### 14107 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

1 With respect to a given amount of LEU, the ‘‘natural uranium equivalent’’ is the amount of natural uranium feed that would be required to produce that amount of LEU. The ratio of feed to product is a function of the assay of the feed and the desired assays of the enriched product and the depleted tails (‘‘assay’’ refers to the ratio of the fissile isotope U–235 to other isotopes of uranium such as U–234 and U–238). The industry generally refers to the enriched product as ‘‘Enriched
Uranium Product’’ or EUP and to the tails as ‘‘depleted uranium,’’ DU, ‘‘depleted uranium
hexafluoride’’ or DUF 6

. **DEPARTMENT OF ENERGY**

**Excess Uranium Management: Effects**
**of DOE Transfers of Excess Uranium on Domestic Uranium Mining,**  **Conversion, and Enrichment Industries; Notice of Issues for Public** 
**Comment**

**AGENCY :**  Office of Nuclear Energy, Department of Energy.

**ACTION :**  Request for public comment.

**SUMMARY :**  The U.S. Department of Energy (DOE) plans to issue a new Secretarial Determination covering
continued transfers of uranium for cleanup services at the Portsmouth
Gaseous Diffusion Plant and for downblending of highly-enriched uranium (HEU) to low-enriched uranium (LEU). In support of this process, DOE issued a Request for Information that solicited
information about 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. DOE also commissioned an economic analysis of the effects of its proposed uranium transfers. DOE now provides for public review the responses received from the public, the economic analysis prepared for DOE, and a list of factors DOE has identified for analysis of the impacts of DOE transfers on the uranium mining, conversion, and enrichment industries. DOE requests comment on this list of factors, the information and documents made available through this notice, and the included summary of information
considered.

**DATES :**  DOE will accept comments, data, and information responding to this proposal submitted on or before April 6,

2015.

**ADDRESSES :**  Interested persons may submit comments by any of the following methods.

1. Email: RFI-UraniumTransfers@ hq.doe.gov. Submit electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file format, and avoid the use of special characters or any form of encryption.

2. Postal Mail: Mr. David Henderson, U.S. Department of Energy, Office of Nuclear Energy, Mailstop NE–52, 19901 Germantown Rd., Germantown, MD 20874–1290. If possible, please submit all items on a compact disk (CD), in which case it is not necessary to include printed copies.

3. Hand Delivery/Courier: 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. If possible, please submit all items on a CD, in which case it is not necessary to include printed copies.

No facsimiles (faxes) will be accepted. Supporting documents are available on
the Internet at http://www.energy.gov/
ne/downloads/excess-uraniummanagement.

**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 :** 

Table of Contents

I. Introduction

A. Excess Uranium Inventory B. Statutory Authority C. Procedural History D. Request for Information E. Market Analyses II. Analytical Approach

A. Overview
B. Factors for Consideration III. Summary of Information Under
Consideration A. Uranium Mining Industry
1. Market Prices 2. Realized Prices of Current Operators 3. Production at Existing Facilities 4. Employment Levels in the Industry 5. Changes in Capital Improvement Plans

and Development of Future Facilities 6. Long-Term Viability and Health of the

Industry B. Uranium Conversion Industry
1. Market Prices 2. Realized Prices of Current Operators 3. Production at Existing Facilities 4. Employment Levels in the Industry 5. Changes in Capital Improvement Plans

and Development of Future Facilities 6. Long-Term Viability and Health of the

Industry C. Enrichment Industry
1. Market Prices 2. Realized Prices of Current Operators 3. Production at Existing Facilities 4. Employment Levels in the Industry 5. Changes in Capital Improvement Plans

and Development of Future Facilities 6. Long-Term Viability and Health of the

Industry IV. Request for Comments
V. Confidential Business Information

I. Introduction

A. Excess Uranium Inventory

The Department of Energy (DOE)
holds inventories of uranium in variousforms and quantities—including lowenriched 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. DOE explained its approach to managing this inventory in a July 2013 Report to Congress, Excess Uranium Inventory Management Plan (2013 Plan).

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 downblending of highly-enriched uranium (HEU) to LEU. DOE currently transfers uranium for these two programs at an aggregate rate of approximately 2,705
metric tons of natural uranium equivalent (MTU) per year. 1

B. Statutory 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. 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)(B) of the USEC Privatization Act (42 U.S.C. 2297h–10(d)(2)(B)), 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. Section 306(a) of Division D, Title III of the Consolidated and Further Continuing


### 14108 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

2 See May 15, 2014, Secretarial Determination. 3 Some comments were marked as containing
confidential information. Those comments are provided with confidential information removed. Appropriations Act, 2015 (Pub. L. 113– 235), limits the validity of any determination by the Secretary under Section 3112(d)(2)(B) of the USEC
Privatization Act to no more than two calendar years subsequent to the
determination.

C. Procedural History

In accordance with the above statutes and other laws, the Secretary has periodically determined whether certain
transfers of natural and low-enriched
uranium will have an adverse material impact on the domestic uranium
industries. DOE issued the most recent Secretarial Determination in May 2014.
That determination covered transfers of up to a total of 2,705 MTU per year natural uranium equivalent, broken down as follows: Up to 650 MTU per year of natural uranium equivalent in
the form of LEU transferred for downblending, with the balance, but not less than 2,055 MTU per year of natural uranium equivalent for cleanup services
at the Paducah or Portsmouth Gaseous
Diffusion Plant. 2 At this time, DOE is conducting uranium transfers consistent with the May 2014 Secretarial

Determination.

To inform the May 2014 Secretarial
Determination—as it had for a number of previous determinations—DOE tasked Energy Resources International, Inc. (ERI) with assessing the potential effects on the domestic uranium mining, conversion, and enrichment industries from DOE’s proposed volume of
uranium transfers. In addition to its review and consideration of the report prepared by ERI (2014 ERI Report), DOE held in-person meetings and accepted written communications regarding the
transfers from several entities that expressed an interest in DOE’s proposed
uranium transactions. DOE staff then prepared a separate analysis based on these and other inputs and
recommended a course of action to the Secretary.

DOE plans to issue a new Secretarial Determination pursuant to section 3112(d). As a preparatory step, DOE sought information from the public through a Request for Information published in the Federal Register on December 8, 2014 (79 FR 72661). DOE is now soliciting additional public input.

D. Request for Information

In the December 8, 2014, Request for Information (79 FR 72661), DOE
solicited information from interested stakeholders and specifically requested comment on the following seven questions.

(1) What factors should DOE consider in assessing whether transfers will have adverse material impacts?

(2) With respect to transfers from DOE’s excess uranium inventory in calendar years 2012, 2013, and 2014,
what have been the effects of transfers
in uranium markets and the consequences for the domestic uranium mining, conversion, and enrichment
industries relative to other market
factors?

(3) What market effects and industry consequences could DOE expect from
continued transfers at annual rates comparable to the transfers described in
the 2014 Secretarial Determination?

(4) Would transfers at a lower annual rate significantly change these effects, and if so, how?

(5) Are there actions DOE could take other than altering the annual rate of transfers that would mitigate any negative effects on these industries?

(6) Are there actions DOE could take with respect to transfers that would have positive effects on these
industries?

(7) Are there any anticipated changes in these markets that may significantly change how DOE transfers affect the
domestic uranium industries?

In response to this request, DOE received comments from a diverse group of parties representing interests across the nuclear industry. DOE received
comments from members of the uranium mining, conversion, and
enrichment industries. DOE also
received comments from trade associations, nuclear utilities, local governmental bodies, and members of the public. All comments are available

at http://www.energy.gov/ne/
downloads/excess-uraniummanagement. 3

E. Market Analyses

In preparation for the May 2014 Secretarial Determination, DOE tasked 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 2014 through 2033. DOE may consider this report in its deliberations regarding a new Determination (‘‘2014 ERI Report’’).

In preparation for the planned
Secretarial Determination that is the subject of today’s notice, DOE tasked ERI with preparing an additional analysis of DOE transfers (‘‘2015 ERI Report’’). For this additional analysis,
DOE tasked ERI to consider the effect of hypothetical DOE transfers on the
domestic uranium industries under
three different scenarios. Under Scenario 1, DOE would continue
transfers at the current annual rate of 2,705 MTU per year, consisting of 2,055 MTU for cleanup work and 650 MTU as
low-enriched uranium for downblending. Under Scenario 2, DOE
would decrease transfers to a rate corresponding with 1,855 MTU per year, consisting of 1,410 MTU forcleanup work and 445 MTU as lowenriched uranium for downblending. Under Scenario 3, DOE would cease transfers for cleanup work and downblending.

