```

[Federal Register Volume 80, Number 52 (Wednesday, March 18, 2015)]
[Notices]
[Pages 14107-14125]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06189]

[[Page 14107]]

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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.

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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 
down-blending 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-uranium-management.

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 
various forms and quantities--including low-enriched uranium (LEU) and 
natural uranium--that have been declared as excess and are not 
dedicated to U.S. national security missions. Within DOE, the Office of 
Nuclear Energy (NE), the Office of Environmental Management (EM), and 
the National Nuclear Security Administration (NNSA) coordinate the 
management of these excess uranium inventories. 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 down-blending 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\
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    \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 
DUF6.
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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

[[Page 14108]]

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.
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    \2\ See May 15, 2014, Secretarial Determination.
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    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-uranium-management.\3\
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    \3\ Some comments were marked as containing confidential 
information. Those comments are provided with confidential 
information removed.
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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 for 
cleanup work and 445 MTU as low-enriched 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-uranium-management.

II. Analytical Approach

    DOE issues Secretarial Determinations pursuant to Section 3112(d) 
of the USEC Privatization Act. Section 3112(d) states that DOE may 
transfer ``natural and low-enriched 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

[[Page 14109]]

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.
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    \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\
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    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).
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    \5\ Sales under the Russian HEU Agreement ceased at the end of 
2013.
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    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.

[[Page 14110]]

    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 long-term 
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

[[Page 14111]]

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\
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    \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 
U3O8 and 261,285 pounds 
U3O8 equivalent contained within 100,000 kgU 
of UF6. UPC, 2015 Third Quarter Report, 2 (2015), 
available at http://www.uraniumparticipation.com/i/pdf/financials/2015-Q3-Report-for-the-Three-Months-Ended-November-30.pdf; UPC, 2014 
Third Quarter Report, 2 (2014), available at http://www.uraniumparticipation.com/i/pdf/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-Update-August-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-cv-
01012-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.
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    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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

[[Page 14112]]

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.
---------------------------------------------------------------------------

    \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.

      Table 1--ERI's Estimate of Effect of DOE Transfers on Uranium
          Concentrate Spot and Term Prices in $ per Pound U3O8
                       [Market clearing approach]
------------------------------------------------------------------------
                                     2015 ERI Report    2014 ERI Report
                                   -------------------------------------
                                     Estimated  price   Estimated  price
                                      effect (2015-      effect (2014-
------------------------------------------2024)--------------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 U3O8 on the spot market, and $50.00 per 
pound U3O8 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 Estimate of Effect of DOE Transfers on Uranium Concentrate Spot Price in $ per Pound U3O8
                                            [Econometric model] \15\
----------------------------------------------------------------------------------------------------------------
                                                          2015 ERI Report                 2014 ERI Report
                                                 ---------------------------------------------------------------
                                                     Estimated       Estimated       Estimated       Estimated
                                                   price effect    price effect    price effect    price effect
                                                    (2015-2017)     (2018-2024)     (2014-2016)     (2017-2021)
----------------------------------------------------------------------------------------------------------------
Scenario 1......................................           $2.40           $5.10           $2.80           $5.50
Scenario 2......................................            1.70            4.80  ..............  ..............
Scenario 3......................................            0.30            2.00  ..............  ..............
----------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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

[[Page 14113]]

$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.
---------------------------------------------------------------------------

    \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 
U3O8 on the spot market and $45.00 per pound 
U3O8 on the term market. 2014 ERI Report, 23.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.

   Table 3--TradeTech's Estimate of Effect of DOE Transfers on Uranium
               Concentrate Spot Price in $ per Pound U3O8
------------------------------------------------------------------------
                            TradeTech report
-------------------------------------------------------------------------
                                                             Estimated
          Transfer rate  (compared to current)             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 U3O8 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \19\ Additional information about the U-PRICE model can be found 
in Chapter 1 of UxC Uranium Market Outlook--Q4 2014, 7-21 (2014).
---------------------------------------------------------------------------

    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,''

[[Page 14114]]

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--UxC's Estimate of Effect of DOE Transfers on Uranium Concentrate Spot and Term Prices in $ per Pound
                                                      U3O8
----------------------------------------------------------------------------------------------------------------
                                                                            UxC Report
                                                 ---------------------------------------------------------------
                                                   Near- & mid-
                                                    term price      Percent of       Long-term      Percent of
                                                      effect      expected price   price effect   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 
DUF6 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 
UF6 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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

[[Page 14115]]

portfolio is about 50% of any change in spot market price. ERI 
estimates that less than 30% of U.S. production currently comes from 
companies that are effectively unhedged against changes in spot price. 
