This section describes the legal framework for obligation accounting, the uranium market and how obligations on uranium may be added at various stages of the nuclear fuel cycle, the mechanics of obligation exchanges, and the national security need for unobligated LEU. The United States has negotiated nuclear cooperation agreements under section 123 of the Atomic Energy Act of 1954, as amended, with nuclear trading partners worldwide. These agreements establish obligations governing how nuclear material and equipment subject to the agreements are to be used. The United States had 22 nuclear cooperation agreements in force as of June 2016. Once a nuclear cooperation agreement has been negotiated, U.S. government officials may negotiate an administrative arrangement that provides procedures for implementing the agreement, including details about accounting for foreign obligated material. Administrative arrangements with foreign partners may require DOE to produce annual reports on inventories of obligated material. For example, under the administrative arrangements for Australia, Canada, and EURATOM, the reports are to be conducted at the country level, not by facility. According to DOE documents, this is generally the case with its foreign partners. The annual obligation inventory reports summarize the import and export of foreign obligated material into and out of the United States in a given year. NMMSS produces summary information for these reports, which contain aggregated data for foreign obligation balances at all U.S. facilities by calendar year. After NMMSS generates data for the annual obligation inventory reports, NNSA provides these reports to U.S. foreign partners. These foreign partners use the reports to periodically reconcile their accounting records with those of the United States. Other regulations, orders, guidance and an international agreement govern the accounting and reporting of nuclear material as well. For example, a DOE order and NRC regulations establish requirements for nuclear material control and accounting and the reporting of nuclear materials to NMMSS. The DOE order provides direction on the procedures that DOE contractors are to use in submitting data on certain quantities of 17 DOE-owned reportable nuclear materials. NRC regulations require NRC licensees to submit data to NMMSS on certain quantities of some of these nuclear materials. In addition, the United States has an agreement with the International Atomic Energy Agency (IAEA) on the safeguard of nuclear material, which requires the United States to maintain a system of accounting and control over certain nuclear material. Through the application of safeguards, IAEA seeks to verify that nuclear material subject to safeguards is not diverted to nuclear weapons or other proscribed purposes. Uranium is a commodity that is necessary for commercial nuclear power. The market is global, and the vast majority of the uranium used to fuel U.S. commercial nuclear reactors is mined abroad. According to a 2016 U.S. Energy Information Administration, report, in 2015, only 6 percent of the 57 million pounds of uranium delivered to fuel U.S. nuclear reactors was of U.S. origin. Of the remaining 94 percent, 47 percent originated in Australia or Canada; 37 percent originated in Kazakhstan, Russia, or Uzbekistan; and the remaining 10 percent originated in Bulgaria, the Czech Republic, Malawi, Namibia, Niger, or South Africa. After being mined, uranium undergoes a number of additional processing steps to become nuclear fuel for commercial reactors. These steps make up the nuclear fuel cycle. Obligations on nuclear material may be added at various stages in the cycle (see fig. 1). For example, if uranium is mined and milled in Australia and is then shipped to Canada, it may carry an Australian obligation. If the uranium goes through conversion at a plant using Canadian technology and is then shipped to Europe, it may carry a Canadian obligation. If the uranium is enriched at a plant using European technology and is then shipped to Japan, it may carry an obligation from EURATOM. Finally, if the uranium undergoes fuel fabrication at a plant using Japanese technology before export to a final user in the United States, it may carry a Japanese obligation. By the end of the process, the uranium may carry obligations to Australia, Canada, EURATOM, and Japan. Figure 1 illustrates how obligations may be added to uranium at various stages of the nuclear fuel cycle. Such obligations are tracked in NMMSS while the material remains in the United States. To conduct an obligation exchange and record the transaction in NMMSS, both the facility “shipping” the obligation and the facility “receiving” the obligation must submit a DOE/NRC Form 741, “Nuclear Material Transaction Report,” to NMMSS. The shipper’s transaction report and the receiver’s transaction report should contain the same data. Following an obligation exchange, each facility will have the same total amount of a given material type, such as LEU, as it had before the exchange, but it will have different proportions of obligated and unobligated