DOE also asked ERI to provide specific categories of information in its analysis, including a discussion of price volatility and regional differences in the
markets. DOE tasked ERI to discuss the implications of changing certain assumptions underlying its analysis, specifically regarding what proportion of DOE material would enter the global as compared to the domestic market and regarding the share of DOE material delivered under long-term contracts. ERI’s report also includes updated information regarding changes in the market between April 2014 and February 2015. Both the 2014 ERI Report and the 2015 ERI Report can be
found at http://www.energy.gov/ne/
downloads/excess-uraniummanagement.

II. Analytical Approach

DOE issues Secretarial Determinations pursuant to Section 3112(d) of the USEC Privatization Act. Section 3112(d) statesthat DOE may transfer ‘‘natural and lowenriched uranium’’ 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 it proposes to consider in determining
whether its uranium transfers will have an ‘‘adverse material impact’’ on the
domestic uranium industries.

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


### 14109 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

4 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). 4 5 Sales under the Russian HEU Agreement ceased
at the end of 2013. susceptible of many meanings. Contextual clues provide some guidance in understanding the phrase, but DOE has not identified context (such as a 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. Uranium transactions can take myriad forms, and the effect of any given transaction on any one or all of these industries will depend heavily 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 Secretary 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 Secretary is responsible for reviewing relevant information and exercising judgment to decide whether a particular sale or
transfer will have an adverse material impact.

DOE’s first step in developing an analytical framework is to elaborate
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. 4 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 whether DOE made a particular transfer, it would ill serve the purposes of the USEC Privatization Act for 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. It bears mention that not every difference in predicted outcomes will necessarily count as an impact of the transfer. For example, if DOE transfers would be the final contribution after independent causes have pushed an industry to a given adverse state, DOE might not regard the full scope of the adversity as
attributable to the transfers.

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 believes it is
reasonable to view material adverse impacts as referring to impacts that go beyond 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 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. Indeed, the USEC Privatization Act explicitly
directed DOE to transfer various quantities of uranium to market participants. 42 U.S.C. 2297h–10(b)(2) & (c).

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 component 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). 5 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 3112(b) transfers that
would have been inconsistent with the policy goals of 3112(d).

Indeed, the structure and legislative history of 3112(b) confirm that the schedule for Russian material’s entering domestic markets reflects Congress’s balancing of concerns similar to those that motivated 3112(d)(2). Congress could have simply allowed all Russian
material into the U.S. without limitation. Instead, Congress provided a schedule that ramped up over a period of 20 years. Thus, Congress was attempting to balance the competing concerns of providing a market for the consumption of downblended 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.


### 14110 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

6 UPA refers to ‘‘uncommitted utility demand.’’ It appears that they are referring to UxC’s estimate of uncovered reactor requirements, found at UxC Uranium Market Outlook—Q4 2014, 61–62 (2014).

7 Commenters cite to UxC’s Q3 Uranium Market
Outlook. In addition to UxC’s most recent estimate of uncovered utility uranium requirements, UxC Uranium Market Outlook—Q4 2014, 61–62 (2014),
DOE has reviewed information from EIA and the Euratom Supply Agency. EIA, 2013 Uranium Marketing Report, 34 (2014); ESA, Natural Uranium Coverage 2014–2022, available at http:// ec.europa.eu/euratom/docs/F9-CoverageRate.xls.

8 DOE has reviewed UxC’s most recent estimate of uncovered enrichment requirements found at: UxC Enrichment Market Outlook—Q4 2014, 39–40 (2014). DOE also notes that UxC’s most recent report on the conversion market does not include updated numbers on uncovered utility requirements for conversion services. UxC Conversion Market Outlook—December 2014, 37 (2014).

9 Comparing the financial statements of Uranium Production Corporation—a uranium investment fund—reveals that between November 30, 2013, and November 30, 2014, UPC increased its stock by approximately 1.5 million pounds U3O8 equivalent—1,311,286 pounds U 3 O 8 and 261,285 pounds U 3 O 8 equivalent contained within 100,000 kgU of UF 6 . UPC, 2015 Third Quarter Report, 2 (2015), available at http://www.uraniumparticipation.com/i/pdf/financials/2015-Q3-Reportfor-the-Three-Months-Ended-November-30.pdf; UPC, 2014 Third Quarter Report, 2 (2014), available

at http://www.uraniumparticipation.com/i/pdf/ Section 3112(d)(2) confirms that DOE’s consideration of 3112(b) in interpreting 3112(d)(2) is reasonable. Section 3112(d)(2) explicitly directs the Secretary to ‘‘take into account’’ the
sales of uranium under the Russian HEU Agreement and the Suspension Agreement. DOE believes that in addition to requiring the Secretary to consider any transfers under these programs that are ongoing at the time of DOE’s transfers, this language asks the Secretary to consider and take into account the history and context of these transfers and the statutory text authorizing them. In addition, it bears mention that in a 3112(d)(2) deliberation DOE may take account of
the fact that the cessation of the Russian HEU Agreement removed a substantial amount of secondary supply from
uranium markets.

The preceding discussion is not intended automatically to support transfers of up to 20 million pounds under Section 3112(d). The Secretary must exercise his own judgment as to
whether 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
hence would not constitute an ‘‘adverse material impact.’’

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, DOE proposes to
consider the effects of DOE transfers using a set of factors. DOE proposes to analyze its transfers in light of the best available information, data and expert judgment to form the basis for the Secretary’s determination.

B. Factors for Consideration

In the December 2014 RFI, DOE sought comment from the public on
what factors it should consider in assessing whether a given set of
transfers would have an adverse material impact on the domestic uranium industries. After considering the comments received, DOE believes the following factors may be relevant to this question: 1. Market prices 2. Realized prices of current operators 3. Production at existing facilities 4. Employment levels in the industry 5. Changes in capital improvement plans and development of future
facilities 6. Long-term viability and health of the industry These factors reflect many of those suggested by commenters, and DOE believes they reflect the types of impacts that a DOE transfer could in principle have on a domestic uranium industry. 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 is open to additional
comment on these factors. There are a few factors proposed by commenters that are not included in DOE’s list, for
the reasons outlined below.

One commenter suggested that DOE
should consider the effects of its transfers on the profitability of the industries. Comment of ConverDyn,
Encl. at 2. Another commenter suggested that DOE should consider the effect of its transfers on gross profit margin. TradeTech Report, 12–13. DOE notes that profit and profitability can vary depending on company-specific circumstances and accounting treatments, and therefore may not be reliable indicators of how a given market phenomenon like DOE transfers is affecting an industry. Moreover, for assessing the impact on an industry, the profit of participants is, in a sense, an indirect measure, as it is principally a link between market dynamics—prices
and sales—and the ultimate reaction of industry in terms of increasing or decreasing activity. For these reasons, DOE proposes to look instead at factors which are either more directly related to industry impact or are more reliable predictors of industry impact.

Several commenters suggested that
DOE should consider current market conditions as a factor. Comment of UPA, at 3; comment of Uranerz, at 3. DOE agrees that current market conditions are relevant, and DOE plans to consider the potential effects of DOE transfers in light of the relevant context, which
includes current market conditions as well as past and projected future
conditions. DOE believes that considering broader market conditions in this manner will yield insight into
how the domestic uranium industries can be expected to respond to DOE
transfers.

Some commenters suggested that DOE consider uncommitted utility demand or uncovered utility requirements compared to the level of DOE transfers. UPA and others, for example, stated that
transfers at the rate described in the May 2014 Secretarial Determination would constitute more than 100 percent of global uncommitted utility demand in calendar year 2015 and almost 60 percent in 2016. These commenters cite to a report by the Ux Consulting Company, LLC (UxC): UxC Uranium Market Outlook—Q4 2014 (2014). 6 Comment of UPA, at 2–3; see also comment of Uranerz Energy Corp., at 2– 3; comment of Signal Equities, at 2. 7 Similarly, URENCO USA Inc. (URENCO)—citing UxC’s Q4
Enrichment Market Outlook—stated that
DOE transfers of LEU will constitute 72% of uncovered enrichment requirements in 2015. Comment of URENCO, at 4. 8 While the volume of uncovered requirements may be
information relevant to the overall assessment, DOE is not convinced a particular comparison between that volume and the magnitude of a proposed transfer is reliable as an indication of the impacts of its transfers
on the uranium industries. It is far from clear that uranium from proposed DOE
transfers in 2015 and 2016 would be sold only to utilities with uncovered requirements in the year of transfer. The market involves many participants other than utilities seeking to fill uncovered requirements. For example,intermediaries that hold mid- or longterm contracts may need to purchase material on the spot market to fulfill
contracted deliveries. As discussed below, some market participants—such as China—purchase material in excess of their requirements. Traders and investment funds may also make purchases independent of reactor requirements. 9 Thus, spot demand in


### 14111 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

financials/2014-Q3.pdf. 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/UPC-Investor-UpdateAugust-2014.pdf.

