production rather than sell 

conversion services at a price that is not 

sufficient to cover the set of forward 

costs described below, even if the 

market price is higher than its marginal 

cost per unit. UxC’s estimates of current 

production provide evidence that some 

primary converters have in fact adopted 

this strategy. Specifically, [REDACTED]. 

UxC Conversion Market Outlook— 

December 2014, 46 (2014). 

Given that ConverDyn sells 

conversion services almost exclusively 

through term contracts, it follows that 

the effect on ConverDyn’s realized price 

depends on the effect of DOE transfers 

on the term price. However, as noted 

above, DOE concludes that its transfers 

have had, and will likely continue to 

have, essentially no effect on term 

prices for conversion. Consequently, 

DOE transfers under the assessed case 

will have very little effect, if any, on the 

pricing of ConverDyn’s term contracts. 

DOE recognizes that this conclusion is 

contrary to an assertion that ConverDyn 

has made. ConverDyn has claimed that 

price suppression due to DOE transfers 

has caused it to lose millions of dollars 

in revenue. ConverDyn’s analysis 

apparently applied the supposed price 

suppression across all the company’s 

sales. DOE does not find ConverDyn’s 

analysis convincing. ConverDyn stated 

in its March 10, 2014 letter that price 

suppression [REDACTED]. Letter from 

Malcolm Critchley, ConverDyn, to Peter 

B. Lyons, DOE, 7 (Mar. 10, 2014). 

ConverDyn, citing to the 2012 ERI 

report, states that it developed these 

estimates by applying a 5.8% price 

impact to contracts awarded since the 

start of the DOE sales program in 2009, 

and to expected futures sales between 

2014 and 2016. Id.; Supplemental 

Declaration of Malcolm Critchley, 

ConverDyn v. Moniz, Case no. 1:14–cv– 

01012–RBW, Document 21–2, at ¶ 8 

(July 14, 2014). But in 2009, DOE 

transferred uranium at a rate closer to 

1,200 MTU per year, and it did not 

begin transferring at 2,800 MTU per year 

until 2012. Even if DOE transfers 

beginning in May 2012 suppressed term 

prices by 5.8%—which DOE has 

concluded they did not—ConverDyn 

offers no explanation for why transfers 

at the prior, lower rate should also have 

had a 5.8% price impact. More 

importantly, as discussed in the 

previous section, the term conversion 

price appears to respond very weakly, if 

at all, to changes in supply and demand 

for conversion services. Given the 

stability of the term conversion price 

since 2010, in the face of major market 

shocks and also despite the May 2012 

increase in DOE’s transfers, DOE does 

not believe transfers under the assessed 

case will appreciably affect the price at 

which ConverDyn makes long-term 

contracts. 

2. Production at Existing Facilities 

As stated above, there is only one 

conversion facility in the United States, 

the Metropolis Works facility (MTW) 

operated by Honeywell International. 

ConverDyn is the exclusive marketing 

agent for conversion services from this 

facility. This section focuses on two 

types of potential effects of DOE 

transfers on production levels at MTW: 

Loss of sales volume for conversion 

services from MTW, and change in 

average production costs at MTW. 

a. Sales Volume 

The nominal capacity of the 

Metropolis Works facility is 15 million 

kgU as UF6. However, the facility 

generally operates below that level and 

has consistently produced no more than 

11–12 million kgU in recent years. 

Supplemental Declaration of Malcolm 

Critchley, ConverDyn v. Moniz, Case no. 

1:14–cv–01012–RBW, Document 21–2, 

at ¶ 10 (July 14, 2014). 

ERI estimated the effect of DOE 

transfers on production at MTW on a 

series of assumptions based in part, on 

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26406 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

95The analysis below differs from the discussion 

above regarding production by the domestic mining 

industry. The two industries and markets have 

different characteristics. With respect to mining, the 

presence or absence of DOE transfers is expected to 

result in a small change in uranium prices. The 

result of a price increase or decrease would be to 

motivate a production increase or decrease, 

respectively, by the producers with marginal costs 

in the relevant range. By contrast, as discussed 

below, converters generally have relatively low 

variable costs. DOE estimates that ConverDyn’s 

marginal cost is substantially lower than the current 

spot price for conversion. Thus, changes in price do 

not motivate production in the same way as in the 

uranium markets, and a different approach is 

warranted for estimating production changes. 

96A version of this table appeared as Table 7 in 

Section III.B.3 of the Department’s March 18, 2015, 

Notice of Issues for Public Comment. 80 FR 14,119. 

The figures in that table and accompanying text 

were slightly different from those found in the 2015 

ERI Report. This version of the table includes the 

correct figures from page 68–70 of the 2015 ERI 

Report. This difference between the two sets of 

figures is minimal. 

97ConverDyn states that any economic model 

should analyze actual sales data including both 

historic and forward sales. RFI Comment of 

ConverDyn, Enclosure, at 2. To the extent that such 

data has been provided to DOE through responses 

to the RFI, NIPC, and ConverDyn’s March 10, 2014 

letter, this analysis considers those data. However, 

if the suggestion is that no economic model 

constructed without such data is reasonable, DOE 

does not agree. 

98ConverDyn suggests that it believes DOE is 

requesting or requiring it to submit specific 

information. NIPC Comment of ConverDyn, 

Enclosure, at 1–2. To the contrary, DOE is merely 

describing its assumptions and its reasoning. In 

some respects DOE has made use of information 

that ConverDyn provided, and on some points DOE 

has used other inputs. It is appropriate for DOE to 

consider, in making factual inferences, whether a 

given inference is consistent with information 

provided by ConverDyn, conflicts with a 

submission, or is made in the absence of 

information from ConverDyn. 

99UxC’s figures for worldwide supply include 

both primary production and secondary supplies 

from sources such as re-enrichment of tails and 

various statements from ConverDyn.95

ERI estimates that production at this 

facility was approximately 11 million 

kgU as UF6 per year prior to the loss of 

sales associated with Fukushima. 

Because ConverDyn has stated that this 

volume loss was approximately 25%, 

ERI estimates current sales volume at 

8.25 million kgU as UF6. 2015 ERI 

Report, 65. Based on statements from 

Traxys, the entity that currently 

purchases the material that DOE 

transfers to Fluor B&W Portsmouth for 

cleanup work at the Portsmouth 

Gaseous Diffusion Plant, ERI assumes 

that 50% of the material used for 

cleanup at Portsmouth and 100% of all 

other DOE material enters the U.S. 

market. 2015 ERI Report, 65–66. To 

estimate ConverDyn’s U.S. and 

worldwide market share, ERI refers to a 

statement from ConverDyn that its share 

of the U.S. market for conversion 

services is 25%. ERI uses this to 

calculate ConverDyn’s share of the 

international market as 16% by 

subtracting an amount equivalent to 

25% of the U.S. market from ERI’s 

estimate of ConverDyn’s total sales 

volume. 2015 ERI Report, 68. 

A summary of ERI’s estimates of the 

effect of DOE transfers on ConverDyn’s 

sales volume appears in Table 13. Using 

the assumptions described above, ERI 

estimates that under Scenario 1, DOE 

transfers decrease ConverDyn’s market 

volume by 0.7 million kgU, or 8%. 

Under Scenario 2, ERI estimates that 

DOE transfers decrease ConverDyn’s 

market volume by 0.5 million kgU, or 

6%. Under Scenario 3, ERI estimates 

that DOE transfers decrease 

ConverDyn’s market volume by 0.1 

million kgU, or 1%. 2015 ERI Report, 

69–70. As with ERI’s price estimates 

discussed above, these estimates do not 

suggest that were DOE to transfer 

uranium in accordance with Scenario 1, 

ConverDyn would lose the predicted 

volume of sales. DOE has been 

transferring at or above the rate of 

Scenario 1 for nearly three years. On 

ERI’s analysis, to some degree the 

estimated effect has already occurred. 

Transfers in accordance with Scenario 1 

would continue the effect, and transfers 

in accordance with Scenario 2 or 3 

would lead to an increase in 

ConverDyn’s sales volume in the long 

term by the amount ERI predicts. 

TABLE 13—ERI’S ESTIMATE OF DECREASE IN CONVERDYN’S SALES

VOLUME 96

Volume 

(million kgU) 

Percent 

change 

Scenario 1 .......... 0.7 8 

Scenario 2 .......... 0.5 6 

Scenario 3 .......... 0.1 1 

ConverDyn’s comments in response to 

the RFI and NIPC do not provide a 

separate estimate of the effect of DOE 

transfers on its sales volume.97

ConverDyn’s comments refer to the 

relevant sections of the 2014 ERI Report 

and 2015 ERI Report regarding its sales 

volume and production costs. RFI 

Comment of ConverDyn, Enclosure, at 5; 

NIPC Comment of ConverDyn, 

Enclosure, at 9. With respect to the ERI 

Reports, ConverDyn does not refute or 

confirm the assumptions ERI used in its 

analysis regarding ConverDyn’s sales 

volume, market share, or production 

costs.98 ConverDyn also incorporated by 

reference into its comments a document 

it submitted to DOE in March 2014. RFI 

Comment of ConverDyn, Enclosure, at 5 

n.12; NIPC Comment of ConverDyn, 

Enclosure, at 1 n.1. That document 

provides estimates of the effect of DOE 

transfers on ConverDyn’s sales volume 

and profits, but it does not provide 

financial information demonstrating 

that those effects have occurred or 

supporting analysis explaining why a 

given change in ConverDyn’s sales or 

revenue should be attributed to DOE 

transfers. Letter from Malcolm 

Critchley, ConverDyn, to Peter B. Lyons, 

DOE (Mar. 10, 2014); see also 

Supplemental Declaration of Malcolm 

Critchley, ConverDyn v. Moniz, Case no. 

1:14–cv–01012–RBW, Document 21–2, 

at ¶ 7 (July 14, 2014). Specifically, 

ConverDyn [REDACTED] and that the 

lost sales associated with DOE transfers 

would be equally distributed among 

itself, Areva and Cameco. This amounts 

to 933 MTU per year, [REDACTED]. Id. 

at 5 n.3. ConverDyn then provides a 

table asserting that it would experience 

[REDACTED]. Id. at 4–5. 

In addition to the above, ConverDyn 

notes in its RFI comment that the 

Metropolis Works facility ceased 

production beginning in January 2015 

for a period of approximately three 

months. The facility apparently stops 

operating on an annual basis for 

maintenance and upgrades, but 

ConverDyn states that the pause is 

ordinarily only one month long. 

ConverDyn states that the longer 

shutdown was necessitated by ‘‘the 

continued depressed state of the 

conversion market.’’ Although 

ConverDyn refers to the displacement of 

conversion sales by DOE’s transfers, it 

acknowledges that DOE’s transfers are 

not the sole cause of the lengthening of 

Metropolis Works facility’s annual 

shutdown. ConverDyn does not include 

supporting data or otherwise provide a 

proportionate breakdown of the impact 

of DOE material versus other factors in 

causing this shutdown. RFI Comment of 

ConverDyn, Enclosure, at 4. 

The UxC Report does not provide 

estimates for production levels or 

production costs at individual facilities, 

but its report does note that the cost for 

primary producers is ‘‘known to be in 

the range of $10–$15/kgU.’’ UxC Report, 

15. In a separate publication, UxC 

provides more detailed estimates of both 

current production levels and projected 

future production for individual 

facilities. Market share can be 

determined by comparing production 

levels to those of other primary 

producers and secondary sources. UxC 

Conversion Market Outlook—December 

2014, 45–47 (2014). Notably, UxC’s 

estimates of production at MTW 

[REDACTED]. Id. at 47. 

[REDACTED].99 Id. at 46. [REDACTED]. 

Id. at 48. 

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underfeeding. [REDACTED]. UxC Conversion 

Market Outlook—December 2014, 46 (2014). 100Traxys also states that it purchased additional 

conversion in 2014 above and beyond what it 

purchased from Fluor B&W Portsmouth. Traxys 

suggests that these purchases ‘‘offset’’ an equivalent 

of DOE-introduced quantities. RFI Comment of 

Traxys, at 1. As far as DOE is aware, these 

purchases are unrelated to its transfers of natural 

uranium hexafluoride to FBP. Thus, DOE does not 

treat these purchases as ‘‘offsetting.’’ 

101ConverDyn urges DOE to consider the effects 

of prior uranium inventory transfers in assessing 

the reduction in demand and sales volume. DOE 

believes that for transfers for Portsmouth cleanup 

and down-blending services, any displaced sales 

volume will take place in the year of transfer. 