2015 ERI Report, 60-61.
    TradeTech also provides its estimates of the decline in realized 
price for several producers--both U.S. and foreign. Although TradeTech 
does not provide specific figures, it provides information on several 
firms in chart form. It appears from the chart that among the firms for 
which TradeTech provides estimates, realized prices in 2013 varied from 
as low as about $38 to as high as about $57. For most producers, there 
was a decline in realized price between 2011 and 2013. The magnitude of 
that decline ranges from approximately $12 to as low as $2 or $3. 
TradeTech Report, 13. TradeTech notes that one reason for declining 
realized prices is the expiration of long-term 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 U3O8 
equivalent (per lb U3O8). 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 U3O8 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 U3O8. The weighted average price in 2013 from 
U.S. brokers and traders was $50.44. For 2013, EIA does not report the 
weighted average price of uranium purchased by U.S. reactor operators 
directly from U.S. producers to avoid disclosure of individual company 
data. However, in recent years when that value is reported, it has been 
above the average price paid for U.S. origin uranium. 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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    EIA provides data about sales using different pricing mechanisms. 
EIA reports that of the approximately 23.3 million pounds 
U3O8 equivalent purchased by U.S. reactor 
operators from domestic sources \25\ and delivered in 2013, 14.5 
million pounds were purchased based on fixed or base-escalated 
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).
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 per pound in the 
spot market for two in-situ-leach operations; and $35 per pound in the 
spot market for additional conventional mines and a uranium mill. 2015 
ERI Report, 62.
    ERI then estimates average production costs for existing mines by 
referring to EIA's published data on production expenditures across the 
uranium industry. Using a three year average to smooth out year-to-year 
differences, ERI notes that average production costs have remained 
fairly constant since 2009 at about $40 per pound. 2015 ERI Report, 63. 
ERI further reports that it estimates production costs at U.S. in-situ-
leach facilities to range from the low $30s to the mid $40s per pound. 
ERI concludes that the pattern of cutbacks and estimated production 
costs ``do not seem to indicate that adding back the $3 per pound price 
effect attributed to all DOE inventory material for Scenario 1 would 
move current prices enough to cause U.S. producers to ramp well field 
development and production activities back up.'' 2015 ERI Report, 64. 
ERI further notes that the spot price would remain near $40 per pound 
and ``may still not be sufficient for higher cost ISL producers to 
restart well field development or higher cost conventional mines to 
resume mining activities, and likely would not have prevented the 
decisions to cut back when prices declined to $35/lb in mid 2013 and 
then below $30/lb in mid 2014.'' 2015 ERI Report, 64.
    The 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

[[Page 14116]]

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 
U3O8. This is about 5% higher than in 2013 and 
15% higher than in 2012. In fact, this represents the highest 
production total in any calendar year since 1997. EIA, Domestic Uranium 
Production Report Q4 2014, 2 (January 2015). 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

[[Page 14117]]

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

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

    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).
---------------------------------------------------------------------------

    \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 
U3O8 (MTU) using a conversion rate of 2,599.79 
pounds U3O8 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.
---------------------------------------------------------------------------

    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

[[Page 14118]]

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 UF6 on the spot market, and $16.00 per kgU as 
UF6 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.
---------------------------------------------------------------------------

    \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 UF6 on the 
spot market and $16.00 per kgU as UF6 on the term market. 
2014 ERI Report, 23.

  Table 5--ERI's Estimate of Effect of DOE Transfers on Conversion Spot
                   and Term Prices in $ per kgU as UF6
------------------------------------------------------------------------
                                     2015 ERI Report    2014 ERI Report
                                   -------------------------------------
                                     Estimated  price   Estimated  price
                                      effect  (2015-     effect  (2014-
                                          2024)              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 UF6 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 UF6 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 UF6 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 UF6 
between January and 2015 and December 2016. TradeTech, 30. This 
corresponds to a price suppression of $0.48. If DOE transfers decreased 
to 25% of current levels, TradeTech estimates that the spot price would 
increase by an average of $0.66 per kgU as UF6 between 
January and 2015 and December 2016. TradeTech, 29. This corresponds to 
a price suppression of $0.25.
---------------------------------------------------------------------------

    \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.

 Table 6--TradeTech's Estimate of Effect of DOE Transfers on Conversion
                     Spot Price in $ per kgU as UF6
------------------------------------------------------------------------
                            TradeTech report
-------------------------------------------------------------------------
                                                             Estimated
          Transfer rate  (compared to current)             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

[[Page 14119]]

equal to, if not greater than, the impact on spot uranium prices.'' 
Specifically, UxC notes that much of the world's spot conversion is 
sold in conjunction with uranium through contracts for UF6. 
UxC also notes that over the past few years the UF6 price 
has fallen as much as the U3O8 price has on a 
percentage basis. Finally, UxC notes that the Ux North American 
UF6 Price has been below the Ux NA UF6 value 
(i.e. the sum of spot uranium and spot conversion prices for a given 
quantity of UF6) over most of the period of DOE transfers. 