10 Traxys North America LLP has a contractual arrangement with DOE’s contractor at Portsmouth, Fluor-B&W Portsmouth, to purchase all uranium
hexafluoride FBP receives from DOE. The existence of FBP’s contract with Traxys does not obligate DOE
to transfer to FBP the amounts of uranium under
consideration.

11 Traxys represented that it had already sold to utilities ‘‘almost 100%’’ of the material from DOE as early as July 7, 2014. Declaration of Kevin P. Smith, ConverDyn v. Moniz, Case no. 1:14-cv01012–RBW, Document 17–7 at ¶6 (July 7, 2014). The figures for global uncommitted utility demand cited by UPA were released after this date. See Comment of UPA, at 3 n.2. 12 The market clearing price is the price at which quantity supplied is equal to quantity demanded. 13 In other words, ERI assumes that demand for uranium will stay the same regardless of variations in market price.

14 Note that the transfer rates in these scenarios refer only to the level of uranium transfers for cleanup at Portsmouth and downblending of LEU. They do not include transfers for three other programs, TVA BLEU, Energy Northwest depleted 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. ERI’s predictions about market price reflect these
transfers as well as the Portsmouth and downblending transfers. any given year may substantially exceed uncovered requirements. At least for the uranium industry, this is confirmed by the very report that commenters cite to in their comments. UxC projects that spot demand in 2015 and 2016 will be significantly higher than uncovered requirements in both years. Compare
Table 14 with Table 15 of UxC Uranium Market Outlook—Q4 2014, 62–63 (2014). In addition, the company that currently distributes on the broader
market most of the uranium that DOE is transferring under the 2014 Secretarial Determination represents that it has already sold almost all of this material to utilities under forward delivery contracts. Comment of Traxys, at 1. 10 Therefore, the global uncommitted utility figures cited by UPA and others presumably already take account of DOE
transfers as an element of covered requirements. 11

Commenters also proposed share price and market capitalization as factors for consideration. E.g., Comment of ConverDyn, Enclosure, at 2. DOE is
not convinced that either of these provides an appropriate indicator for
whether DOE transfers will cause an adverse material impact, because both market capitalization and share price
are too attenuated from the effects of DOE transfers. While share price certainly does influence a company’s
decisions about investment and allocation of capital, it is only one factor. At the same time, a company’s share price tends to reflect myriad inputs besides the effects of a market phenomenon like DOE transfers. Other contributions to share price can include 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). Furthermore, many of the largest U.S. producers are part of multi-line companies whose share prices depend in part on product markets other than uranium. For these reasons, DOE believes that share price and market capitalization are too highly attenuated to serve as useful proxies for industry impact.

Some commenters suggested that DOE should consider the ‘‘spill-over effects’’
across the different nuclear fuel industries that might cause indirect harm. E.g., Comment of URENCO, at 5. Although the commenter did not explain what ‘‘spill-over effects’’ it was referring to, DOE recognizes that as a general matter the interaction between
the different uranium markets can be relevant, particularly the relationship between enrichment prices and uranium concentrate/conversion prices. As enrichment can be used to provide
additional uranium concentrate as uranium hexafluoride—either through underfeeding or re-enrichment of tails— there is a potential for changes in one market to affect the others. However,
DOE does not believe this should be considered as a separate factor. Instead,
DOE believes these effects are better
understood and assessed when considered as part of the analysis for
each of the six market factors listed
above.

III. Summary of Information Under
Consideration

In this section, DOE summarizes for each industry the information that DOE believes to be relevant with respect to
the above-listed factors. In addition to the 2014 ERI Report, the 2015 ERI Report, and the comments received in response to the RFI, in some instances
DOE refers to additional information from other sources. Where available, DOE provides a link to where these
documents are available on the Internet.

A. Uranium Mining Industry

1. Market Prices

In preparation for the proposed Secretarial Determination, 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: 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. 12 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. 13 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.

Applying this approach to the three
scenarios listed in Section I.E above— 2,705 MTU per year (scenario 1), 1,855 MTU per year (scenario 2), or zero transfers (scenario 3)—ERI estimates
that DOE transfers will have the effects
listed in Table 1. Transfers at the rate of 2,705 MTU per year would cause the price of uranium concentrates to be
lower than it would be without DOE transfers by, on average, $2.80 between 2015 and 2024—with prices being $3.00 and $2.80 lower in 2015 and 2016 specifically. 2015 ERI Report, 45. For DOE transfers at a rate of 1,855 MTU per year, ERI estimates that prices would be, on average, $2.60 lower between 2015 and 2024—with prices being $2.10 and $1.90 lower in 2015 and 2016 specifically. If DOE ceased transfers under these two programs, ERI estimates that prices would be, on average, $1.30
lower between 2015 and 2024—with prices being $0.30 and $0.10 lower in 2015 and 2016 specifically. 14 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 in the current market price because DOE is currently transferring uranium at that rate. 2015 ERI Report, 44. This means that if DOE continued transferring at Scenario 1 levels, the market prices would not change; if DOE began transferring at Scenario 2 levels, the


### 14112 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

15 It is more appropriate to compare the estimated price effect to the forecasted market price at the time of the effect. ERI’s report does not provide specific quantifications of the forecasted market price in out-years. Thus, it is not possible to list the percentage of expected market price with specificity. However, DOE notes that, at least with respect to the later term projections, ERI predicts that market prices will be in the $52 to $57 range after 2017. 2015 ERI Report, 52; 2014 ERI Report,

44. 16 ERI also compared those numbers to then current term and spot price indicators as of March 31, 2014. At that time, the TradeTech price indicator was $34.00 per pound U 3 O 8 on the spot market and $45.00 per pound U 3 O 8 on the term market. 2014 ERI Report, 23. market price would be expected to rise by approximately $0.90; if DOE ceased transfers under these programs, market prices would be expected to rise by $2.70. See Table 4.1 of 2015 ERI Report, 45. These prices represent ERI’s prediction of the average effect over the next decade, rather than for any given

year.



### TABLE 

### 1—ERI’ S 

### E STIMATE OF 

### E FFECT OF 

### DOE T RANSFERS ON 

### U RANIUM 

### C ONCENTRATE 

### S POT AND 

### T ERM 

### P RICES

IN 

### $ PER 

### P OUND 

### U 3 

### O 8 [Market clearing approach]

2015 ERI Report 2014 ERI Report

Estimated price effect (2015–2024) Estimated price effect (2014–2023)

Scenario 1 ..................................................................................................................... ............................... $2.80 $2.90

Scenario 2 ..................................................................................................................... ............................... 2.60 ..............................
Scenario 3 ..................................................................................................................... ............................... 1.30 ..............................

ERI then compares these numbers to the current spot and term price indicators published by TradeTech on January 31, 2015—i.e. $37.25 per pound

U 3 O 8 on the spot market, and $50.00 per pound U 3 O 8 on the term market. As a percentage of the current prices, the average price effect attributable to DOE’s transfers over the period 2015–2024 under Scenario 1 represents approximately 7.6% of the current spot price and 5.7% of the current term price. Under Scenario 2, the average price effect over the same period represents 7.1% of the spot price and 5.3% of the term price. Under Scenario 3, the average price effect represents 3.6% of the spot price and 2.7% of the term price. 2015 ERI Report, 47, 49.

The second model that ERI used to predict the effects of DOE transfers specifically on the spot price for uranium using an econometric model. A summary of ERI’s estimates using this model appears in Table 2. 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. Applying this econometric model, ERI predicts that transfers under Scenario 1 would cause the spot price to be lower by about $2.40 per pound between 2015

and 2017 than it would be in the absence of transfers, and by about $5.10 between 2018 and 2024. For Scenario 2, ERI estimated that the spot price would be lower by about $1.70 per pound

between 2015 and 2017 than it would be without transfers, and by about $4.80 between 2018 and 2024. For Scenario 3, ERI estimated that the spot price would be lower by about $0.30 per pound between 2015 and 2017, and by $2.00

between 2018 and 2024. 2015 ERI Report, 53. Again, as noted for the market clearing analysis, the market price currently takes account of the 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.



### TABLE 

### 2—ERI’ S 

### E STIMATE OF 

### E FFECT OF 

### DOE T RANSFERS ON 

### U RANIUM 

### C ONCENTRATE 

### S POT 

### P RICE

IN 

### $ PER 

### P OUND 

### U 3 

### O 8

[Econometric model] 15

2015 ERI Report 2014 ERI Report

Estimated price effect (2015–2017) Estimated price effect (2018–2024) Estimated price effect (2014–2016) Estimated price effect (2017–2021)

Scenario 1 ........................................................................................................ $2.40 $5.10 $ 2.80 $5.50

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

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

..................... ........................