However, DOE agrees that certain prior transfers 

have effects in the market several years after the 

actual transfer, and it has taken these effects into 

account. 

102This calculation assumes MTW production 

volumes in line with UxC’s base case primary 

conversion supply estimate for 2015, 2016, and 

2016. UxC Conversion Market Outlook—December 

2014, 46 (2014). Specifically, UxC estimates 

[REDACTED]. Id. 

Traxys provides some information 

relevant to DOE’s assessment of the 

likely impact its transfers will have on 

production by the domestic conversion 

industry. Traxys explains that in selling 

material obtained from Fluor-B&W 

Portsmouth, it pursues a goal to sell at 

least 50% of the material to non-U.S. 

customers. Traxys states that it has 

consistently met this goal. RFI Comment 

of Traxys, at 1. Traxys further explains 

that in 2014 no more than 40% of DOEderived material was sold in the U.S. 

market. RFI Comment of Traxys, at 2.100

This is similar to the amount of 

conversion that Traxys has separately 

stated went to the U.S. market in prior 

years. Traxys stated in July 2014 that 

42% of DOE-derived conversion entered 

the U.S. marketplace during calendar 

year 2013. Declaration of Kevin P. 

Smith, ConverDyn v. Moniz, Case no. 

1:14–cv–01012–RBW, Document 17–7 at 

¶11 (July 7, 2014). 

MTW’s actual production has 

fluctuated dramatically in recent years, 

ranging from 4.5 to 11 million kgU, for 

a number of reasons including work 

stoppages due to labor disputes, 

shutdowns imposed by MTW’s safety 

regulator, and plant upgrades as well as 

possibly competition with other sources 

of conversion. The scale of those 

fluctuations, and of the associated 

financial consequences, makes it 

difficult to identify an amount of 

reduced production that could 

reasonably be attributed to DOE’s past 

transfers—an analytical step that would 

otherwise help inform DOE’s forecast of 

the effect of future transfers on MTW’s 

production. In what follows, DOE will 

apply basic economic principles to 

information gleaned from ConverDyn 

and other sources to make that 

evaluation. 

ConverDyn offers a scenario in which 

DOE transfers at 2,800 MTU per year 

would cause ConverDyn to lose sales of 

933 MTU per year. Letter from Malcolm 

Critchley, ConverDyn, to Peter B. Lyons, 

DOE, 4–5 (Mar. 10, 2014); see also 

Supplemental Declaration of Malcolm 

Critchley, ConverDyn v. Moniz, Case no. 

1:14–cv–01012–RBW, Document 21–2, 

at ¶ 7 (July 14, 2014). DOE does not 

believe that ConverDyn’s estimate that it 

would lose volume of 933 MTU per year 

is accurate. ConverDyn estimated that 

loss by reasoning that each of three 

Western conversion providers—i.e. not 

those providers in Russia or China— 

would experience volume losses equal 

to one third of the amount of DOE 

transfers (at the old 2,800 MTU per year 

rate). That analysis is overly simplistic. 

As ERI explains, approximately one 

third of DOE-sourced uranium is 

distributed in the world outside the 

United States, whereas ConverDyn’s 

U.S. sales generally represent more than 

a third of its recent production. 

Assuming that ConverDyn’s domestic 

market share is 25%, or 4.5 million kgU, 

data from UxC indicate that 

approximately [REDACTED] would be 

devoted to U.S. sales. UxC Conversion 

Market Outlook—December 2014, 45–46 

(2014). The relative volume loss to the 

different converters should depend on 

the relative proportions of each 

converter’s production that ends up on 

the U.S. versus world market. It seems 

unlikely that the three converters have 

identical market shares in the various 

world markets. Thus, all else being 

equal, one would not expect ConverDyn 

to have the same volume loss as its 

peers elsewhere. 

ERI’s analysis takes account of this 

difference in market share between the 

U.S. and the rest of the world. DOE 

believes that ERI’s approach to 

estimating lost sales volume based on 

market share is reasonable.101 However, 

ERI’s estimate assumes that 

ConverDyn’s production volume will be 

8.25 million kgU in 2015. Based on 

other available information, DOE 

believes that that both sales and 

production at MTW are significantly 

higher. Specifically, ConverDyn has 

provided information about sales, and 

UxC estimates and forecasts MTW’s 

production. ConverDyn’s March 10, 

2014 Letter suggested [REDACTED]. 

Letter from Malcolm Critchley, 

ConverDyn, to Peter B. Lyons, DOE, 5 

n.3 (Mar. 10, 2014). Similarly, UxC 

estimates [REDACTED]. UxC 

Conversion Market Outlook—December 

2014, 46 (2014). Applying ERI’s 

approach to this higher estimate of 

MTW production, DOE concludes that 

as a consequence of DOE transfers under 

the assessed case, MTW can be expected 

to experience a reduction in production 

volume of about 700,000 kgU in 2015, 

and 600,000 kgU in 2016 and 2017.102

In addition to the above effects, 

ConverDyn’s March 10, 2014, letter also 

refers to [REDACTED]. Letter from 

Malcolm Critchley, ConverDyn, to Peter 

B. Lyons, DOE, 5–6 (Mar. 10, 2014). 

DOE believes that these [REDACTED]. 

ConverDyn acknowledges that this may 

be the case [REDACTED]. Id. at 5 n.3. 

[REDACTED]. [REDACTED] on the basis 

of the total price gap between term and 

spot prices, which is about $8.50 per 

kgU. As discussed above, DOE’s best 

estimate of the price effect under the 

assessed case is a suppression of about 

$0.80. That amount represents about 9% 

of the current gap between the spot and 

term prices. 

b. Production Costs 

Based on the estimates of the effect of 

DOE transfers on ConverDyn’s 

production volume, ERI also estimated 

the change in average per unit 

production costs that a volume decrease 

would cause. ERI’s approach to 

calculating this effect is straightforward. 

Average per unit production cost can be 

calculated by dividing the total 

production cost by the number of units 

produced. If MTW’s costs were 100% 

variable, then average production costs 

would not change, regardless of the 

volume produced. However, if some 

portion of MTW’s costs are fixed, then 

a decrease in the number of units 

produced would lead to increased 

production costs, and vice versa. If the 

proportion of fixed costs, current 

production volume, and current per unit 

production cost are all known, the 

change in average production cost can 

be easily calculated. ERI looked to 

various public sources and estimates to 

provide a basis for its assumptions. DOE 

believes that this a reasonable approach 

for estimating the effect of DOE transfers 

on production cost at MTW. 

As discussed above, ERI estimates 

that ConverDyn’s current sales volume 

is 8.25 million kgU. This estimate is 

based on ConverDyn’s statements about 

prior production levels at MTW and a 

stated 25% decrease in volume 

associated with the Fukushima 

accident. 2015 ERI Report, 65. ERI then 

estimates that MTW’s current average 

per unit production cost is $15 kgU. 

This cost is primarily based on 

ConverDyn’s claim that it has lost more 

than $100 million in the past decade. 

Finally, ERI analyzed two scenarios 

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26408 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

103 DOE assumes that ConverDyn’s calculation is 

based on the loss of sales at the prevailing term 

price in March 2014, i.e. $16.00 per kgU. DOE 

recognizes that there are actually two mechanisms 

by which ConverDyn may lose sales. [REDACTED] 

Letter from Malcolm Critchley, ConverDyn, to Peter 

B. Lyons, DOE, 5 n.3 (Mar. 10, 2014). To the extent 

that some reduced sales come from this latter 

category, [REDACTED]. Given that term prices have 

remained relatively steady for the past several 

years, DOE does not believe the difference would 

be significant for the purposes of this analysis. 

104UxC’s conversion market outlook bases these 

estimates based on current market conditions. As 

described above, DOE believes that the ConverDyn’s 

current sales volume should reflect a level of 

transfers at 2,705 MTU per year. DOE notes that this 

is somewhat higher than the assessed case. Thus, 

MTW’s production volume in future years should 

be slightly higher due to this reduction. DOE does 

not believe this difference is significant enough to 

markedly change this calculation. 

assuming fixed costs make up 80% or 

100% of MTW’s total production costs. 

ERI states that these assumptions are 

based on the fact that conversion 

facilities in general have fairly high 

fixed costs relative to variable costs. 

2015 ERI Report, 71. 

DOE believes that ERI’s estimate of 

production cost at $15 per kgU is 

reasonable. This appears to be a 

conservative estimate because it falls at 

the upper end of UxC’s estimate, and 

because it is about as high as production 

costs could be for ConverDyn to have a 

viable business at the price point it set 

by its own announcement in 2010 and 

2011. In addition, ConverDyn has not 

disputed ERI’s estimate of MTW’s 

production costs. 

However, as stated above, based on 

ConverDyn’s statements and estimates 

from UxC, DOE believes MTW’s current 

production volume is higher than 8.25 

million kgU. Thus, ERI’s estimate of 

MTW production volume appears to be 

an underestimate. In addition, DOE 

believes that ConverDyn’s fixed costs 

are somewhat lower than 80%. 

ConverDyn has not provided details of 

its cost structure, but it has provided 

information that is consistent with ERI’s 

analysis while suggesting that ERI 

overestimated ConverDyn’s fixed costs. 

ConverDyn offers a scenario in which 

DOE transfers at 2,800 MTU per year 

would cause ConverDyn to lose sales of 

933 MTU per year. The company says 

that decrease in volume would result in 

[REDACTED]. Letter from Malcolm 

Critchley, ConverDyn, to Peter B. Lyons, 

DOE, 4–5 (Mar. 10, 2014). ConverDyn’s 

fixed costs would not change if 

ConverDyn lost sales, so the change in 

profit would be due to the decrease in 

revenues, offset by the elimination of 

the variable costs that would have been 

incurred to produce the lost volume. 

See Supplemental Declaration of 

Malcolm Critchley, ConverDyn v. 

Moniz, Case no. 1:14–cv–01012–RBW, 

Document 21–2, at ¶ 7 (July 14, 2014). 

The revenue decrease from losing 933 

MTU in volume would be about $14.9 

million. [REDACTED].103 Assuming 

MTW has production costs of $15 per 

kgU and MTW’s variable costs are 

[REDACTED], then fixed costs at MTW 

should be [REDACTED]. This represents 

about [REDACTED] of total costs. DOE 

adopts this estimate of ConverDyn’s 

variable costs, because it is based on 

information ConverDyn has provided. 

DOE has performed an analysis like 

ERI’s, using the different assumptions 

discussed above. Specifically, this 

calculation uses $15 per kgU as MTW’s 

current production cost, [REDACTED] 

as the proportion of fixed cost, and 

UxC’s base case primary conversion 

supply estimate of MTW’s production 

volume as MTW’s production volume 

with DOE transfers 104— 

namely[REDACTED]. UxC Conversion 

Market Outlook—December 2014, 46 

(2014). Based on these inputs, DOE 

concludes that transfers in the assessed 

case would increase MTW’s average 

production cost by $0.63 in 2015, $0.49 

in 2016, and $0.45 in 2017. 

DOE does not believe this increase 

indicates an adverse material impact. In 

recent years MTW has experienced 

several significant disruptions in its 

business that are not attributable to DOE 

transfers. These disruptions have caused 

MTW’s annual production to vary 

significantly—from as high as 11 

million kgU to as low as 4.5 million 

kgU, the latter figure representing less 

than a third of MTW’s nameplate 

capacity. DOE notes that the predicted 

decrease in volume reasonably 

attributable to DOE—i.e. 700,000 kgU in 

2015 and 600,000 kgU in 2016 and 

2017—and the associated decrease in 

MTW’s average production cost, are 

substantially smaller than the 

production decreases at MTW from 

these other disruptions. The production 

swings experienced at MTW in recent 

years have been as much as seven times 

the magnitude of the sales volume 

decreases attributable to DOE. 

Moreover, the conversion industry 

has maintained term prices at around 

$16 per kgU notwithstanding those 

fluctuations. As discussed above, 

converters seem able to demand, and 

conversion purchasers seem willing to 

accept, prices high enough to cover 

production costs and justify the 

investment to maintain conversion 

capacity. As average production costs 

increase over time—which they will do 

even absent DOE’s transfers—it seems 

likely the prices of term contracts will 

keep pace. 

3. Employment Levels in the Industry 

ERI notes that Metropolis Works 

restarted after an extended shutdown in 

summer 2013 with approximately 270 

employees. Prior to the 2012–2013 

shutdown, ERI estimates that the facility 

employed approximately 334 people. As 

this change coincided with a change in 

long-term production volume, ERI 

concludes that it is unlikely that 100% 

of Metropolis Works’ production costs 

are fixed. 2015 ERI Report, 72–73. 