UxC Report, 15. With respect to the future effect of DOE transfers, UxC 
expects that DOE transfers will continue to have a similar effect on 
spot conversion prices and a somewhat less but still ``noticeable'' 
effect on term conversion prices. UxC Report, 16.
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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 conversion services ``almost exclusively'' on long-
term contracts. Declaration of Kevin P. Smith, ConverDyn v. Moniz, Case 
no. 1:14-cv-01012-RBW, Document 17-7, at ] 16 (July 7, 2014). 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 
U3O8 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 UF6. 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 UF6 per year 
prior to the loss of sales associated with Fukushima. Because ConverDyn 
has stated that this volume loss was approximately 25%, ERI estimates 
current sales volume at 8.25 million kgU as UF6. 2015 ERI 
Report, 65.
    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 Estimate of Decrease in ConverDyn's Sales Volume
------------------------------------------------------------------------
                                              Volume
                                           (million kgU)  Percent change
------------------------------------------------------------------------
Scenario 1..............................            0.67             7.5
Scenario 2..............................            0.46             5.3
Scenario 3..............................            0.08               1
------------------------------------------------------------------------

[[Page 14120]]

    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 Estimate of Increase in ConverDyn's Production Cost
----------------------------------------------------------------------------------------------------------------
                                                             80% fixed                      100% fixed
                                                 ---------------------------------------------------------------
                                                  Cost (per kgU)  Percent change  Cost (per kgU)  Percent change
----------------------------------------------------------------------------------------------------------------
Scenario 1......................................          $15.97             6.5          $16.20               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 
different assumptions regarding ConverDyn's pre-Fukushima 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

[[Page 14121]]

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-horizon-4394892; 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.honeywell-metropolisworks.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.honeywell-metropolisworks.com/?document=oct-16-2012-press-release-honeywell-and-u-s-nuclear-regulatory-commission-reach-agreement-on-necessary-upgrades-to-metropolis-nuclear-conversion-facility&download=1.
---------------------------------------------------------------------------

    \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.honeywell-metropolisworks.com/?document=letter-to-employees-23&download=1. Older letters provided 
slightly different figures. Jim Pritchett, Honeywell Metropolis 
Works, Letter to Community (Dec. 19, 2013), available at http://www.honeywell-metropolisworks.com/?document=letter-to-the-community-from-new-metropolis-works-plant-manager&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-employees-23&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.honeywell-metropolisworks.com/?document=letter-to-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 U3O8. 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 both requirements and demand in the long-term. 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.

[[Page 14122]]

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.

  Table 9--ERI's Estimate of Effect of DOE Transfers on Enrichment Spot
                      and Term Prices in $ per SWU
------------------------------------------------------------------------
                                     2015 ERI Report    2014 ERI Report
                                   -------------------------------------
                                     Estimated  price   Estimated  price
                                      effect  (2015-     effect  (2014-
                                          2024)              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.

[[Page 14123]]

 Table 10--UxC's Estimate of Effect of DOE Transfers on Enrichment Spot
                      and Term Prices in $ per SWU
------------------------------------------------------------------------
                               UxC Report
-------------------------------------------------------------------------
                                     Near- & mid-term   Long-term  price
                                       price effect          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 enrichment requirements are covered 
under long-term contracts. 2015 ERI Report, 74. Even in the term 
market, contracting volume is down compared to levels prior to 2010. 
UxC Enrichment Market Outlook--Q4 2014, 9, 21 (2014). Long-term 
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.
---------------------------------------------------------------------------

    \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/corp-website/298/annualreportandaccounts2010_1.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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/company-structure/urenco-usa (accessed Feb. 21 
2015).
    Due to the nature of gas centrifuges, it is highly unlikely that 
UUSA will decrease production of SWU. As URENCO states, due to the low 
level of electricity required to run the centrifuges, slowing 
production would have almost no effect on operating expenses. 
Furthermore, stopping and restarting a centrifuge may damage the 
equipment. 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

[[Page 14124]]

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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-northwest-news/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/fuel-cycle-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 
U3O8. 2015 ERI Report, 13. Thus, these purchases 
affect near-term uranium concentrate demand, but do not affect near-
term demand for LEU.
    In addition to demand for LEU, higher demand for uranium 
concentrates can affect demand for enrichment because of the 
relationship described above between natural uranium and enrichment as 
inputs for producing enriched uranium product. In the medium to long 
term, supply from current mines will cease to exceed demand. Meanwhile, 
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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 both requirements and demand in the long-term. 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

[[Page 14125]]

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 
considering commenters' suggestions about long-term 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 that transactions to bridge the gap from near- to 
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
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