For the 2014 ERI Report, ERI had conducted a similar market clearing approach for a level of transfers that is equal to Scenario 1 of the 2015 ERI Report. Although that report used slightly older data, the results are very similar. Notably, ERI estimated that the price effect attributable to DOE transfers at the current rates is $2.90 between 2014 and 2023—with prices being $3.00 lower in 2014 and 2015, and $2.80

lower in 2016. 16 2014 ERI Report, 40. ERI also conducted a similar econometric analysis for a level of transfers that is equal to Scenario 1. 2014 ERI Report, 42–45. The econometric analysis in the 2014 ERI Report estimated a slightly higher price effect compared to the 2015 Report. Specifically, ERI estimated that DOE transfers would cause the spot price to be lower by about $2.80 per pound between 2014 and 2016, and by about


### 14113 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

17 Figures 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. 18 As 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 the current rate of transfers. NAC Report, A–1 to A–3. 19 Additional information about the U–PRICE model can be found in Chapter 1 of UxC Uranium Market Outlook—Q4 2014, 7–21 (2014). $5.50 between 2017 and 2021. 2014 ERI Report, 44. The updated analysis in the 2015 ERI Report produces slightly different figures because it relies on updated estimates of the amount of DOE material expected to affect the markets. Compare Table 3.4 of 2014 ERI Report, 33, with Tables 3.6, 3.7, and 3.8 of 2015 ERI Report, 32–34.

Three commenters provided their own estimates of the price effects of
DOE transfers.

UPA attached to its comment a market analysis it commissioned from TradeTech, LLC, a uranium market consultant. Comment of UPA, Attachment, TradeTech, ‘‘UPA DOE Material Transfer Study’’ (2015) (hereinafter ‘‘TradeTech Report’’). A summary of TradeTech’s estimates appears in Table 3. TradeTech explains that it estimated the price effect of DOE transfers using its proprietary Dynamic Pricing Model. This model is an econometric forecasting approach to estimate the equilibrium between two
dimensions TradeTech calls ‘‘active supply’’ and ‘‘active demand.’’ In its estimates, TradeTech assumes that 50 percent of DOE transfers enters the spot market and 50 percent enters 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.

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. 17 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 and 2015 and December 2016. TradeTech Report, 24. This corresponds to a price suppression of $0.70.



### TABLE 

### 3—T RADE 

### T ECH 

### ’ S 

### E STIMATE OF



### E FFECT OF 

### DOE T RANSFERS ON 

### U RANIUM 

### C ONCENTRATE 

### S POT 

### P RICE IN 

### $ PER 

### P OUND 

### U 3 

### O 8

TradeTech report

Transfer rate (compared to current) Estimated price effect (2015–2016)

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

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

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

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

Fluor-B&W Portsmouth attached to its comment an April 2014 market analysis from NAC International (NAC). Comment of Fluor-B&W Portsmouth, Attachment A, NAC International, ‘‘Impact of DOE Excess Uranium Sales
on the U 3 O 8 Market’’ (April 2014) (hereinafter ‘‘NAC Report’’). 18 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 withheld from the public version of the NAC Report to protect confidential
information.

Cameco attached to its comment a market analysis it commissioned from Ux Consulting Company, LLC (UxC),
another uranium market consultant. 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
estimates of the effect of DOE transfers on future prices appears in Table 4. 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. 19

Using these two models, UxC
estimates the effects of DOE transfers using two slightly different methodologies. For the first approach,
what UxC calls the ‘‘incremental approach,’’ UxC does not include the cumulative impact of previous years’ transfers. The second approach, which UxC calls the ‘‘total impact approach,’’


### 14114 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

20 Enrichers can change the amount of natural uranium needed as input (‘‘feed’’) by applying a greater or lesser amount of enrichment work to a given amount of feed. ‘‘Underfeeding’’ refers to when enrichers ply a greater amount of enrichment work to an amount of feed, thus requiring less feed to achieve the same amount of enriched product.

21 In addition to ‘‘underfeeding,’’ enrichers can apply additional enrichment work to existing depleted uranium from past enrichment processes by feeding them back into the enrichment process. This process is often called ‘‘re-enrichment’’ of
tails.

22 ERI’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. includes sales from previous years. UxC argues that previous years’ sales should
be included because ‘‘such sales have a longer-term effect on market perceptions among both buyers and sellers. In particular, the increased supplies from
DOE’s sales and transfers removed market opportunities available to other uranium suppliers.’’ UxC Report, 5.

Using its incremental approach, UxC
estimates 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. Using its total impact approach, UxC estimates 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 estimates the effect of DOE
continued transfers at current rates for the period 2015 to 2030. UxC estimates
that DOE 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 will 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 estimates that DOE
transfers 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 estimated 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 

### 4—U X 

### C’ S 

### E STIMATE OF 

### E FFECT OF 

### DOE T RANSFERS ON 

### U RANIUM 

### C ONCENTRATE 

### S POT AND 

### T ERM 

### P RICES IN 

### $

PER 

### P OUND 

### U 3 

### O 8

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 focus 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. 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 20 and/or re-enriching DUF 6 tails. 21 This essentially allows enrichers to produce
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, requiring
customers to deliver less natural uranium feed to get the same amount of enriched uranium output.

The other market analyses do not appear to take these interplays into

account. 22 But DOE believes the price interplay would be small, and the two effects may potentially offset. Since only
some of DOE inventories contain an enrichment component, DOE materials can be expected to have a larger proportional effect on the uranium
concentrates and conversion markets as compared to the enrichment market. At current rates, ERI estimates that DOE
transfers in 2015 under Scenario 1 would represent 4%, 5%, and 2% of that year’s global requirements for uranium, conversion, and enrichment, respectively. Since DOE inventories are a greater proportion of uranium and conversion requirements, it seems likely
that the effect of DOE transfers would be to slightly increase the ratio of SWU price to UF 6 price. This would increase the optimum tails assay, which may actually increase demand for uranium concentrates slightly. In addition, practices in the industry suggest that the enrichment component of DOE material does not displace primary production at existing facilities. Enrichers typically do not increase centrifuge capacity without long-term contracts in place to purchase the output. Comment of URENCO, Inc., at 2. Also, some in the market have chosen to allow older centrifuges to retire without being replaced instead of retaining excess capacity. 2015 ERI Report, 16; UxC Enrichment Market Outlook—Q4 2014, 11 (2014). Thus, it is far from clear that for every SWU contained within DOE material, a corresponding amount of primary production becomes excess capacity
available for tails re-enrichment or underfeeding. Considering this information as a whole, it does not appear that the interrelationship
between the enrichment and uranium markets will significantly affect how
DOE’s material affects uranium market prices.

2. Realized Prices of Current Operators

ERI states that realized price varies from one company to another. To estimate the realized prices for U.S. producers, ERI gathered information from public filings representing approximately 95% of U.S. production. 2015 ERI Report, 60–61. ERI does not list the specific dollar figures, but it provides a graph of how realized uranium prices have changed over time for several U.S. producers. This graph shows that realized prices declined for most primary producers in 2014. Even with this decline, 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, ERI reports that Cameco has reported that the price sensitivity of its current contract


### 14115 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

23 These 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).

24 As calculated according to monthly price
indicator data from UxC.

25 Note 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). 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 decliningrealized 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. NAC also provides its estimated supply capability broken down by production cost. The specific figures are withheld from the public version of the NAC Report to protect confidential information. NAC Report, 3–9 to 3–11. 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 production facility operators. 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 U 3 O 8 equivalent (per lb U 3 O 8 ). EIA, 2013 Uranium Marketing Report, 4 (2014). EIA provides comparatively more information on the price paid by U.S. reactor operators. Although EIA does not provide a complete range of prices, it does report that the bottom 7.1 million pounds U 3 O 8 equivalent (approximately 1 ⁄ 8 th 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. 23 EIA, 2013 Uranium Marketing Report, 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 lb U 3 O 8. 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. EIA, 2013 Uranium Marketing Report, 4 (2014). For comparison, DOE notes that the 2013 average spot price was around $39.00 and the average term price was around $54.00. 24

EIA provides data about sales using different pricing mechanisms. EIA reports that of the approximately 23.3 million pounds U 3 O 8 equivalent purchased by U.S. reactor operators
from domestic sources 25 and delivered in 2013, 14.5 million pounds werepurchased 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).

3. Production at Existing Facilities

ERI reports that U.S. production has risen since the DOE uranium inventory transfers 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: 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 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.