Although it does not provide specific 

estimates, ERI states that ‘‘[a] portion of 

the reduction in work force at 

Metropolis Works may be associated 

with the introduction of DOE inventory 

into the market.’’ However, ERI also 

notes that several other factors likely 

played a part as well. 2015 ERI Report, 

73. ConverDyn does not provide a 

separate estimate of decreased 

employment levels due to DOE 

transfers; instead ConverDyn referred to 

the relevant sections of the 2014 ERI 

Report, which reaches conclusions 

similar to those in the 2015 ERI Report. 

RFI Comment of ConverDyn, Enclosure, 

at 5. 

The Department recognizes that 

employment at the MTW facility is 

lower than in prior years. Little of this 

decrease can reasonably be attributed to 

DOE transfers. While some portion of 

MTW’s labor force is a fixed cost that 

does not depend on volume, DOE 

estimates the maximum amount of 

decrease attributable to DOE transfers by 

assuming all employment at ConverDyn 

and MTW varies directly with 

production. As discussed above, DOE 

forecasts that transfers under the 

assessed case will reduce MTW’s 

production by 700,000 kgU in 2015 and 

600,000 kgU in 2016 and 2017, or 7% 

of expected 2015 production and 5% 

expected production in 2016 and 2017. 

Assuming all of ConverDyn’s current 

labor force is fully variable with 

production, the employment decrease 

reasonably attributable to DOE transfers 

in futures years would be approximately 

19 person-years in 2015, 14 personyears in 2016, and 13 person-years in 

2017. Of course, the assumption that 

labor is fully variable is likely to be 

quite conservative, and it is more likely 

that a substantial portion of the labor 

force is a fixed cost. If 50% of labor 

costs are variable, this would result in 

a reduction of 9 lost person-years in 

2015 and 7 lost person-years in 2016 

and 2017. As with comparable analyses 

discussed above, these figures represent 

a persistently lower employee count; 

DOE is not forecasting that every year 

ConverDyn will lose an additional 7 to 

19 employees. 

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105ConverDyn states that large-scale projects 

outside the United States are immaterial. NIPC 

Comment of ConverDyn, Enclosure, at 7. Consistent 

with the analytical approach described above, 

DOE’s task is to forecast the state of the domestic 

uranium conversion industry with and without 

DOE transfers under the assessed case. However, 

DOE believes activities in the global conversion 

industry may in some cases be relevant for 

predicting how DOE transfers will affect the 

domestic conversion industry. 

106Letters from Honeywell management include 

similar numbers. A November 20, 2014, letter 

included identical figures. Jim Pritchett, Honeywell 

Metropolis Works, Letter to Employees (Nov. 20, 

2014), available at http://www.honeywellmetropolisworks.com/?document=letter-toemployees-23&download=1. Older letters provided 

slightly different figures. Jim Pritchett, Honeywell 

Metropolis Works, Letter to Community (Dec. 19, 

2013), available at http://www.honeywellmetropolisworks.com/?document=letter-to-thecommunity-from-new-metropolis-works-plantmanager&download=1. 

107ERI’s reference requirements include 

anticipated future reactor shutdowns, both in the 

United States and elsewhere, due to reasons such 

as competition with natural gas and other energy 

sources. 

108ConverDyn suggests that forward demand 

from Japanese reactors should be assumed to be 

zero until at least 2018. As stated above, the 

requirements and demand outlooks of TradeTech 

predict growth in demand despite planned reactor 

shutdowns in Germany and decreased demand from 

Japan. It also appears that UxC projections account 

for decreased demand from Japan as well. 

A reduction in employment of 7 or 

even 19 person-years is relatively small, 

particularly in comparison to MTW’s 

reduction of approximately 64 after the 

2012–2013 shutdown. The industry has 

been able to weather employment losses 

much larger than any that could 

reasonably be attributed to DOE 

transfers. 

4. Changes in Capital Improvement 

Plans and Development of Future 

Facilities 

Although there are several large-scale 

development projects currently planned 

or underway outside the United States— 

namely AREVA’s COMURHEX II 

modernization project and TVEL’s plan 

for a new facility at SCC—DOE is not 

aware of any such plans in the United 

States. See Eileen Supko & Thomas 

Meade, ‘‘New facilities are on the 

horizon,’’ Nuclear Engineering 

International (Oct. 6, 2014), available at 

http://www.neimagazine.com/features/

featurenew-facilities-are-on-the-horizon4394892; UxC Conversion Market 

Outlook—December 2014, 50, 56–57, 73 

(2014).105

Metropolis Works has, however, 

undertaken substantial capital 

expenditures at its existing facility in 

recent years. Honeywell has stated that 

it has invested ‘‘nearly $177 million 

over the past 10 years in capital 

improvements, including $50 million in 

safety projects.’’ ‘‘About Us,’’ 

Honeywell, http://www.honeywellmetropolisworks.com/about-us.106 Some 

of these upgrades came during an 

extended shutdown in 2012 and 2013, 

in which Metropolis Works made 

upgrades to ensure the facility could 

withstand extreme natural disasters. 

These changes were made under an 

agreement with the U.S. Nuclear 

Regulatory Commission (‘‘NRC’’) in 

response to an inspection NRC 

conducted in the wake of the 

Fukushima disaster in Japan. 

‘‘Honeywell and U.S. Nuclear 

Regulatory Commission Reach 

Agreement on Necessary Upgrades to 

Metropolis Nuclear Conversion 

Facility,’’ News Release (Oct. 16, 2012), 

available at http://www.honeywellmetropolisworks.com/?document=oct16-2012-press-release-honeywell-and-us-nuclear-regulatory-commission-reachagreement-on-necessary-upgrades-tometropolis-nuclear-conversionfacility&download=1. 

In terms of current plans, Metropolis 

Works announced in November 2014 

that it would be shutting down for 

approximately 90 days beginning in 

early January 2015. Honeywell noted 

that it would use the extended 

shutdown to make updates and capital 

improvements. Jim Pritchett, Honeywell 

Metropolis Works, Letter to Employees 

(Nov. 20, 2014), available at http://

www.honeywell-metropolisworks.com/

?document=letter-to-employees23&download=1; see also Comment of 

ConverDyn, Enclosure, at 4. Honeywell 

has further stated that the company 

plans to spend $17.5 million in 

improvements during 2015. Jim 

Pritchett, Honeywell Metropolis Works, 

Letter to Employees (Jan. 30, 2014), 

available at http://www.honeywellmetropolisworks.com/?document=letterto-employees-24&download=1. 

Honeywell recently announced that 

MTW would restart production on or 

about April 1, 2015. Honeywell 

Metropolis Works, News Item (Mar. 27, 

2015), http://www.honeywellmetropolisworks.com/news/ (accessed 

Mar. 31, 2015). 

With the expected increase in demand 

for conversion services worldwide, DOE 

believes that it is likely that MTW will 

continue to make capital improvements 

and refurbishments necessary to 

maintain current capacity. Honeywell 

has invested a substantial amount in 

such capital improvements in recent 

years. UxC reports that [REDACTED]. 

UxC Conversion Market Outlook— 

December 2014, 70 (2014). ConverDyn’s 

comments agree with that proposition; 

ConverDyn indicates that it is not 

planning to expand capacity but does 

intend to maintain its capacity. NIPC 

Comment of ConverDyn, Enclosure, at 7. 

DOE does not believe that the price 

effect associated with DOE transfers 

would make a significant difference in 

plans for new facilities or other capital 

improvements at existing facilities. As 

described above, the term price, at 

which the vast majority of capacity is 

transacted, appears to respond weakly 

to changes in supply. DOE transfers are 

expected to decrease ConverDyn’s sales 

volume, but even without DOE 

transfers, ConverDyn’s total sales would 

still be below MTW’s current maximum 

nameplate capacity. In addition, 

transfers under the assessed case will 

represent only about 3% of total supply 

in coming years, and about 11% of 

secondary supply. In light of forecasts of 

supply and demand by ERI and UxC, 

DOE concludes that eliminating this 

amount of conversion would not make 

a difference to the assessment that new 

capacity is not warranted. 

5. Long-Term Viability and Health of the 

Industry 

ERI’s most recent Reference Nuclear 

Power Growth forecast predicts global 

requirements for conversion services 

will grow to approximately 67.2 million 

kgU by 2020, approximately 20% higher 

than current requirements. Global 

requirements are expected to continue 

to rise to a level of 91.4 million kgU by 

2035, approximately 63% higher than 

current requirements. 2015 ERI Report, 

13.107 ERI presents a graph comparing 

global requirements, demand, and 

supply from 2013–2035. Global 

secondary supply and supply from 

primary converters are expected to 

exceed global demand until at least 

2025. Beyond that point, supply is 

forecast generally to keep pace with 

growth in requirements. 2015 ERI 

Report, 14. 

Although not focused on conversion, 

the requirements forecasts noted above 

in Section IV.A.5 are also relevant to the 

conversion industry. In general, 

requirements and/or uranium 

concentrate demand forecasts should 

also apply to demand for conversion 

services.108 However, there may be 

some small differences due to strategic 

and discretionary inventory building. 

For example, China has been purchasing 

strategic supply well in excess of its 

requirements. Those purchases have 

come in the form of U3O8. 2015 ERI 

Report, 13. Thus, these purchases affect 

near-term uranium concentrate demand, 

but do not affect near-term conversion 

demand. 

In its December 2014 Conversion 

Market Outlook, UxC predicts 

significant increases in both 

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26410 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

109ConverDyn suggests that Russian, Chinese, 

and Indian demand should be excluded because 

these markets are closed to sales from the domestic 

conversion industry. DOE notes that even if North 

American converters lack access to these markets, 

converters in those countries have access to markets 

worldwide. ConverDyn does not contest the notion 

that conversion is essentially a global commodity. 

Thus, increased demand in Russia, China, and India 

will consume capacity with which ConverDyn 

would otherwise compete in markets that it can 

access. 

110ConverDyn further states [REDACTED]. Letter 

from Malcolm Critchley, ConverDyn, to Peter B. 

Lyons, DOE, 4 (Mar. 10, 2014). [REDACTED]. 

111ERI states that it assumes 80% of the material 

supplied under the Suspension Agreement includes 

a conversion component. ERI further states that it 

believes Rosatom would not have a market for these 

included conversion sales without the Suspension 

Agreement. 2015 ERI Report, 83. In any case, it 

appears that ERI’s analysis includes this material as 

part of the overall conversion supply. 

requirements and demand in the longterm. UxC Conversion Market Outlook— 

December 2014, 40, 44 (2014). 

Specifically, [REDACTED]. Id. at 44. In 

the longer term, [REDACTED]. Id. UxC 

projects that conversion supply 

[REDACTED]. Id. at 46. [REDACTED]. 

Id. at 47. 

UxC also provides a more detailed 

explanation of its price forecast, which 

generally predicts an increase in price 

over the next 10 years. UxC Conversion 

Market Outlook—December 2014, 82, 85 

(2014). [REDACTED]. Id. at 82. 

[REDACTED]. Id. at 75. UxC provides a 

separate forecast for the term price. 

[REDACTED]. Id. at 85. UxC also notes 

that some market participants 

[REDACTED]. Id. at 73. 

Finally, as with uranium 

concentrates, DOE recognizes that the 

predictability of transfers from its excess 

uranium inventory over time is 

important to the long-term viability and 

health of the uranium conversion 

industry. Again, DOE notes that the 

upper scenario considered by ERI would 

represent continued transfers at rates 

consistent with the May 2012 and May 

2014 determinations. Compare 2015 ERI 

Report, 25, with 2014 ERI Report, 28. 

As described above, demand is 

expected to increase substantially in the 

next several years. Along with it, as the 

existing conversion facilities age, 

additional capital improvement for 

refurbishments will be required. Even 

with these refurbishments, eventually, 

new conversion capacity will be 

necessary to match increasing demand. 

Given that demand in North America is 

not expected to decrease substantially 

and that enrichment capacity is 

expected to increase, it is likely that the 

domestic uranium conversion industry 

will retain its capacity, either through 

continuing refurbishments at MTW or 

through the development of one or more 

new conversion facilities.109

Although DOE transfers may not have 

a large effect on the conversion term 

price, displaced production volume 

increases average production costs for 

primary producers. DOE does not 

believe this effect will be large enough 

to significantly alter planned decisions 

about conversion capacity in the United 

States. At worst, as with the uranium 

mining industry, the effect of DOE 

transfers would be to shift major capital 

improvements later in time. DOE does 

not believe that this difference is 

significant enough to appreciably affect 

the long-term viability and health of the 

domestic uranium conversion industry. 