material (see fig. 2). Tritium is a key radioactive isotope used to enhance the power of nuclear weapons in the U.S. stockpile. Tritium is produced in nuclear reactors, and NNSA supports a program that produces tritium from LEU to help meet stockpile demands. NNSA’s tritium program requires that only unobligated LEU be used in reactors to produce tritium. The reactors that are under agreement to produce tritium for DOE belong to TVA, a government corporation, and, according to DOE, LEU fuel loaded into TVA reactors for tritium production must consist entirely of LEU that is unobligated. It is DOE’s responsibility to ensure that TVA is supplied with unobligated fuel to support tritium production. DOE maintains an inventory of unobligated LEU. However, the United States lost its sole supplier of unobligated LEU when USEC ceased uranium enrichment operations in 2013. In 2014, NNSA projected that unobligated LEU fuel for tritium production would last through 2027. NNSA has since identified several actions that could extend that projected date from 2038 to 2041. These actions include “downblending” highly enriched uranium (HEU) from dismantled weapons to produce unobligated LEU, as well as conducting obligation exchanges to preserve unobligated LEU. According to DOE, to meet defense mission requirements in the future, the United States will eventually need to reestablish the capability to produce unobligated LEU. In the meantime, NNSA and TVA have been working together to identify actions to preserve DOE’s remaining quantities of unobligated LEU. From October 1, 2003, through November 30, 2015, 817 obligation exchanges took place in the United States, and most were conducted to meet commercial customer demand. The majority (98 percent) of these exchanges involved NRC-licensed commercial facilities; the rest were conducted by DOE contractors. NRC licensees told us they generally conducted exchanges to meet customer demand for material with obligations from certain countries and to avoid the need to physically transport uranium. DOE contractors told us they conducted a number of obligation exchanges primarily to accommodate the closure of the vault where the material was being stored. According to NMMSS data, there were 817 exchanges of foreign obligated nuclear material in the United States from October 1, 2003, through November 30, 2015. The majority of these obligation exchanges were between commercial nuclear facilities and involved particular material types and certain types of obligations. Specifics on the exchanges follow. Of the 817 obligation exchanges, 802 (98 percent) were conducted by NRC-licensed commercial nuclear facilities; 14 were conducted by DOE contractors; and 1 was conducted by an NRC licensee that conducts work both for commercial purposes and for DOE. The majority (99 percent) of the obligations exchanged involved LEU or natural uranium, and the remaining 1 percent consisted of two obligation exchanges involving plutonium and two involving depleted uranium. The majority (99 percent) of obligation exchanges involved facilities exchanging obligated for unobligated material. The remaining 1 percent involved facilities exchanging obligated material for obligated material. The majority (92 percent) of the obligations exchanged involved obligations from either Australia or Canada. Five percent were obligations from Argentina, Brazil, Chile, China, EURATOM, or Japan, and 3 percent involved material with layered obligations—that is, obligations to multiple countries. The number of obligation exchanges peaked in 2007 with 107 exchanges and has generally declined since then, with steady declines since 2011. Figure 3 shows the number of obligation exchanges conducted in the United States from October 1, 2003, through November 30, 2015. According to officials from Centrus Energy Corp. (formerly USEC), the company that conducted the most obligation exchanges from 2003 to 2015—the peak in 2007 resulted from increased demand that year for LEU. The officials noted that the demand for LEU fluctuates and can be cyclical, as most nuclear power plants operate on an 18-month cycle and must be shut down at regular intervals to replace spent fuel rods with new ones. The officials attributed the decline in obligation exchanges to decreased demand for LEU and to the May 2013 closure of the Paducah Gaseous Diffusion Plant, which meant that less unobligated LEU was available. According to NRC licensees, exchanges were generally conducted to meet commercial customer demand for material with obligations from certain countries and to avoid the need to physically transport uranium. In contrast, DOE contractors told us they conducted a number of obligation exchanges primarily to accommodate the closure of the vault where the material was being stored. According to NRC licensees, obligation exchanges were conducted primarily to meet their customers’ demand for uranium with specific obligations. These customers were utility companies that may have had contracts that specified the delivery schedule and obligation requirements for LEU years in advance of delivery of material.