After reporting this information, ERI presents a chart showing the price levels
at the time cutbacks were announced at various U.S. suppliers. ERI reports price points for four operations: $45 per pound in the spot market for conventional mines in Utah; $40 perpound in the spot market for two insitu-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 2014 ERI Report came to similar conclusions using similar methodology. That report noted that despite the overall increase in uranium production in recent years, there have been production cuts at several operations. 2014 ERI Report, 49. ERI also provided a chart of production cut
announcements and the then-current spot and term prices. 2014 ERI Report,
58. ERI noted that some uranium producers report costs in public filings, but these costs are not reported consistently across firms and generally


### 14116 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

26 This figure includes information on some projects that are not part of the domestic uranium mining industry, such as Uranium One’s Kazakh projects. 27 NAC 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. do not include royalties and severance taxes or the cost of ongoing wellfield development at in-situ-leach operations. ERI’s estimate of average industry-wide production costs is the same as in the 2015 ERI Report—i.e. approximately $40 per pound. 2014 ERI Report, 59.

TradeTech predicts a ‘‘potential
reduction in the number of market participants.’’ TradeTech Report, 21. It then 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. 26 Although TradeTech does not provide specific 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.

As noted above, 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.

UxC does not provide any specific estimates of production levels or costs at currently operating facilities. However, in other reports, UxC outlines detailed
estimates for individual mines. UxC Uranium Market Outlook—Q4 2014, 76– 78 (2014); UxC Uranium Production Cost Study, 80–84 (Aug. 2013).

In addition to the information described above, DOE has considered information from EIA reports. EIA reports on production 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

U 3 O 8 . 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). The same number of uranium concentrate processing facilities— seven—operated in 2014 as in 2013. EIA reports that the White Mesa conventional mill halted production in the fourth quarter of 2014 and that the Nichols Ranch in-situ-leach plant began operation in the second quarter of 2014.
EIA Domestic Uranium Production Report Q4 2014, 3–6 (January 2015).

4. Employment Levels in the Industry

DOE has considered information contained 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.

For the 2014 ERI Report, ERI conducted a similar analysis and came to broadly similar conclusions. It estimated an employment loss of 50 person-years for 2013, and an average loss of 44 person years over the course of 2014–2023. 2014 ERI Report, 48.

Though no commenter provided specific numbers, several referred to decreases in employment in recent years caused by decreases in uranium prices. E.g., Comment of Mark S. Pelizza, at 1.
Some commenters stated that the uranium production industry has lost half its workforce since May 2012 without providing supporting data. Comment of UPA, at 2; comment of Uranerz, at 2. Although several stated that DOE transfers were causing a portion of these losses, no commenter estimated the proportion of recent employment decreases attributable to DOE transfers. TradeTech Report, 21– 22; UxC Report, 5.

5. 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— 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.

The 2014 ERI Report came to similar conclusions. 2014 ERI Report, 57. It noted that despite the overall increase in uranium production in recent years, there have been production cuts at several operations. 2014 ERI Report, 49. ERI also reported the same prices that it believed would be required to motivate further development as it reports the 2015 report. 2014 ERI Report, 57.

NAC provides estimates of the site forward cost including rate of return for ten properties it considers to be under development. 27 The specific figures are


### 14117 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

28 ERI assumes that China’s discretionary strategic inventory building will taper off by 2023. 2015 ERI Report, 10.

29 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.

30 TradeTech’s charts appear to assume China’s stock building purchases will cease to outpace Chinese requirements around 2023. TradeTech Report, 41–42.

31 Converted from metric tons uranium in U 3 O 8 (MTU) using a conversion rate of 2,599.79 pounds

U 3 O 8 per MTU.

32 This 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. withheld from the public version of the NAC Report to protect confidential information. NAC Report, 3–11 to 3–12. NAC does not directly apply its estimate of the price effect of DOE transfers to the production costs for these specific properties.

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 2009 and 2013 raises this figure by about $10–15 per pound, and including land, exploration, and reclamation costs in those years increases these figures by a further $19– 24 per pound. EIA, 2013 Domestic Uranium Production Report, 7, 11 (2014).

EIA also provides a table of different facilities and their operating statuses. EIA reports one uranium mill in development as of the 4th quarter 2014—in the ‘‘permitted and licensed’’ stage. EIA, Domestic Uranium Production Report Q4 2014, 4 (January 2015). EIA reports eight in-situ-leach plants under development—two in the ‘‘developing’’ stage, three that are ‘‘partially permitted and licensed,’’ two that are ‘‘permitted and licensed,’’ and one that is ‘‘under construction.’’ EIA, Domestic Uranium Production Report Q4 2014, 5–6 (January 2015).

6. Long-Term Viability and Health of the Industry

As described above, ERI notes that US industry production has risen since the start of DOE uranium inventory barters
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 requirements. 2015 ERI Report, 6–7. ERI presents a graph comparing global requirements, demand, and supply from 2013—2035. That graph shows that global secondary supply and supply
from current mines will continue 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. 28 In the time period following 2025, ERI’s graph shows demand significantly outstripping 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. 29 TradeTech reports 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. 30 TradeTech Report, 34. The OECD and IAEA report that reactor requirements are expected to grow by at least 35.4 million pounds 31 by 2025— representing approximately 21% of 2015 requirements. 32 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).

In addition to a predicted increase in demand, several sources predict a recovery in either spot or term uranium prices—or both. 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’s chart 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 forecasted Exchange Value predicts an increase in spot price 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. Specific price levels are withheld from Figures 5 and 6 of the public version to protect confidential information. UxC Report, 10–11. 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).

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. Comment of UPA, at 2; comment of Cameco, at 2. 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.

B. Uranium Conversion Industry

1. Market Prices

In its analysis, ERI estimates 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. A summary of ERI’s
estimates of the effect of DOE transfers on the conversion price appears in
Table 5.

Applying this approach to the three scenarios listed above, ERI estimates


### 14118 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

33 As noted above, the transfer rates for these scenarios refer only to the level of uranium transfers for cleanup at Portsmouth and downblending of LEU. The level of transfers for other DOE programs
is the same in all three scenarios.

34 ERI also compared those numbers to then current term and spot price indicators as of March 31, 2014. At that time, the TradeTech price indicator was $7.50 per kgU as UF 6 on the spot market and $16.00 per kgU as UF 6 on the term market. 2014 ERI Report, 23.

35 Figures 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. that DOE transfers at the rate of 2,705 MTU per year would cause the price of conversion services to be, on average, $0.90 lower between 2015 and 2024— with prices being $0.90 lower in 2015 and 2016 specifically. 2015 ERI Report, 45. For DOE transfers at a rate of 1,855 MTU per year, ERI estimates that prices would be, on average, $0.80 lower between 2015 and 2024—with prices being $0.70 and $0.60 lower in 2015 and 2016, respectively. If DOE ceased transfers under these two programs, ERI estimates that prices would be, on average, $0.40 lower between 2015 and 2024—with prices being $0.10 and $0.00 lower in 2015 and 2016, respectively. 33 As with uranium concentrates, this is not a prediction that prices will drop by the specified amount once DOE begins transfers. According to ERI’s analysis, a level of price suppression consistent with the estimate for Scenario 1 is already reflected in the current market price for conversion services. 2015 ERI Report, 44. If DOE continues transferring at Scenario 1 levels, the market prices would not change; if DOE began transferring at Scenario 2 levels, the market price would be expected to rise by approximately $0.20; if DOE ceased transfers under these programs, market prices would be expected to rise by $0.80. See Table 4.2 of 2015 ERI Report,

45.

ERI compares these numbers to the current spot and term price indicators published by TradeTech on January 31,

2015—i.e. $8.50 per kgU as UF 6 on the spot market, and $16.00 per kgU as UF 6 on the term market. As a percentage of the current prices, the average price
effect attributable to DOE’s transfers over the period 2015–2024 under Scenario 1 represents approximately 10.6% of the current spot price and 5.6% of the current term price. Under Scenario 2, the average price effect over the same period represents 9.9% of the spot price and 5.2% of the term price. Under Scenario 3, the average price effect represents 5.0% of the spot price and 2.7% of the term price. 2015 ERI Report, 47, 49.

For the 2014 ERI Report, ERI conducted a similar market clearing approach for a level of transfers that is equal to Scenario 1 of the 2015 ERI Report. Although that report used slightly older data, the results are very similar. Notably, ERI estimated that the price effect attributable to DOE transfers at the current rates is $0.90 between 2014 and 2023—with prices being $0.90 lower in 2014, 2015, and 2016. 34 2014 ERI Report, 40.



### TABLE 

### 5—ERI’ S 

### E STIMATE OF 

### E FFECT OF 

### DOE T RANSFERS ON 

### C ONVERSION 

### S POT AND 

### T ERM 

### P RICES

IN 

### $ PER 

### kgU AS 

### UF 6

2015 ERI Report 2014 ERI Report

Estimated price effect (2015–2024) Estimated price effect (2014–2023)

Scenario 1 ..................................................................................................................... ............................... $0.90 $0.90

Scenario 2 ..................................................................................................................... ............................... 0.80 ..............................
Scenario 3 ..................................................................................................................... ............................... 0.40 ..............................