ConverDyn has submitted, on several 

occasions, figures for losses it says it has 

suffered in the recent past. These figures 

vary. ConverDyn stated in its March 10, 

2014 letter that [REDACTED]. Letter 

from Malcolm Critchley, ConverDyn, to 

Peter B. Lyons, DOE, 1 (Mar. 10, 2014). 

In addition, ConverDyn asserts that it is 

a marginal business, by which it appears 

to mean that it is only barely viable. 

There is some tension between these 

assertions, together with the fact that 

MTW has continued to invest 

substantial amounts of money to 

maintain and upgrade the facility, most 

recently in the beginning of 2015. In any 

case, many causes have contributed to 

ConverDyn’s financial results. Those 

causes include, among others, the 

consequences of the Fukushima 

disaster 110 and the various production 

stoppages MTW has experienced. 

Indeed, some of the losses ConverDyn 

has cited predate any substantial DOE 

transfers of uranium hexafluoride. As 

explained above, DOE bases its 

determination on an analysis of what 

the state of an industry would be with 

DOE transfers as compared to its state 

without transfers, and an assessment of 

what impacts can reasonably be 

attributed to the transfers. ConverDyn’s 

submissions do not include such an 

analysis that would attribute some 

portion of the losses to DOE’s transfers. 

They therefore do not call into question 

the economic analysis described above. 

6. Russian HEU Agreement and 

Suspension Agreement 

Section 3112(d) of the USEC 

Privatization Act requires DOE to ‘‘take 

into account’’ the sales of uranium 

under the Russian HEU Agreement and 

the Suspension Agreement. As 

discussed above, DOE believes this 

assessment should consider any 

transfers under these two agreements 

that are ongoing at the time of DOE’s 

transfers. 

Under the Russian HEU Agreement, 

upon delivery of LEU derived from 

Russian HEU, the U.S. Executive Agent, 

USEC Inc., was to deliver to the Russian 

Executive Agent, Technabexport 

(Tenex), an amount of natural uranium 

hexafluoride equivalent to the natural 

uranium component of the LEU. DOE 

notes that the Russian HEU Agreement 

concluded in December 2013. Thus, 

there are no ongoing transfers under this 

agreement. 

The current iteration of the 

Suspension Agreement, described above 

in Section I.D.3.b, sets an annual export 

limit on natural uranium from Russia. 

73 FR 7705 (Feb. 11, 2008). That 

agreement provides for the resumption 

of sales of natural uranium and SWU 

beginning in 2011. While the HEU 

Agreement remained active (i.e. 2011– 

2013), the annual export limits were 

relatively small— equivalent to between 

170,000 and 410,000 kgU as UF6. After 

the end of the Russian HEU Agreement, 

restrictions range between an amount 

equivalent to 4,540,000 and 5,140,000 

kgU as UF6 per year between 2014 and 

2020. 73 FR 7705, at 7706 (Feb. 11, 

2008). Material imported from Russia in 

accordance with the Suspension 

Agreement is not derived from downblended HEU; thus, this material is part 

of worldwide primary supply as 

analyzed by ERI in the 2015 ERI 

Report.111 This material is also 

presumably accounted for in the various 

projections and models developed by 

TradeTech and UxC. Thus, DOE’s 

analysis takes those sales that have a 

conversion component under the 

Suspension Agreement into account as 

part of overall supply available in the 

market. 

7. Conversion Industry Conclusion 

After considering the six factors as 

discussed above, DOE concludes that 

transfers under the assessed case will 

not have an adverse material impact on 

the domestic uranium conversion 

industry. MTW and ConverDyn, 

together the sole conversion provider in 

the United States, sell nearly 

exclusively on term contracts. As 

explained above, DOE transfers will not 

affect the term price at which those 

contracts are transacted. DOE transfers 

under the assessed case will contribute 

to the spot price a continued $0.70– 

$0.80 suppression, a somewhat smaller 

effect than transfers in the past few 

years have had. Because only a very 

small proportion—if any—of MTW’s 

sales take place at the spot price, that 

price suppression will not be material 

for the domestic industry. 

In addition, DOE forecasts that over 

time, MTW’s production will be smaller 

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Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 26411 

112This facility is operated through Louisiana 

Energy Services, LLC, a subsidiary of Urenco 

Limited. 113As noted above, the transfer rates for these 

scenarios refer only to the level of uranium transfers 

for cleanup at Portsmouth and down-blending of 

LEU. Uranium transfers under other programs—i.e. 

blended LEU to TVA, depleted uranium 

hexafluoride to Energy Northwest, and the possible 

future transfer of depleted uranium hexafluoride to 

GE-Hitachi Global Laser Enrichment—are the same 

in all three scenarios. 

114The ‘‘natural uranium equivalent’’ figures for 

material from down-blending listed in Table 4 are 

also based on these assumptions. The natural 

uranium equivalent is then adjusted to take account 

of the natural uranium required as diluent as part 

of the down-blending process—typically 10% of the 

total natural uranium equivalent. 

than it would have been in the absence 

of DOE transfers by 700,000 kgU in 2015 

and 600,000 kgU in 2016 and 2017. DOE 

conservatively estimates such a 

reduction would increase MTW’s 

average production costs by about $0.63 

in 2015, $0.49 in 2016, and $0.45 in 

2016. DOE does not believe this change 

would constitute an adverse material 

impact, within the meaning of section 

3112(d), because it is well within the 

range of production changes that MTW 

has experienced in recent years 

independent of DOE transfers. The 

reduced production may also lead to a 

decrease in employment, but DOE 

expects that decrease to be no more than 

a persistent 19 person-years in 2015 and 

14 person-years thereafter, a smaller 

change than what MTW has 

implemented on its own in ordinary 

business decisions. 

Honeywell, the owner and operator of 

MTW, continues to invest in 

maintaining and refurbishing the MTW 

facility, and DOE transfers seem 

unlikely to change those plans. 

ConverDyn claims that MTW is on the 

verge of collapse. If that is so, DOE does 

not believe that MTW’s state is 

reasonably attributable to DOE’s recent 

transfers or that the dire outcomes 

ConverDyn predicts will reasonably be 

attributable to transfers under the 

assessed case. 

DOE does not believe that any of the 

effects described for the domestic 

uranium conversion industry have the 

substantial importance that would make 

them ‘‘adverse material impacts’’ within 

the meaning of section 3112(d). 

C. Uranium Enrichment Industry 

The domestic uranium enrichment 

industry consists of a relatively small 

number of companies, one of which 

operates a currently operating 

enrichment facility and several of which 

are developing facilities expected to 

begin production in the near future. The 

Paducah Gaseous Diffusion Plant, which 

was operated by USEC Inc.—since 

restructured as Centrus Energy Corp.— 

closed in 2013. Centrus may still be 

selling SWU from its inventory of 

uranium enriched at that facility, but 

this material is finite. Thus, there is 

only one currently operating enrichment 

facility in the United States, the 

URENCO USA (UUSA) gas centrifuge 

facility in New Mexico.112 DOE is also 

aware of three other planned 

enrichment facilities in Idaho, Ohio, 

and North Carolina. 

The current capacity of the UUSA 

facility is 3.7 million SWU. For 

comparison, the World Nuclear 

Association reports that worldwide 

capacity in 2015 is approximately 61 

million SWU. See WNA, ‘‘Uranium 

Enrichment’’ (Jan. 2015), http://

www.world-nuclear.org/info/NuclearFuel-Cycle/Conversion-Enrichment-andFabrication/Uranium-Enrichment/ 

(accessed Mar. 31, 2015). 

1. Prices for Enrichment Services 

Like market prices for uranium 

concentrates and conversion, 

enrichment market prices are generally 

described in terms of the spot price and 

the term price. This section discusses 

the potential impacts of DOE transfers 

on these two prices. For reference, as of 

March 30, 2015, UxC’s spot price 

indicator is $79.00 per separative work 

unit (SWU) and its term price indicator 

is $90.00 per SWU. 

Two of the market analyses discussed 

above contain estimates of the effect of 

DOE transfers on the market prices for 

conversion services: ERI and UxC. This 

section begins with a summary of each 

report and then discusses DOE’s review 

of the reports’ methodologies and 

conclusions. This section concludes 

with a discussion of how a change in 

conversion market prices would affect 

the domestic uranium enrichment 

industry. A principal mechanism 

through which such a change in market 

price could impact individual producers 

is through the effect on the realized 

price of primary enrichers. 

a. Energy Resources International Report 

In its analysis, ERI estimates the effect 

of DOE transfers on the market prices 

for enrichment services. To estimate this 

effect, ERI employed a market clearing 

price model similar to what is described 

above for the uranium and conversion 

markets. As with uranium concentrates 

and conversion, ERI constructed 

individual supply and demand curves 

for enrichment services and estimated 

the clearing price with and without DOE 

transfers. 2015 ERI Report, 44. The 

discussion in Section IV.A.1 regarding 

DOE’s analysis of ERI’s market clearing 

approach analysis also applies to ERI’s 

estimates of the effect of DOE transfers 

on market prices for enrichment 

services. A summary of ERI’s estimates 

of the effect of DOE transfers on the 

market price for SWU appears in Table 

15. 

As with uranium concentrates, DOE 

tasked ERI with estimating the effects of 

DOE transfers under the same three 

scenarios described in Section IV.A.1. 

The amounts of uranium entering the 

market at various times in different 

scenarios are outlined above in Table 4 

in terms of MTU natural uranium 

equivalent.113 Not all of the uranium 

under these scenarios includes an 

enrichment component—denominated 

in SWU. The amount of SWU that is 

necessary to produce the volumes 

contemplated under the different 

scenarios are listed in Table 14. For the 

LEU transferred for down-blending 

services, these figures are calculated 

assuming natural uranium feed, a tails 

assay of 0.20 wt-% U–235, and a 

product assay of 4.95 wt-% U235.114 As 

with uranium concentrates, the assessed 

case falls somewhere between Scenarios 

1 and 2 when calculated in terms of 

SWU. 

TABLE 14—ENRICHMENT COMPONENT OF SCENARIOS CONSIDERED IN THIS ANALYSIS

Enrichment component of transfers for Portsmouth cleanup and down-blending in SWU 

Portsmouth 

cleanup Down-blending Total 

ERI Scenario 1 .......................................................................................................... 0 680,000 680,000 

ERI Scenario 2 .......................................................................................................... 0 470,000 470,000 

ERI Scenario 3 .......................................................................................................... 0 0 0 

Assessed Case .......................................................................................................... 0 520,000 520,000 

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26412 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

Table 15 summarizes ERI’s results. As 

with uranium concentrates, the 

relationship between the amount of 

transfers under each scenario and the 

price effect is essentially linear for each 

year ERI analyzed (2015–2024). 

Compare Table 3.8 to Table 4.3 of 2015 

ERI Report, 25–26, 45. Thus, it possible 

to interpolate the price effect that ERI’s 

analysis would predict for other levels 

of transfers. The estimated price effect 

for the assessed case is approximately 

$0.20 higher than ERI’s estimates for 

Scenario 2. These interpolated values 

are included in Table 15. 

TABLE 15—ERI’S ESTIMATE OF EFFECT OF DOE TRANSFERS ON URANIUM ENRICHMENT PRICES IN $ PER SWU 

[Market clearing approach] 

2015 ERI Report 

ERI Scenario 1 ERI Scenario 2 ERI Scenario 3 Assessed case 

(interpolated) 

2015 ......................................................................................... $5.90 $5.10 $3.20 $5.30 

2016 ......................................................................................... 3.80 3.00 1.10 3.20 

2017 ......................................................................................... 3.50 2.60 0.70 2.80 

2018 ......................................................................................... 4.70 3.90 2.00 4.10 

2019 ......................................................................................... 5.10 4.20 2.30 4.40 

2020 ......................................................................................... 4.90 4.00 2.10 4.20 

2021 ......................................................................................... 5.20 4.30 2.40 4.50 

2022 ......................................................................................... 4.60 3.70 1.80 3.90 

2023 ......................................................................................... 4.40 3.50 1.60 3.70 

2024 ......................................................................................... 2.80 1.90 0.00 2.10 

Average (2015–2024) .............................................................. 4.50 3.60 1.70 3.80 

As with uranium concentrates and 

conversion, it is important to emphasize 

that this is not a prediction that prices 

will drop by the specified amount once 

DOE begins transfers following a new 

determination. A level of price 

suppression consistent with the 

estimate for Scenario 1 would, on ERI’s 

analysis, already be reflected to some 

extent in the current market price 

because DOE has been transferring 

uranium at that rate for some time. 2015 

ERI Report, 44. The price suppression 

that ERI estimates would persist under 

Scenario 3 is largely ERI’s estimate of 

the consequence of past DOE transfers, 

from which some of the uranium is still 

expected to be entering the market in 

future years. 

b. UxC Report 

UxC estimates past effects of DOE 

uranium transfers on the price of 

enrichment services using its 

proprietary U–PRICE and SWU–PRICE 

models and then uses those models to 

forecast the effects of continued 

transfers at the rates described in the 

May 2014 Determination. UxC Report, 5. 

As with its uranium concentrate 

estimates discussed above, UxC 

provides ‘‘incremental’’ and ‘‘total 

impact’’ figures. In UxC’s models, 

continued transfers at a given rate have 

a cumulative effect, so that the change 

to prices increases over time. UxC’s 

‘‘incremental approach’’ estimates the 

effect of DOE transfers beginning in 

2012. The ‘‘total impact approach’’ 

estimates the effect of DOE transfers 

beginning in 2008, so as, in UxC’s view, 

to take full account of the cumulative 

effect of all transfers. 

Using its incremental approach, UxC 

estimates that between 2012 and 2014 

DOE’s transfers reduced the spot price 

by an average of $7.49 per SWU and the 

term price by an average of $5.37 per 

SWU. Using its total impact approach, 

UxC estimates that DOE’s transfers 

between 2008 and 2014 reduced the 

spot price in the period from 2012 to 

2014 by an average of $9.19 per SWU 

and the term price by an average of 

$6.96 per SWU. UxC Report, 8–9. 

UxC also forecasts the effect of DOE’s 

continuing transfers at current rates for 

the period 2015 to 2030. A summary of 

UxC’s estimates of the effect of DOE 

transfers on future enrichment prices 

appears in Table 16. UxC estimates that 

DOE transfers in the near and medium 

terms would reduce the spot price by an 

average of $5.31 per SWU. UxC projects 

that this effect will change slightly in 

the medium term as market prices start 

to recover. Specifically, DOE transfers 

would reduce the spot price between 

2018 and 2030 by an average of $4.86 

per SWU. UxC also notes that the former 

number is larger relative to the expected 

price of enrichment than the latter 

number (5.9% versus 3.8%)—both, DOE 

surmises, because the longer-term price 

effect is smaller, and because the longerterm price is higher. UxC Report, 12. 

UxC forecasts that DOE transfers in the 

near and medium terms would reduce 

the term price by an average of $5.50 per 

SWU. Between 2018 and 2030, UxC 

forecasts that DOE transfers would 

reduce the term price by an average of 

$5.00 per SWU. Again, the near and 

medium term impact is larger in relation 

to the expected price (5.6% versus 

3.6%). UxC Report, 11. 

TABLE 16—UXC’S ESTIMATE OF EFFECT OF DOE TRANSFERS ON ENRICHMENT SPOT AND TERM PRICES IN $ PER SWU 

UxC Report 

Near- & midterm price 

effect 

Long-term 

price effect 

Spot Price ................................................................................................................................................................ $5.31 $4.86 

Term Price ............................................................................................................................................................... 5.50 5.00 

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Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 26413 

115 In principle, overfeeding could generate 

surplus enrichment services just as underfeeding 

generates surplus natural uranium. At the prices 

prevailing in the recent past and anticipated in the 

near future, overfeeding would not be economical. 

Other sources of secondary supply in the uranium 

and conversion markets provide natural uranium, 

not enriched uranium. DOE’s transfers for downblending are secondary supply, but they constitute 

a much smaller portion of overall supply than total 

transfers do relative to uranium and conversion 

supplies. 

116As noted elsewhere in this analysis, DOE 

believes the magnitude of any effect of DOE 

transfers on the uranium or enrichment price that 

is transmitted through the interaction with the 

enrichment or uranium price, respectively, is small. 

It is not inconsistent with that conclusion to believe 

that the interaction of the two prices could help 

limit the market’s susceptibility to parallel pricing 

conduct. 

117Transfers under the assessed case contain, on 

average, about 14% less SWU per year than the 

prior transfer rate. 

118 DOE notes that the additional suppression in 

enrichment prices would itself affect the interaction 

between the enrichment and uranium markets. 

Because that effect would tend push more 

enrichment capacity back to underfeeding, DOE 

believes it would at worst cause DOE’s 40% 

adjustment to be an overestimate. 

119URENCO states that the term enrichment price 

is currently $87.00 per SWU. NIPC Comment of 

URENCO, at 2. The most recent data available to 

DOE do not support this figure. 

c. Effect of DOE Transfers on Market 

Price 

After reviewing the market analyses 

described above, and other information 

including other comments received, 

DOE concludes that ERI’s method for 

estimating and forecasting the price 

effects reasonably attributable to DOE’s 

transfers is reasonable. As explained 

above, the market-clearing price 

analysis is consistent with basic 

economic principles and should be a 

reasonable way to estimate relatively 

small changes in price, assuming the 

market has a competitive price-setting 

mechanism. It is not clear whether the 

enrichment market functions in that 

way. The market is even more 

concentrated than the conversion 

market: Only four companies worldwide 

provide enrichment services, and one 

provides services essentially exclusively 

to Chinese purchasers. Unlike uranium 

and conversion, the enrichment market 

does not include significant sources of 

secondary supply.115 On the other hand, 

buyers may be more sensitive to 

enrichment prices, both because 

enrichment constitutes a larger portion 

of the total cost of enriched uranium 

product and because natural uranium 

can be substituted, in the 

‘‘underfeeding’’ sense described above, 

with uranium.116 DOE observes that 

enrichment prices have been more 

variable than conversion prices and 

nearly as variable as uranium prices. For 

example, while enrichment prices did 

not drop immediately after the 

Fukushima incident, as uranium spot 

prices did, they have decreased by about 

45% since 2011. Finally, there is not a 

large gap between spot and term prices 

for enrichment, as there is for 

conversion. 

To be conservative, DOE will assume 

that a competitive price-setting 

mechanism does determine enrichment 

prices. On that assumption, ERI’s 

market-clearing analysis should provide 

an appropriate forecast for the effects of 

DOE’s transfers. To the extent that 

enrichment prices are uncompetitive, 

the price effect will tend to be smaller 

than what ERI forecasts. 

Also, DOE notes that ERI’s analysis 

assumes demand for enrichment to be 

perfectly inelastic. This assumption is a 

reasonable approximation, because, as 

discussed above, nuclear utilities have 

predictable requirements that must be 

filled. In reality, demand may have 

some small degree of elasticity. That 

elasticity would also tend to make the 

price effect smaller than what ERI 

forecasts. 

However, as noted above, ERI’s model 

does not take account of the interplay 

between uranium concentrates and 

enrichment prices. As explained above, 

for the uranium concentrates market, 

DOE expects that this interplay is not 

large enough to make a significant 

difference to this analysis. With respect 

to the enrichment market, DOE notes 

that only about one quarter of DOE’s 

future transfers under the assessed case 

will displace enrichment services. 

Consequently, the effect of DOE’s 

transfers on uranium hexafluoride 

prices should generally be larger than 

the effect on enrichment prices. Both 

ERI and UxC forecast such a relative 

difference—about 7% for concentrates 

for a rate of 2,705 MTU per year, 

compared to about 4% for enrichment. 

The amount of enrichment currently 

devoted to underfeeding depends in 

part on the relative prices of natural 

uranium hexafluoride and enrichment. 

If uranium prices decrease by a relative 

3%, enrichers can be expected to devote 

less primary supply to underfeeding— 

on the order of 3% less, or about 

200,000 SWU given that enrichers 

currently use about 8 million SWU for 

underfeeding. This is close to 40% of 

the total amount of SWU from DOE 

transfers under the assessed case. 

UxC’s model takes these interactions 

into account. DOE further notes that 

UxC’s forecast of the effect on SWU 

prices is quite similar to ERI’s, although 

it predicts a slightly larger effect on the 

price. UxC analyzed transfers that are 

equivalent to ERI’s Scenario 1. Whereas 

ERI forecasts a price effect in the near 

term (2015–2017) of $4.40 for Scenario 

1, UxC forecasts a near-term price effect 

of $5.31 (spot) or $5.50 (term). ERI 

forecasts a longer-term effect averaging 

$4.50 over the next decade. By 

comparison, UxC forecasts an effect of 

$4.86 (spot) or $5.00 (term). 

While UxC did not provide forecasts 

for other possible transfer rates, it is 

reasonable to assume the price change 

would be proportional to the market 

displacement for supply changes that, 

like DOE’s, constitute small proportions 

of total supply and have small effects on 

price. Accordingly, DOE concludes that 

UxC’s model would forecast, for 

transfers under the assessed case, price 

effects of $4.55 (spot) or $4.70 (term) in 

the near-term and $4.15 (spot) or $4.30 

(term) in the longer term.117 DOE does 

not place much weight on UxC’s 

forecast because, as discussed above, 

UxC’s model relies on subjective 

exogenous variables such as ‘‘market 

participants’ general perception of the 

industry outlook’’ and ‘‘changes in 

market psychology’’ that UxC sets prior 

to running its model in order to define 

the scenario that the model will predict. 

However, DOE does believe that the 

consistency between UxC’s forecast and 

ERI’s indicates that the effect of 

interactions between the uranium and 

enrichment markets is unlikely to be 

larger than what DOE estimates here. 

Because the forecast price effects are 

only estimates, not precise to the penny, 

and because the underlying 

assumptions of ERI’s model are 

reasonable, DOE concludes it is 

appropriate to rely on ERI’s model with 

a revision to account for underfeeding. 

Accordingly, DOE adjusts the resulting 

estimate upward by 40% to reflect the 

additional enrichment supply that may 

become available due to the relative 

changes in uranium and enrichment 

prices.118 Based on the above, DOE 

forecasts that transfers under the 

assessed case will continue to exert 

some downward pressure on the market 

prices for enrichment services, ranging 

from around $5.25 in the near term and 

$5.40 over the longer term. 

The significance of price suppression 

at this level depends, at least in part, on 

market price. The 2015 ERI Report relies 

on the price indicators for SWU 

published by TradeTech on January 31, 

2015. The spot price for SWU has 

decreased by about $9.00 since that 

date. The current price indicators, as 

published by UxC, are $79.00 per SWU 

in the spot market and $90.00 per SWU 

in the term market.119 Thus, the 

estimated near-term price effect 

attributable to DOE transfers represents 

6.7% and 5.9% of the spot and term 

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26414 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

120 DOE notes that URENCO’s financial 

statements have referred to its order book as 

‘‘extending up to and beyond 2025’’ at least since 

2010. See URENCO, Annual Report & Accounts 

2010, at 3 (2010), available at http://

media.urenco.com/corp-Web site/298/

annualreportandaccounts2010_1.pdf. 

121On May 22, 2014, URENCO submitted an 

application to the U.S. NRC to amend its license for 

the facility to allow it to use high assay tails 

(approximately 0.4 wt-% U–235) as feed material. 

See 79 FR 43099 (July 24, 2014); ‘‘Redacted— 

Supplement to License Amendment Request for 

Capacity Expansion of URENCO USA Facility 

(LAR–12–10),’’ Letter from URENCO to U.S. NRC, 

LES–14–00071–NRC (June 17, 2014). 

prices, respectively. Although it may be 

useful to compare the estimated price 

effect to current market prices for a 

sense of scale, comparing a longer term 

price effect to current market prices can 

be somewhat misleading; it is more 

appropriate to compare the price effect 

in future years to forecasted market 

prices in those years. 

In its annual Enrichment Market 

Outlook, UxC provides a detailed 

explanation of its price forecast, which 

generally predicts an increase in term 

prices over the next 10 years. UxC 

Enrichment Market Outlook—Q4 2014, 

91–94 (2014). [REDACTED]. Id. at 94. 

UxC reports [REDACTED]. Id. at 74. In 

the mid-term, UxC projects that the term 

price for SWU [REDACTED]. Id. at 94. 

UxC does not provide a separate forecast 

for the spot price. Id. at 79. 