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 6. 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 UF 6 between January 2012 and December 2014. TradeTech Report, 17.
TradeTech also estimates that continued
DOE transfers at current rates would reduce the spot price by an average of $0.91 per kgU as UF 6 between January
2015 and December 2016. TradeTech Report, 21.

TradeTech also provides estimates for
the effect of DOE transfers of 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 UF 6 between January and 2015 and December 2016. TradeTech,

31. 35 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 $0.70. If DOE transfers decreased to 50% of current levels, TradeTech estimates that the spot price would increase by an average of $0.43 per kgU as UF 6 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 estimates that the spot price would increase by an average of $0.66 per kgU as UF 6 between January and 2015 and December 2016. TradeTech, 29. This corresponds to a price suppression of $0.25. 

### TABLE 

### 6—T RADE 

### T ECH 

### ’ S 

### E STIMATE OF 

### E FFECT OF 

### DOE T RANSFERS ON 

### C ONVERSION 

### S POT 

### P RICE IN 

### $ PER 

### kgU AS 

### UF 6

TradeTech report

Transfer rate (compared to current) Estimated price effect (2015–2016)

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

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

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

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

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


### 14119 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

36 It appears that ERI developed this assumption based on its estimate of ConverDyn’s production costs of $15 per kgU. Since ConverDyn claims to be operating at a loss, ERI assumes that its realized price must be lower. 2015 ERI Report, 70. 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 UF 6 . UxC also notes that over the past few years
the UF 6 price has fallen as much as the

U 3 O 8 price has on a percentage basis. Finally, UxC notes that the Ux North

American UF 6 Price has been below the

Ux NA UF 6 value ( i.e. the sum of spot uranium and spot conversion prices for a given quantity of UF 6 ) 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.

2. Realized Prices of Current Operators

ERI does not provide in either report a specific estimate of the change in ConverDyn’s realized price due to DOE transfers. However, ERI does note that ConverDyn’s realized price is believed to have increased over the past decade, although ERI says unit costs have
increased as well. ERI bases its sales revenue assumptions on a sale price of $14 per kgU. This estimate appears to be based predominately on claims by the company that it is operating at a loss. 2015 ERI Report, 70; 2014 ERI Report,

70. 36

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. However, some information relevant to ConverDyn’s realized price is publicly available.

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);
see also UxC Conversion Market Outlook—December 2014, 27–28, 32 (2014). Traxys has stated that ConverDyn specifically sells conversionservices ‘‘almost exclusively’’ on longterm contracts. Declaration of Kevin P. Smith, ConverDyn v. Moniz, Case no. 1:14-cv-01012–RBW, Document 17–7, at ¶ 16 (July 7, 2014). 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.

DOE does not have complete information regarding the pricing
structure of conversion services contracts. ConverDyn has stated in the past that the conversion market generally relies on long-term contracts that are ‘‘linked, at least in part, to market prices at the time of the
contract.’’ Declaration of Malcolm Critchley, Converdyn v. Moniz, Case no. 1:14-cv-01012–RBW, Document 7–3, at ¶ 37 (June 23, 2014). Although it is common practice for long-term contracts
for U 3 O 8 to include a non-fixed element that depends on market prices at the time of delivery, it is unclear to what extent this practice is prevalent in the conversion industry.

In addition to the above, ConverDyn’s
comment also refers to a document it
submitted to DOE in March 2014 that provides some additional information on ConverDyn’s contracting practices. Comment of ConverDyn, Enclosure, at 5
n.12. That document was submitted with a request that it be treated as containing proprietary information. Letter from Malcolm Critchley, ConverDyn, to Peter B. Lyons, DOE (March 10, 2014). DOE may consider
this document in its deliberations.

3. Production at Existing Facilities

There is only one existing 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. Comment of ConverDyn, at 1; 2015 ERI Report, 64. The nominal capacity of the Metropolis Works facility is 15 million kgU as UF 6

. However, the facility generally operates below that level. 2015 ERI Report, 65. Based on statements from ConverDyn, ERI estimates that production at this facility was approximately 11 million kgU as UF 6 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 UF 6 . 2015 ERI Report, 65.

In estimating the effect of DOE transfers on ConverDyn’s sales volume, 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. Based on statements from ConverDyn, ERI assumes that ConverDyn’s share of the U.S. market for conversion services is 25% and that
its share of the international market is 16%. 2015 ERI Report, 68. A summary
of ERI’s estimates of the effect of DOE transfers on ConverDyn’s sales volume appears in Table 7. Using the assumptions described above, ERI estimates that under Scenario 1, DOE transfers decrease ConverDyn’s market volume by 0.67 million kgU, or 7.5%. Under Scenario 2, ERI estimates that DOE transfers decrease ConverDyn’s market volume by 0.46 million kgU, or 5.3%. Under Scenario 3, ERI estimates
that DOE transfers decrease ConverDyn’s market volume by 0.08 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, 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, of the amount ERI predicts.



### TABLE 

### 7—ERI’ S 

### E STIMATE OF 

### D ECREASE IN 

### C ONVER 

### D YN 

### ’ S 

### S ALES 

### V OLUME

Volume (million kgU) Percent change

Scenario 1 ..................................................................................................................... ........................................... 0.67 7.5

Scenario 2 ..................................................................................................................... ........................................... 0.46 5.3

Scenario 3 ..................................................................................................................... ........................................... 0.08 1


### 14120 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

Based on its estimate of the effect on ConverDyn’s sales volume, ERI also estimates the change in production costs at Metropolis Works due to DOE transfers. A summary of ERI’s estimates
of the effect of DOE transfers on ConverDyn’s production costs appears in Table 8. ERI analyzes two scenarios based on slightly different assumptions about the amount of ConverDyn’s costs that are variable. Specifically, ERI calculates production costs based on 80% and 100% fixed costs. 2015 ERI Report, 70.

ERI assumes that ConverDyn’s production cost would be $15 per kgU if DOE material was not being introduced into the market. Assuming 100% of Metropolis Works’ costs are fixed, DOE transfers would not affect total production costs, but they would increase per unit costs. Specifically, ERI

estimates that DOE transfers at the level under Scenario 1 increase production costs to $16.2 per kgU, about 8% higher

than without DOE transfers. Transfers at

the level under Scenario 2 would cause Metropolis Works production costs to be $15.84, about 5.6% higher than without DOE transfers. Under Scenario 3, production costs would be $15.15, about 1% higher than without DOE transfers. 2015 ERI Report, 70. If 80% of Metropolis Works’ costs are fixed, total production costs would be lower with DOE transfers, but per unit production

costs would also be lower. Under Scenario 1, production costs would be $15.97, about 6.5% higher than without DOE transfers. Under Scenario 2, production costs would be $15.68, about 4.5% higher than without DOE transfers. Under Scenario 3, production costs would be $15.12, about 1% higher

than without DOE transfers. 2015 ERI Report, 71.



### TABLE 

### 8—ERI’ S 

### E STIMATE OF 

### I NCREASE IN 

### C ONVER 

### D YN 

### ’ S 

### P RODUCTION 

### C OST

80% fixed 100% fixed

Cost (per kgU) Percent change Cost (per kgU) Percent change

Scenario 1 ........................................................................................................ $15.97 6.5 $1 6.20 8
Scenario 2 ........................................................................................................ 15.68 4.5 15. 84 5.6
Scenario 3 ........................................................................................................ 15.12 1 15.15 1

The 2014 ERI Report conducted a similar analysis using slightly differentassumptions regarding ConverDyn’s preFukushima production and current market share. Specifically, ERI
calculated the effect of DOE transfers assuming two different pre-Fukushima production levels: 10 million kgU and 12 million kgU. With these assumptions, ERI estimated ConverDyn’s current sales volume at 7.50 million kgU and 9.00 million kgU respectively. 2014 ERI Report, 66, 68.
ERI also calculated the effect of DOE transfers assuming two different assumptions about ConverDyn’s share of the U.S. Market: 25% and 30%. 2014 ERI Report, 65–66. Based on these assumptions ERI estimates that DOE transfers decrease ConverDyn’s market volume by between 0.60 and 0.72 million kgU. 2014 ERI Report, 66, 68. This represents between 6.9% and 8.1% of ConverDyn’s estimated sales volume. 2014 ERI Report, 67, 69.

On production cost, ERI similarly estimates based on 80% and 100% fixed costs. As with sales volume, ERI
conducts this calculation twice: once assuming a volume of 7.50 million kgU, and once assuming a volume of 9.00 million kgU. For the 7.50 million kgU scenario, ERI estimates that if production costs are 100% fixed, DOE transfers cause unit production costs to increase about 8% to $16.20 per kgU. If production costs are 80% fixed, DOE transfers cause unit production costs to increase about 6.4% to $15.96 per kgU. For the 9.00 million kgU scenario, ERI estimates that production costs would increase by 7.8% for 100% fixed costs and 6.2% for 80% fixed costs. 2014 ERI Report, 70–71.

ConverDyn’s comment in response to the RFI does not provide a separate
estimate of the effect of DOE transfers on its sales volume. ConverDyn refers to
the relevant sections of the 2014 ERI report regarding its sales volume and production costs. Comment of ConverDyn, Enclosure, at 5. With respect to the 2014 ERI Report, ConverDyn does not refute or confirm the assumptions ERI used in its analysis regarding ConverDyn’s sales volume, market share, or production costs. ConverDyn’s comment also refers to a
document it submitted to DOE in March 2014. Comment of ConverDyn, Enclosure, at 5 n.12. That document was submitted with a request that it be treated as containing proprietary
information. Letter from Malcolm Critchley, ConverDyn, to Peter B. Lyons, DOE (March 10, 2014). 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. Id. DOE may consider this
document in its deliberations.

In addition to the above, ConverDyn notes in its comment that the Metropolis Works facility ceased production beginning in January 2015 for a period of approximately three months—two months longer than usual. ConverDyn states that this 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. 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).

Traxys provides some information relevant to DOE’s analysis of the assumptions ERI uses in its calculations. 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. Comment of Traxys, at 1. Traxys further explains that in 2014 no


### 14121 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

37 Letters 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

. more than 40% of DOE-derived material
was sold in the U.S. market. Comment of Traxys, at 2. 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).

4. 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 is unlikely that 100% of Metropolis Works’ production costs are fixed. 2015 ERI Report, 72–73; 2014 ERI Report, 71. 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; 2014 ERI Report, 72. 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. Comment of ConverDyn, Enclosure, at 5.

5. Changes in Capital Improvement Plans and Development of Future
Facilities

Neither ERI nor any of the commenters provide an estimate of the effect of DOE transfers on new facility development or capital improvement plans. However, DOE understands that several conversion services companies are undertaking these or related

activities.

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). 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

. 37 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 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 future 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

. 6. Long-Term Viability and Health of the Industry

ERI’s most recent Reference Nuclear Power Growth forecasts project global requirements to 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. ERI presents a graph comparing global requirements, demand, and supply from 2013—2035. That graph forecasts that global secondary supply and supply from primary converters will continue to exceed global demand until at least 2025. Beyond that point, supply generally keeps pace with growth in requirements. 2015 ERI Report, 14.

Although not focused on conversion, the requirements forecasts noted above
in section III.A.6 are also relevant to the conversion industry. In general, requirements and/or uranium
concentrate demand forecasts should also apply to demand for conversion services. 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 U 3 O 8 . 2015 ERI Report, 13. Thus, these purchases affect near-term uranium concentrate demand,
but do not affect near-term conversion
demand.

No other commenter provided specific projections about future conversion requirements, demand, or prices. However, DOE has some
additional information not submitted in response to the RFI. In its December 2014 Conversion Market Outlook, UxC predicts significant increases in bothrequirements and demand in the longterm. UxC Conversion Market Outlook— December 2014, 40, 44 (2014). 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).

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.


### 14122 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

38 As noted above, the transfer rates for these scenarios refer only to the level of uranium transfers for cleanup at Portsmouth and downblending of LEU. The level of transfers for other DOE programs
is the same in all three scenarios.

39 ERI also compared those numbers to then current term and spot price indicators as of March 31, 2014. At that time, the TradeTech price indicator was $96.00 per SWU on the spot market and $99.00 per SWU on the term market. 2014 ERI Report, 23. C. Enrichment Industry

1. Market Prices

In its analysis, ERI also estimated 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
market. 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. A summary of ERI’s estimates of the effect of DOE transfers on the market price for SWU appears in Table 9.

Applying this approach to the three scenarios listed above, ERI estimates that DOE transfers at the rate of 2,705 MTU per year would cause the price of enrichment services to be, on average, $4.50 lower between 2015 and 2024— with prices being $5.90 and $3.80 lower in 2015 and 2016 specifically. 2015 ERI Report, 46. For DOE transfers at a rate of 1,855 MTU per year, ERI estimates that prices would be, on average, $3.60
lower between 2015 and 2024—with prices being $5.10 and $3.00 lower in 2015 and 2016 specifically. If DOE
ceased transfers under these two programs, ERI estimates that prices would be, on average, $1.70 lower between 2015 and 2024—with prices being $3.20 and $1.70 lower in 2015 and 2016 specifically. 38 As with uranium concentrates, this is not a prediction that prices will drop by the specified amount once DOE begins transfers pursuant to a new determination. According to ERI’s analysis, a level of price suppression consistent with the estimate for Scenario 1 is already reflected in the current market price for
conversion services. If DOE continued transferring at Scenario 1 levels, the market prices would not change; if DOE began transferring at Scenario 2 levels, the market price would be expected to rise by approximately $0.80; if DOE ceased transfers under these programs, market prices would be expected to rise by $2.70. See Table 4.3 of 2015 ERI Report, 46.

ERI compares these numbers to the current spot and term price indicators published by TradeTech on January 31, 2015—i.e. $88.00 per SWU on the spot market, and $90.00 per SWU on the term market. As a percentage of the current prices, the average price effect
attributable to DOE’s transfers over the period 2015–2024 under Scenario 1 represents approximately 5.1% of the current spot price and 5.0% of the current term price. Under Scenario 2, the average price effect over the same period represents 4.1% of the spot price and 4.0% of the term price. Under Scenario 3, the average price effect represents 1.9% of the spot price and 1.9% of the term price. 2015 ERI Report,

48, 50.

For the 2014 ERI Report, ERI conducted a similar market clearing approach for a level of transfers that is equal to Scenario 1 of the 2015 ERI Report. Although that report used slightly older data, the results are similar. Notably, ERI estimated that the price effect attributable to DOE transfers at the current rates is $4.00 between 2014 and 2023—with prices being $5.20, $5.70, and $3.60 lower in 2014, 2015, and 2016, respectively. 39 2014 ERI Report, 40.



### TABLE 

### 9—ERI’ S 

### E STIMATE OF 

### E FFECT OF 

### DOE T RANSFERS ON 

### E NRICHMENT 

### S POT AND 

### T ERM 

### P RICES IN 

### $ PER 

### SWU

2015 ERI Report 2014 ERI Report

Estimated price effect (2015–2024) Estimated price effect (2014–2023)

Scenario 1 ..................................................................................................................... ............................... $4.50 $4.00

Scenario 2 ..................................................................................................................... ............................... 3.60 ..............................
Scenario 3 ..................................................................................................................... ............................... 1.70 ..............................

In addition to its estimate of the price
effect of DOE transfers on the uranium concentrate market, UxC estimates the effect on the price of enrichment services using its proprietary U–PRICFE and SWU–PRICE models. UxC Report,
5. As with its uranium concentrate estimates, UxC estimates the impact using two different methodologies, an ‘‘incremental approach’’ and a ‘‘total impact approach.’’

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 between 2008 and 2014 DOE’s transfers reduced the spot price 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 estimates the effect of DOE
continued 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 10. 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 will 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%). UxC Report, 12. UxC estimates 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, DOE transfers are estimated to 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.


### 14123 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

40 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/corpwebsite/298/annualreportandaccounts2010

_ 1.pdf.

41 On 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% 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). 

### TABLE 

### 10—U X 

### C’ S 

### E STIMATE OF 

### E FFECT OF 

### DOE T RANSFERS ON 

### E NRICHMENT 

### S POT AND 

### T ERM 

### P RICES IN 

### $ PER 

### SWU

UxC Report

Near- & mid-term price effect Long-term price effect

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

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

As mentioned above, a change in market prices for uranium concentrates and conversion services may also affect
enrichers. URENCO has stated that at a small amount of its capacity is devoted to underfeeding. Comment of URENCO,
at 3. ERI notes that URENCO estimates it is using 10–15% of its capacity for underfeeding. 2015 ERI Report, 75. Thus, to the extent that URENCO
utilizes or resells the natural uranium
hexafluoride that results from underfeeding, the market prices for
uranium and conversion could be
relevant to its business decisions.

2. Realized Prices of Current Operators

There is only one currently operating enrichment facility in the United States, the URENCO USA (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). ERI estimates that more than 95% of enrichmentrequirements are covered under longterm contracts. 2015 ERI Report, 74. Even in the term market, contracting volume is down compared to levels prior to 2010. UxC Enrichment MarketOutlook—Q4 2014, 9, 21 (2014). Longterm contracts for SWU 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).