Using these price forecasts, it is 

possible to project the estimated price 

effect in future years as a percentage of 

the expected market price. DOE predicts 

that the price effect reasonably 

attributable to DOE transfers under the 

assessed case will be around $5.25 in 

the near term, and then average 

approximately $5.40 between 2018 and 

2024. As prices increase, this price 

effect will represent a smaller 

proportion of the then-prevailing market 

prices. Based on UxC forecasts, which 

DOE believes to be a reasonable 

expectation for future prices, the price 

effect will average approximately 

[REDACTED] of the term price in 2015– 

2017, and [REDACTED] between 2018 

and 2024. 

d. Effect on Realized Price 

As with uranium concentrates and 

conversion, the principal mechanism 

through which a change in market price 

would impact the domestic uranium 

enrichment industry is through the 

effect on what prices an enricher 

actually receives for its services. The 

market prices published by TradeTech 

and UxC are based on information about 

recent offers, bids, and transactions, and 

are thus a snapshot of contracting 

activity at the time of the publication. 

Enrichment, like uranium concentrates 

and conversion, is primarily sold on 

long-term contracts. Consequently an 

enricher’s actual revenues are somewhat 

insulated from short-run fluctuations in 

price. 

There is only one currently operating 

enrichment facility in the United States, 

the UUSA gas centrifuge facility in New 

Mexico. No commenter provides 

information about the realized price 

achieved by URENCO or the effect of 

DOE transfers on that price. However, 

other sources provide some relevant 

information. 

In recent years, the vast majority of 

SWU has been sold on the term market. 

UxC Enrichment Market Outlook—Q4 

2014, 17, 20 (2014). UxC reports that 

approximately [REDACTED] SWU were 

sold through spot contracts in 2014. Id. 

at 19. UxC estimates that 2014 

enrichment demand stood at 

approximately [REDACTED]. Id. at 38. 

Based on these figures, spot sales in 

2014 accounted for [REDACTED] of total 

SWU demand. ERI estimates that more 

than 95% of enrichment requirements 

are covered under long-term contracts. 

2015 ERI Report, 74. Long-term 

contracts for SWU typically last for 10 

or more years, in some cases and in 

some cases 15 or more years. UxC 

Enrichment Market Outlook—Q4 2014, 

100 (2014). 

Current term contracting volume is 

much smaller than pre-2010 volumes. 

Id. at 9, 21. UxC reports that long-term 

contracting activity [REDACTED]. Id. at 

20. [REDACTED]. Id. at 20. UxC also 

projects that term contracting activity 

will [REDACTED]. Id. at 21. Therefore, 

DOE concludes that only 10–20% of 

term sales will reflect current prices. For 

the next few years, most sales will be on 

contracts concluded several years ago 

when prices were higher. More 

contracting will take place when those 

contracts expire, and those contracts 

will reflect the relevant future term 

prices. 

Consistent with DOE’s analysis, EIA 

reports that in 2013, the average price 

paid for SWU was $142.22. EIA, 

Uranium Marketing Report, 7 (2014). 

This is well above the average market 

prices for 2013, approximately $110 in 

the spot market and $120 in the term 

market according to UxC. 

URENCO’s most recent financial 

statements indicate that at least a 

portion of its contract portfolio 

‘‘extend[s] beyond 2025.’’ URENCO 

Limited, Interim Financial Statements 

for the 6 Months Ended 30 June 2014, 

at 6, available at http://

www.urenco.com/_/uploads/contentfiles/Urenco_Group_Interim_Accounts_

to_30_June_2014-final-02092014.pdf.120

URENCO has also stated that its 

enrichment contracts are usually fixed 

base price with escalation, leaving 

URENCO with ‘‘no direct exposure to 

uranium prices.’’ URENCO Investor 

Update, 4 (Sept. 9, 2014), available at 

http://www.urenco.com/_/uploads/

results-and-presentations/URENCO_

Bond_Investor_Presentation_2014.pdf. 

These statements reflect all enrichment 

activity at URENCO, not just production 

at the UUSA facility. But URENCO has 

controlled the U.S. facility since the 

beginning of planning, and it is unlikely 

U.S. sales depart from the company’s 

overall practices. Because UUSA began 

operating in 2010, its contract terms will 

only have begun at that time. And it is 

likely that the vast majority of the 

facility’s capacity was under long-term 

contracts at inception, because an 

enrichment plant operator ordinarily 

does not construct a plant before having 

contractual commitments for virtually 

the entire capacity. That approach 

would also be consistent with what 

URENCO reports for its overall 

contracting approach. 

Therefore, DOE concludes that 

URENCO USA has essentially zero 

exposure to current term prices. 

Transfers under the assessed case will 

eventually affect URENCO’s realized 

price, because URENCO’s contracts will 

expire and URENCO will enter new 

contracts at the prevailing future term 

prices. Therefore, DOE concludes that 

the effect of DOE transfers on 

URENCO’s prices will be through the 

effect on longer-term, rather than nearterm, prices. As noted above, the longerterm price effect forecast for transfers 

under the assessed case is $5.40 per 

SWU. 

As noted above, URENCO has stated 

that a small amount of its capacity is 

devoted to underfeeding. RFI Comment 

of URENCO, at 3.121 ERI notes that 

URENCO estimates it is using 10–15% 

of its capacity for underfeeding. 2015 

ERI Report, 75. To the extent that 

URENCO sells the natural uranium 

hexafluoride yielded from underfeeding, 

DOE transfers could affect its revenues 

to the extent the transfers cause 

decreases in the prices for uranium 

concentrates and conversion services. 

Using the price effects forecast above for 

the uranium and conversion spot prices, 

transfers under the assessed case would 

affect the price for that amount of 

material by 7.1%. 

2. Production at Existing Facilities 

URENCO reports that the nameplate 

capacity for the UUSA facility is 3.7 

million SWU. RFI Comment of 

URENCO, at 1. URENCO has also stated 

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122Although not the subject of this determination, 

DOE notes that ERI analyzed the possible future 

transfer to GLE of high-assay depleted uranium. 

2015 ERI Report, 27–28. As this transaction would 

involve re-enrichment of depleted tails, it would 

tend to support additional demand for enrichment 

services. 

that construction of additional 

centrifuges will continue until the 

facility reaches 5.7 million SWU. 

‘‘About Us, URENCO USA,’’ URENCO, 

http://www.urenco.com/about-us/

company-structure/urenco-usa 

(accessed Feb. 21, 2015). 

Due to the nature of gas centrifuges, 

it is highly unlikely that UUSA will 

decrease production of SWU. As 

URENCO states, due to the low level of 

electricity required to run the 

centrifuges, slowing production would 

have almost no effect on operating 

expenses. Furthermore, stopping and 

restarting a centrifuge may damage the 

equipment. RFI Comment of URENCO, 

at 3. That said, there is a possibility that 

URENCO will divert capacity currently 

used to produce LEU to underfeeding or 

tails re-enrichment. Specifically, UxC 

notes [REDACTED]. UxC Enrichment 

Market Outlook—Q4 2014, 42 (2014). 

Given how little spot contracting 

activity there has been in recent years, 

DOE believes that this effect will be 

small. 

3. Employment Levels in the Industry 

ERI does not provide an estimate of 

the change in employment due to DOE 

transfers in the enrichment industry. No 

commenter references changes in 

employment in the enrichment 

industry. URENCO states that its 

business is essentially fixed-cost and 

makes no reference to changes in 

employment. 

Although DOE notes that there have 

been changes in employment in the 

enrichment industry in recent years, 

mostly related to the closure of the 

Paducah Gaseous Diffusion Plant, DOE 

does not believe that its transfers will 

have any significant effect on 

employment levels in the enrichment 

industry. 

4. Changes in Capital Improvement 

Plans and Development of Future 

Facilities 

URENCO recently completed ‘‘Phase 

II’’ of its expansion plans, bringing the 

capacity of its facility to 3.7 million 

SWU. ‘‘Phase II Completion,’’ URENCO 

(Apr. 9, 2014), http://www.urenco.com/ 

news/detail/phase-ii-completion 

(accessed Feb. 22, 2014). URENCO is 

continuing to move forward with 

‘‘Phase III’’ expansion, which will bring 

plant capacity to approximately 5.7 

million SWU. URENCO notes that it has 

slowed its plan for construction of 

additional capacity. RFI Comment of 

URENCO, at 3. URENCO expects to 

reach 5.7 million SWU capacity by 

2023. URENCO Investor Update, 31 

(Sept. 9, 2014). Although the company 

recently received a license amendment 

that would allow it to expand capacity 

to 10 million SWU per year, URENCO 

states that this move is ‘‘to provide for 

future licensing flexibility should the 

market recover.’’ URENCO notes that it 

cancelled construction of ‘‘Phase IV’’ in 

2013. RFI Comment of URENCO, at 3. 

DOE is aware of several other planned 

or proposed enrichment facilities in the 

U.S., namely, AREVA’s Eagle Rock 

Enrichment Facility in Idaho, Centrus 

Energy’s—formerly USEC Inc.— 

American Centrifuge Plant in Piketon, 

OH, and Global Laser Enrichment’s 

facility in Wilmington, NC.122

Development of each of these facilities 

has been put on hold or slowed until 

market prices improve. 

The Eagle Rock Enrichment Facility 

would use gas centrifuge technology 

and would have a capacity of 

approximately 3.3 million SWU. ‘‘Eagle 

Rock Enrichment Facility,’’ AREVA, 

http://us.areva.com/EN/home-203/

eagle-rock-enrichment-facility.html 

(accessed Feb. 21, 2015). After 

announcing several delays in 

construction, AREVA stated in May 

2013 that it was no longer projecting a 

start date for building the facility. 

‘‘French company won’t set date for 

Idaho nuclear facility,’’ The Oregonian 

(May 23, 2013), http://

www.oregonlive.com/pacific-northwestnews/index.ssf/2013/05/french_

company_wont_set_date_f.html 

(accessed Feb. 21, 2015). At the time of 

this announcement, the term market 

price for SWU was approximately $130, 

according to UxC’s monthly price 

indicator. 

The proposed American Centrifuge 

Plant would use gas centrifuge 

technology and would have a capacity 

of approximately 3.8 million SWU. 

‘‘USEC Inc. Gas Centrifuge,’’ U.S. NRC, 

http://www.nrc.gov/materials/fuelcycle-fac/usecfacility.html (accessed 

Feb. 22, 2015). Active construction of 

new centrifuges has ceased. In a 

November 2013 quarterly filing with the 

SEC, Centrus Energy, then known as 

USEC, stated, ‘‘[a]t current market prices 

USEC does not believe that its plans for 

American Centrifuge commercialization 

are economically viable without 

additional government support.’’ USEC 

Form 10–Q, Securities and Exchange 

Commission, at 10 (Nov. 5, 2013) 

https://www.sec.gov/Archives/edgar/

data/1065059/000106505913000049/

usu-2013930x10q.htm (accessed Feb. 

22, 2015). When this form was 

submitted to the SEC, the term market 

price for SWU was approximately $115, 

according to UxC’s monthly price 

indicator. 

Global Laser Enrichment, a venture of 

GE-Hitachi and Cameco, has proposed 

an enrichment plant that would use 

laser enrichment technology developed 

by Silex Systems, an Australian 

company. The proposed facility in 

Wilmington, NC, would have a capacity 

of about 6 million SWU. GLE License 

Application, Rev. 7, U.S. NRC, Docket 

70–7016, at 1–16 (August 20, 2012), 

available at http://pbadupws.nrc.gov/

docs/ML1224/ML12242A227.pdf. In July 

2014, GLE announced that it would 

slow continued development of the 

facility ‘‘in line with current and future 

market realities.’’ ‘‘Global Laser 

Enrichment,’’ GE-Hitachi, https://

nuclear.gepower.com/fuel-a-plant/

products/gle.html (accessed Feb. 22, 

2015). At the time of GLE’s 

announcement, the term market price 

for SWU was approximately $95, 

according to UxC’s monthly price 

indicator. 

Based on ERI’s estimate, as adjusted 

to account for underfeeding, eliminating 

all DOE–transferred material from the 

market—including material already 

transferred in the past as well as the 

material to be transferred under the 

assessed case—could cause prices to 

rise by no more than $7.40 in 2015 and 

less than $4.50 in 2016 and 2017, which 

could result in a term price of around 

$97.00 in 2015 and just under $95.00 in 

2016 and 2017. 

The timing of the above 

announcements suggests that enrichers 

would require a substantially higher 

price signal in order to move forward 

with adding new capacity. Specifically, 

the American Centrifuge project was put 

on hold when term prices were close to 

$115 and the Eagle Rock facility was put 

on hold when prices were close to $130. 