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 beyond 2025.’’ URENCO Limited,
Interim Financial Statements for the 6 Months Ended 30 June 2014, at 6,
available at http://www.urenco.com/

_ / uploads/content-files/Urenco

_ Group

_ Interim

_Accounts

_ to

_ 30

_ June

_ 2014- final-02092014.pdf

. 40 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 . Given the above considerations, it seems likely that URENCO’s realized price based on its current contract portfolio is as much as 50% higher than the current spot and market prices. Since many of URENCO’s contracts appear to have been entered before DOE began transfers comparable to the current levels, it is unlikely that
continued DOE transfers will have an impact on the realized price achieved for enrichment services from existing capacity at UUSA during the period contemplated for the planned
determination.

As noted above, URENCO has stated that a small amount of its capacity is devoted to underfeeding. Comment of URENCO, at 3. 41 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.

3. Production at Existing Facilities

URENCO reports that the nameplate capacity for the UUSA facility is 3.7 million SWU. Comment of URENCO, at
1. URENCO has also stated 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/companystructure/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. Comment of URENCO, at 3.

4. 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.

5. 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. 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 has requested 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. 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


### 14124 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

42 Although 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 reenrichment of depleted tails, it would tend to support additional demand for enrichment

services. 43 Again, 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. 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. 42 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.

6. Long-Term Viability and Health of the Industry

ERI’s most recent Reference Nuclear Power Growth forecasts project global requirements 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. That graph shows that global supply will 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 III.A.6 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

U 3 O 8 . 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, requirements for LEU will continue to significantly exceed enrichment supply. 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. 43

No other commenter provides specific projections about future enrichment requirements, demand, or prices. In its
Uranium Enrichment Outlook for the 4th quarter of 2014, UxC predicts significant increases in bothrequirements and demand in the longterm. UxC Enrichment Market Outlook—Q4 2014, 36, 38 (2014). UxC also provides a more detailed explanation of its price forecast, which generally predicts an increase in price over the next 10 years. UxC Enrichment Market Outlook—Q4 2014, 91–94 (2014).

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.

IV. Request for Comments

DOE believes it will be possible to identify a rate of transfers that will not have an adverse material impact on
domestic uranium industries. DOE therefore proposes to issue a new Secretarial Determination, pursuant to 3112(d) of the USEC Privatization Act, that transfers of uranium for cleanup
services at the Portsmouth Gaseous Diffusion Plant and for down-blending
of HEU to LEU will not have an adverse material impact on the domestic production, conversion, or enrichment industry. In preparing this determination, DOE may use the six factors proposed above as an analytical framework for assessing the potential impacts of DOE transfers for each industry.

DOE continues to deliberate over
what rate of transfers would be appropriate for such a determination. Commenters suggested a range of options. Many commenters indicated that a rate of 5 million pounds total of


### 14125 Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices

natural uranium equivalent per year would be acceptable. Some commenters favored a rate of 5 million pounds but suggested DOE should cease transfers for some period and then ramp up transfers to the 5 million pounds per year rate. One commenter focused on transfers of uranium hexafluoride, as opposed to uranium concentrates, and
asked DOE to ensure that its transfers are market-neutral with respect to conversion. DOE is also considering
whether to continue transfers at the rate covered by the 2014 determination, 2,705 metric tons per year of natural uranium equivalent.

DOE is also considering whether to
include additional features in a determination that might change how a given set of transfers affects domestic industries. Some commenters proposed a scheme of matched sales, in which DOE would transfer a given tranche of uranium only after ensuring that a buyer had bought an equivalent quantity, at a comparable price, from U.S. producers.
Other commenters asked that DOE transfer uranium in such a way that the uranium appears on markets only in the long term. The commenters do not appear to be suggesting that DOE simply
not transfer uranium until some future date; rather, they contemplate that DOE
would transfer uranium in the near term
but with some restriction on use or availability that prevents the uranium from displacing other supply sources for some number of years. Yet the transfers DOE is considering would be part of barter transactions in exchange for services obtained essentially contemporaneously. In consideringcommenters’ suggestions about longterm as compared to short-term availability of DOE-sourced uranium,
DOE will need to assess whether the markets could support the provision of
services in the near term to be compensated by uranium available only in the long term. In light of the forecast increases in the price of uranium concentrates, it is conceivable thattransactions to bridge the gap from nearto long-term could be financially justifiable for some entities. DOE will continue to analyze this possibility.

To enable the Secretary to make a determination as expeditiously as possible, DOE is setting a deadline of April 6, 2015, for all comments to be
received. DOE invites all interested parties to submit, in writing, comments
and information on the factors described above, the information and documents made available through this notice, and the summary of information considered.
DOE intends to make all comments received publicly available. Any information that may be confidential and exempt by law from public
disclosure should be submitted as
described below.

V. Confidential Business Information

Pursuant to 10 CFR 1004.11, any person submitting information he or she believes to be confidential and exempt by law from public disclosure should submit via email, postal mail, or hand delivery/courier two well-marked copies: One copy of the document marked ‘‘confidential’’ including all the information believed to be confidential, and one copy of the document marked
‘‘non-confidential’’ with the information
believed to be confidential deleted.
Submit these documents via email or on a CD, if feasible. DOE will make its own
determination about the confidential
status of the information and treat it according to its determination. Factors of interest to DOE when evaluating requests to treat submitted information as confidential include: (1) A description of the items; (2) whether and why such items are customarily
treated as confidential within the industry; (3) whether the information is generally known by or available from other sources; (4) whether the information has previously been made available to others without obligation concerning its confidentiality; (5) an explanation of the competitive injury to the submitting person which would result from public disclosure; (6) when such information might lose its
confidential character due to the passage of time; and (7) why disclosure of the information would be contrary to the public interest.

Issued in Washington, DC, on March 13,

2015. John Kotek, Principal Deputy Assistant Secretary for Nuclear Energy, Office of Nuclear Energy.

[FR Doc. 2015–06189 Filed 3–17–15; 8:45 am]

**BILLING CODE 6450–01–P**

**DEPARTMENT OF ENERGY**

**Federal Energy Regulatory**
**Commission**

**[Project No. 1888–030—Pennsylvania, Project No. 2355–018—Pennsylvania/**  **Maryland, Project No. 405–106—Maryland]**

**York Haven Power Company, Exelon Generation Company; Notice of**  **Availability of the Final Environmental Impact Statement for the Susquehanna**  **River Hydroelectric Projects**

In accordance with the National Environmental Policy Act of 1969 and the Federal Energy Regulatory Commission (Commission or FERC) regulations contained in the Code of Federal Regulations (CFR) (18 CFR part 380), the Office of Energy Projects has reviewed the applications for license for the York Haven Hydroelectric Project (FERC No. 1888), the Muddy Run Pumped Storage Project (FERC No. 2355), and the Conowingo Hydroelectric Project (FERC No. 405) and prepared a final multi-project environmental impact statement (EIS).

The existing York Haven Project is located on the Susquehanna River at river mile (RM) 55 in the city of York, in York, Dauphin, and Lancaster Counties, Pennsylvania. The project does not occupy any federal lands. The Muddy Run and Conowingo Projects are located on the Susquehanna River at RM 22 and RM 10, respectively, in Lancaster and York Counties, Pennsylvania, and Cecil and Harford Counties, Maryland. Conowingo Pond, the reservoir for the Conowingo Project, acts as the lower reservoir for the Muddy Run Project. The Muddy Run Project also includes an upper reservoir for pumped storage operation. The projects do not occupy any federal lands.

The final EIS contains staff’s analysis of the applicants’ proposals and the alternatives for relicensing the York Haven, Muddy Run, and Conowingo Projects. The final EIS documents theviews of governmental agencies, nongovernmental organizations, affected Indian tribes, the public, the license applicants, and Commission staff.

A copy of the final EIS is available for review at the Commission or may be
viewed on the Commission’s Web site at http://www.ferc.gov, using the ‘‘eLibrary’’ link. Enter one of the docket numbers, excluding the last three digits, to access the document. For assistance, contact FERC Online Support at FERCOnlineSupport@ferc.gov or tollfree at (866) 208–3676, or for TTY, contact (202) 502–8659.

You may also register online at http://www.ferc.gov/docs-filing/ esubscription.asp to be notified via email of new filings and issuances related to this or other pending projects. For assistance, contact FERC Online Support.

For further information, please contact Emily Carter at (202) 502–6512

or at emily.carter@ferc.gov.

Dated: March 11, 2015.
Kimberly D. Bose,

Secretary.

[FR Doc. 2015–06077 Filed 3–17–15; 8:45 am]

**BILLING CODE 6717–01–P**