Although GLE’s announcement came at 

a time when prices were $95, the level 

of near-term uncovered requirements is 

low—[REDACTED], UxC Enrichment 

Market Outlook—Q4 2014, 39 (2014)— 

and it is not clear that GLE would be 

able secure the necessary long-term 

contracts even at that price. Because the 

developers stopped the projects just 

discussed on the basis of prices at or 

above $95, DOE concludes that DOE 

transfers in the near term will not 

change the decisions whether to 

complete those projects. In the longer 

term, as prices improve, there may come 

a point for each of these projects at 

which its owner is willing to invest to 

complete the project. The price effect 

forecast for transfers under the assessed 

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123URENCO similarly notes that uncovered 

requirements are low. URENCO further notes that 

DOE transfers are equivalent to about 72% of 

unfilled global demand in 2015. RFI Comment of 

URENCO, at 4. As noted in the NIPC, DOE believes 

that figures for unfilled enrichment demand or 

uncovered enrichment requirements likely already 

reflect DOE uranium transfers at recent rates. Even 

if this were not true, the prediction above for the 

price effect of DOE transfers does not depend on an 

estimate of uncovered requirements. Thus, 

changing this input would not alter DOE’s forecast. 

URENCO may also be suggesting that the lack of 

uncovered requirements means that DOE is directly 

displacing its own sales. However, as described 

above, even if DOE transfers were removed from the 

market, it does not appear that prices would rise 

enough to justify UUSA’s increasing capacity 

substantially. 

124Again, DOE notes that although it is not 

included in ERI’s chart of enrichment supply, GLE’s 

proposed Paducah Laser Enrichment Facility would 

represent additional enrichment supply that is not 

intended to be devoted to producing LEU. Compare 

2015 ERI Report, 16, with 2015 ERI Report, 27–28. 

125 DOE also notes that the Russian Suspension 

Agreement places limits on EUP imported into the 

United States from Russia. Thus, URENCO is 

somewhat protected from the effects of competition 

with Russian enrichers for domestic demand. 

case may delay that point, but given the 

forecasts and the announced decisions, 

DOE does not believe it would change 

the long-term outcome for these 

projects. Meanwhile, although URENCO 

is still moving forward with a capacity 

expansion from 3.7 million SWU to 5.7 

million SWU, it has slowed the pace of 

expansion and stated that it does not 

expect to reach this capacity until 2023. 

Even though URENCO has announced 

expansion plans for UUSA, it 

presumably still intends to secure longterm contracts prior to construction. It 

appears that URENCO has decided to 

slow expansion to await higher prices 

that it expects will prevail in a few 

years—UxC’s [REDACTED]. Id. at 114. 

Thus, DOE believes that a term price of 

$95.00–$97.00 would likely not be 

sufficient to support URENCO’s planned 

price expansion.123

As a result, DOE believes that 

transfers under the assessed case will 

not have a significant effect on capacity 

expansion at UUSA or at other planned 

facilities. 

5. Long-Term Viability and Health of the 

Industry 

ERI’s most recent Reference Nuclear 

Power Growth forecast projects global 

requirements for enrichment services to 

grow to approximately 59 million SWU 

between 2021 and 2025, approximately 

31% higher than current requirements. 

Global requirements are expected to 

continue to rise to a level of 74 million 

SWU between 2031 and 2035, 

approximately 64% higher than current 

requirements. 2015 ERI Report, 13. ERI 

presents a graph comparing global 

requirements, demand, and supply from 

2013–2035. Global supply is expected to 

continue to significantly exceed global 

demand over the long term. 2015 ERI 

Report, 16. 

Although not focused on enrichment, 

the requirements forecasts noted above 

in Section IV.A.5 are also somewhat 

relevant to the enrichment industry. In 

general, requirements and/or uranium 

concentrate demand forecasts should 

also apply to demand for low enriched 

uranium. As with conversion, there may 

be some small differences due to 

strategic and discretionary inventory 

building. For example, China has been 

purchasing strategic supply well in 

excess of its requirements. Those 

purchases have come in the form of 

U3O8. 2015 ERI Report, 13. Thus, these 

purchases affect near-term uranium 

concentrate demand, but do not affect 

near-term demand for LEU. 

In addition to demand for LEU, higher 

demand for uranium concentrates can 

affect demand for enrichment because of 

the relationship described above 

between natural uranium and 

enrichment as inputs for producing 

enriched uranium product. In the 

medium to long term, supply from 

current mines will cease to exceed 

demand. Meanwhile, enrichment 

supply will continue to exceed 

requirements for LEU. As prices for 

uranium concentrates and conversion 

increase relative to SWU prices, it may 

become more economical to re-enrich 

high-assay tails. In this vein, ERI 

suggests that enrichers will continue to 

redirect capacity to underfeeding and 

that Rosatom will continue to re-enrich 

tails. 2015 ERI Report, 16.124

In its Uranium Enrichment Outlook 

for the 4th quarter of 2014, UxC predicts 

significant increases in both 

requirements and demand in the longterm. UxC Enrichment Market 

Outlook—Q4 2014, 36, 38 (2014). 

Specifically, [REDACTED]. Id. at 38. In 

the longer term, UxC estimates that 

enrichment demand [REDACTED]. Id. 

UxC’s base case supply outlook projects 

that supply [REDACTED]. Id. at 46. 

UxC’s projected base case supply 

[REDACTED]. Id. at 50. DOE recognizes 

that a significant amount of the forecast 

increase in demand will be in China 

(and to a lesser extent in Russia), 

markets that URENCO asserts it cannot 

access. But enrichers in those countries 

do currently have access to markets 

elsewhere in the world, and enrichment 

is fungible. URENCO does not contest 

the notion that enrichment is essentially 

a global commodity with a single world 

price. Thus, increased demand in China 

and Russia will consume capacity with 

which URENCO would otherwise 

compete in markets that it can access.125

As discussed above in Section IV.C.1, 

UxC also predicts a significant increase 

in enrichment prices over the next ten 

years. 

Finally, as with uranium concentrates 

and conversion services, DOE 

recognizes that the predictability of 

transfers from its excess uranium 

inventory over time is important to the 

long-term viability and health of the 

uranium enrichment industries. Again, 

DOE notes that the upper scenario 

considered by ERI would represent 

continued transfers at rates consistent 

with the May 2012 and May 2014 

determinations. Compare 2015 ERI 

Report, 25, with 2014 ERI Report, 28. 

DOE notes that enrichment market 

prices are at levels not seen in the past 

decade. There is also tremendous 

uncertainty in the market regarding 

future production. Centrus Energy Corp. 

(formerly USEC, Inc.) emerged from 

bankruptcy in the past year and has 

been forced to rethink its business 

model since the closure of the Paducah 

Gaseous Diffusion Plant. A significant 

source of business for Centrus and 

URENCO in recent years has been from 

the Asian markets, specifically Japan, 

Taiwan, and South Korea. Demand in 

these markets has been directly affected 

by the Fukushima Daiichi accident. In 

addition, the enrichment market faces 

uncertainty related to Areva’s finances 

and the potential for GLE to build and 

operate a new facility utilizing the Silex 

technology. DOE is cognizant of these 

uncertainties facing the market. 

However, as described above, 

enrichment capacity is expected to shift 

over time toward a trajectory that more 

closely tracks demand. The moves in 

recent years by several enrichers to 

curtail or postpone planned capacity 

increases contributes to this. As a result, 

prices are expected to recover over the 

next ten years. DOE does not believe 

that the price effect attributable to DOE 

transfers is large enough to cause a 

significant change to production and 

development plans at existing or 

planned facilities. At worst, as with the 

uranium mining industry, the effect of 

DOE transfers would be to shift major 

capital investments later in time. DOE 

does not believe that this difference is 

significant enough to appreciably affect 

the long-term viability and health of the 

domestic uranium enrichment industry. 

6. Russian HEU Agreement and 

Suspension Agreement 

Section 3112(d) of the USEC 

Privatization Act requires DOE to ‘‘take 

into account’’ the sales of uranium 

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126As noted above, one exception to this 

approach is ERI’s econometric model for the spot 

price of uranium concentrates, for which the 

difference between term sales and spot sales of 

DOE-sourced uranium could influence the model’s 

medium- and long-term forecasts. Because DOE 

considers those forecasts fairly uncertain anyway, 

the possibility that less DOE-sourced uranium is 

delivered on term contracts than ERI assumed 

would not alter DOE’s conclusions. 

127Assessing whether the effects would actually 

be smaller, and by how much, would require 

additional analysis. For example, if a term sale of 

DOE-sourced uranium displaced a corresponding 

amount of supply onto the spot market, the overall 

effect could be the same as if the DOE-sourced 

uranium were sold directly on the spot market. The 

likelihood of such a direct displacement differs 

among the uranium concentrates, conversion, and 

enrichment markets. 

under the Russian HEU Agreement and 

the Suspension Agreement. As 

discussed above, DOE believes this 

assessment should consider any 

transfers under these two agreements 

that are ongoing at the time of DOE’s 

transfers. 

Under the Russian HEU Agreement, 

Russian HEU was down-blended to LEU 

and then delivered to USEC Inc. for sale 

to end users in the United States. DOE 

notes that the Russian HEU Agreement 

concluded in December 2013. Thus, 

there are no ongoing transfers under this 

agreement. 

The current iteration of the 

Suspension Agreement, described above 

in Section I.D.3.b, sets an annual export 

limit on natural uranium from Russia. 

73 FR 7705 (Feb. 11, 2008). That 

agreement provides for the resumption 

of sales of natural uranium and SWU 

beginning in 2011. While the HEU 

Agreement remained active (i.e. 2011– 

2013), the annual export limits were 

relatively small—equivalent to between 

100,000 and 250,000 SWU. After the 

end of the Russian HEU Agreement, 

restrictions range between an amount 

equivalent to 2,750,000 and 3,110,000 

SWU per year between 2014 and 2020. 

73 FR 7705, at 7706 (Feb. 11, 2008). 

Material having a SWU component 

imported from Russia in accordance 

with the Suspension Agreement is not 

derived from down-blended HEU; thus, 

this material is part of worldwide 

primary enrichment supply as analyzed 

by ERI in the 2015 ERI Report. This 

material is also presumably accounted 

for in the various projections and 

models developed by UxC. Thus, DOE’s 

analysis takes those sales that have an 

enrichment component under the 

Suspension Agreement into account as 

part of overall supply available in the 

market. 

7. Enrichment Industry Conclusion 

After considering the six factors as 

discussed above, DOE concludes that 

transfers under the assessed case will 

not have an adverse material impact on 

the domestic uranium enrichment 

industry. As explained above, DOE 

transfers under the assessed case will 

continue to exert some downward 

pressure on the market price for 

enrichment services. DOE believes that 

$5.25 per SWU in the near-term and 

$5.40 per SWU over the longer term is 

a reasonable estimate of the price effect 

attributable to DOE transfers; this is 

somewhat smaller than the effect 

transfers in the past few years have had. 

Sales from UUSA, the sole operating 

enrichment facility in the United States, 

are almost exclusively under term 

contracts with no exposure to the spot 

price. Thus, the effect of DOE transfers 

on realized price for enrichment from 

UUSA will come through the effect on 

new term contracts that URENCO will 

enter into in the longer term, i.e. $5.40 

per SWU. DOE transfers may also affect 

the price realized for natural uranium 

hexafluoride from underfeeding at 

UUSA by about 7%. Because DOE 

believes that less than 15% of UUSA’s 

capacity is devoted to underfeeding, this 

effect is expected to be small. Due to 

technical constraints, DOE concludes 

that the price effect attributable to DOE 

transfers under the assessed case will 

not cause URENCO to decrease capacity 

or change employment levels at UUSA. 

DOE believes that decisions to expand 

capacity at UUSA or at other planned 

enrichment facilities require prices 

significantly higher than current prices. 

This would be true with or without DOE 

transfers. Thus, DOE concludes that 

transfers under the assessed case will 

not have a significant effect on nearterm decisions to build future 

enrichment capacity in the United 

States. DOE expects that SWU prices 

will increase in the medium- to longterm enough to support these expansion 

plans. DOE transfers would, at worst, 

have the effect of slightly delaying the 

development of such future capacity 

without preventing these new facilities 

from coming online. As such, DOE 

concludes that transfers under the 

assessed case would not significantly 

affect the long-term viability or financial 

health of the domestic uranium 

enrichment industry. DOE does not 

believe that any of these effects has the 

substantial importance that would make 

it an ‘‘adverse material impact’’ within 

the meaning of section 3112(d). 

V. Other Comments 

DOE received a number of comments 

in response to the NIPC and RFI that 

warrant additional discussion. Many 

comments included suggestions for how 

DOE might mitigate any potential 

adverse impacts. 

Several commenters asserted that for 

a given amount of transferred uranium, 

introducing the material into the spot 

market is particularly harmful to 

industry. These commenters contend 

that DOE should analyze its transfers on 

the assumption that the material is 

primarily appearing on the spot market. 

They also urge DOE to take steps to 

ensure that the uranium it transfers is 

sold through term contracts, rather than 

through spot contracts or through 

future-delivery contracts that 

commenters say are little different from 

future spot contracts. Some of these 

commenters, representing members of 

the domestic mining industry, suggest 

that DOE could achieve this goal by 

distributing its material through 

uranium concentrate producers. These 

producers, the commenters say, have 

incentives to place DOE-sourced 

uranium into long-term deliveries, in 

order to mitigate the effect on spot 

prices. To the extent such an 

arrangement led to higher spot prices, 

DOE would also receive greater value 

for the uranium. 

With respect to the impacts caused by 

DOE transfers, the foregoing analysis 

has, in almost all respects, assumed the 

material contributes to the spot markets 

over time.126 DOE therefore believes its 

analysis has comported with 

commenters’ suggestion. Assuming the 

commenters are correct that spot sales of 

DOE-sourced uranium are the most 

harmful way for the material to enter the 

markets, DOE has assessed the 

consequences. 

DOE recognizes that if some or all of 

its transfers entered the markets through 

term contracts, the effects on spot prices 

could be smaller.127 However, for DOE 

itself to make transfers on the equivalent 

of traditional term contracts would not 

serve the purposes for which, in the 

main, DOE transfers uranium. In DOE’s 

understanding, a buyer on a term 

contract has a right to receive material 

at various future delivery dates; and it 

ordinarily pays for the material at or 

near the time of delivery, at a price 

determined by the contract. By contrast, 

DOE transfers uranium in exchange for 

services provided substantially 

contemporaneously with the 

transactions, not years in the future. 

At least one commenter says that 

some utility buyers have the financial 

capacity to buy uranium and hold it for 

a few years before using it. According to 

the commenter, the price curve for 

uranium, coupled with the financial 

environment in which interest rates 

have remained very low, makes such 

transactions advantageous for utilities. 

DOE notes, however, that holding the 

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26418 Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 

material for a few years would not, 

apparently, serve the purpose of 

commenters who seek to remove DOEsourced material from the spot markets. 

These commenters stress that what they 

consider the true term market involves 

deliveries five to ten years in the future. 

No commenter identified a person or 

group of persons that would have the 

financial wherewithal to pay the spot 

price for DOE-sourced uranium in the 

present and then retain the uranium for 

delivery that far in the future. 

Commenters from the mining industry 

did indicate that they would be 

interested in managing the distribution 

of DOE-sourced uranium. However, 

DOE notes that the commenters appear 

to contemplate that DOE would receive 

in such an arrangement substantially 

less than the prevailing spot market 

price for the uranium. If, on the other 

hand, the commenters expect to pay 

prevailing spot market prices, DOE 

believes they could in principle already 

undertake to manage how the material 

enters the markets. DOE transfers 

uranium to commercial businesses; and 

one of them, DOE believes, sells its 

uranium to Traxys, a uranium trading 

firm. A person that wanted to buy 

uranium from DOE to transfer it from 

the spot market to the term market 

could buy the equivalent amount of 

material from Traxys instead. 

For these reasons, while DOE is 

willing to explore whether it would be 

feasible for some persons, such as 

uranium concentrate producers, to 

manage the appearance of DOE-sourced 

uranium on the markets, DOE does not 

consider it appropriate to incorporate 

this suggestion in today’s determination. 

Commenters also suggested a variety 

of other actions that could help to 

mitigate the impact of DOE transfers. 

Several suggested that DOE consider a 

matched sales arrangement similar to 

the arrangement used during an earlier 

iteration of the Suspension Agreement 

with Russia. Under that program, 

Russian-origin natural uranium (U3O8 or 

UF6) or SWU could only be imported 

into the U.S. if it was ‘‘matched’’ to an 

equal portion of newly-produced U.S. 

origin natural uranium or SWU and the 

two quantities were sold together as a 

unit. See generally 59 FR 15,373 (Apr. 

1, 1994). Commenters suggest that an 

arrangement of this type for DOEsourced uranium would incentivize new 

production capacity that is not already 

committed to long-term contracts. DOE 

acknowledges that a matching program 

could benefit domestic producers, but it 

is concerned that it would not serve the 

purposes for which DOE transfers 

uranium. In general, domestic producers 

already participate in domestic and 

global spot markets for uranium. A new 

sale that would not have occurred 

absent the matching program will tend 

to be from production that would not 

have been economic at current prices. 

The effect of a matching program would 

be to secure a viable, somewhat abovemarket price for the new sale. Because 

buyers will presumably be unwilling to 

pay more than the relevant market 

prices overall, the DOE-sourced 

uranium would have to be transferred at 

a lower price to compensate. The net 

effect would be for DOE to receive less 

value for its uranium in exchange for an 

additional monetary benefit to 

producers. For these reasons, DOE 

declines to incorporate a matched sales 

approach into today’s determination. 

One commenter suggested several 

alternatives to DOE’s exchanging LEU 

for down-blending services. First, the 

commenter suggested that DOE downblend only to an assay of 19.75 wt-% U– 

235, an assay that commercial enrichers 

do not provide and therefore will not 

compete with commercial supply. 

However, because there is very little 

demand for LEU at this assay—which is 

predominantly used in research 

reactors—the resulting LEU would have 

little value to a contractor receiving it in 

exchange for services. Granted, the 

contractor could down-blend the LEU 

further to assays of 5 wt-% or below; but 

that outcome would affect markets the 

same as if DOE itself transferred the 

low-assay LEU. Further, DOE allocates 

the portion of the down-blended LEU 

that is not transferred to the downblending contractor to various 

programmatic needs, many of which 

require LEU with an assay of 5 wt-% or 

below. The commenter also suggests 

that DOE devote the LEU resulting from 

down-blending to either the U.S. 

nuclear fuel bank, the American 

Assured Fuel Supply, or to the IAEA’s 

nuclear fuel bank. Both proposals 

amount to a request that DOE cease 

exchanging LEU for down-blending 

services altogether. The second proposal 

suggests that the difference in funding 

could be made up by decreasing U.S. 

financial contributions to the IAEA by 

an amount equivalent to the value of the 

LEU. The Agency currently plans to 

purchase LEU from the market to stock 

its fuel bank. If the United States 

provided LEU, the IAEA would need to 

purchase less LEU from the market. 

Thus, it appears that this type of 

transaction would not decrease the 

impacts on the domestic enrichment 

industry because it would displace 

purchases of LEU on the open market 

that the IAEA would have otherwise 

made. In any case, DOE believes that it 

can meet its purpose of exchanging 4.95 

wt-% LEU for down-blending services 

without causing an adverse material 

impact on the domestic uranium 

industries; thus, DOE declines to 

incorporate these alternatives into 

today’s determination. 

One commenter suggested that DOE 

should consider as a mitigating strategy 

implementing regulations that limit the 

amount of secondary supply obtained 

from underfeeding that enrichers can 

sell in the United States. Doing so 

would mean protecting producers from 

competition with underfeeding by 

enrichers, at enrichers’ expense. DOE is 

not inclined to engage in such capacity 

controls. 

With respect to the domestic 

conversion industry, one commenter 

suggested stopping transfers of 

conversion services would have a 

positive effect. DOE does not transfer 

conversion services; it transfers natural 

uranium hexafluoride. This displaces 

primary conversion because in order to 

obtain natural uranium hexafluoride 

from primary production, one would 

need to buy uranium concentrates and 

then pay for that material to be 

converted into uranium hexafluoride. 

The commenter is presumably 

suggesting that DOE should accept in 

exchange for its uranium an amount of 

services equivalent to the value of the 

uranium concentrates and ‘‘credits’’ for 

the amount of conversion services 

necessary to produce the material from 

primary production. These ‘‘credits’’ 

would be in the form of a tradeable 

contract for conversion services from a 

primary supplier. This process would 

mean that DOE would receive less 

services in exchange for its uranium 

while making the individual transfers 

substantially more complicated. DOE 

further notes that this would decrease 

the impacts on the domestic conversion 

industry, but it would have no effect on 

the impacts to the domestic uranium 

mining or enrichment industries. For 

these reasons, DOE declines to engage in 

this type of transaction. 

One commenter also suggested that 

DOE could establish price bands below 

which DOE would not transfer uranium. 

The commenter presented this proposal 

specifically for conversion services. 

Thus, this would require DOE to accept 

conversion ‘‘credits’’ as described in the 

preceding paragraph if the conversion 

price fell below a given threshold. 

However, DOE recognizes that this 

approach could in principle apply to 

any uranium transfers. As DOE has 

concluded that its transfers will not 

have an adverse material impact on the 

domestic uranium industries in market 

conditions that are expected to occur, 

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Federal Register / Vol. 80, No. 88 / Thursday, May 7, 2015 / Notices 26419 

128One commenter suggested that DOE subject 

each Secretarial Determination to an analysis under 

the National Environmental Policy Act. DOE notes 

that the actual uranium transfers—as opposed to the 

Secretarial Determination—are already covered 

under other NEPA processes. Thus, it is 

unnecessary to conduct further NEPA analysis for 

today’s determination. 

DOE declines to establish price 

thresholds below which DOE will 

transfer less uranium. However, DOE 

expects to reassess its transfers at least 

every two years, consistent with the 

statutory limit on the validity of section 

3112(d)(2) determinations. Such 

reassessments are, among other things, 

an opportunity to ensure that DOE 

evaluates its transfers in light of 

changing market conditions. 

In addition to comments regarding 

potential ways to mitigate any impacts 

caused by DOE transfers, DOE received 

a number of comments that are related 

to DOE’s current plans, but do not 

directly implicate how DOE conducts its 

analysis of whether DOE transfers will 

cause adverse material impacts. 

One commenter suggested that DOE 

should prepare two separate Secretarial 

Determinations—one for Portsmouth 

cleanup, and one for down-blending 

services. DOE agrees that it could 

conceivably prepare separate 

determinations for these two programs. 

However, DOE believes it is more 

informative to analyze these transfers 

together, to assess their cumulative 

impacts on the domestic uranium 

industries. Thus, DOE declines to adopt 

separate determinations for these 

programs at this time. This commenter 

also suggests that DOE could potentially 

conduct transfers for down-blending 

under section 3112(e)(2) of the USEC 

Privatization Act, which allows certain 

transfers for national security purposes. 

DOE recognizes that certain programs 

may potentially fall under more than 

one subsection of the Act. DOE believes 

it is unnecessary to determine whether 

these transfers could be conducted 

under section 3112(e)(2) because DOE 

has concluded that these transfers will 

not have an adverse material impact on 

the domestic uranium industries. 

Several commenters suggested that 

DOE is not getting fair market value for 

its uranium—as section 3112(d)(2)(C) of 

the USEC Privatization Act requires— 

because DOE values the material at the 

spot price rather than the term price. 

This assessment does not analyze 

whether DOE will receive fair market 

value for its transfers. DOE evaluates 

whether it receives fair market value 

prior to each transfer through a separate 

process. With respect to this analysis, 

DOE has assumed that in its uranium 

transfers it will receive roughly the 

prevailing spot price for its material. 

That assumption is reasonable because 

it is consistent with DOE’s past 

experience and with the contracts under 

which DOE transfers uranium. 

DOE received a number of comments 

requesting that it publish a draft 

Secretarial Determination for notice and 

comment. DOE notes that notice and 

comment is not required for 

determinations pursuant to section 

3112(d)(2). However, DOE has solicited 

public comment on two occasions in 

preparation for this determination, 

through a December 2014 Request for 

Information and a March 2015 Notice of 

Issues for Public Comment. DOE 

received substantial input, described 

above, in response to those two notices, 

and it has carefully considered these 

comments.128

VI. Conclusion 

For the reasons discussed above, DOE 

concludes that transfers under the 

assessed case will not have an adverse 

material impact on the domestic 

uranium mining, conversion, or 

enrichment industries, taking into 

account the Russian HEU Agreement 

and Suspension Agreement. 

[FR Doc. 2015–11035 Filed 5–6–15; 8:45 am] 

BILLING CODE 6450–01–P 

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