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Notice2021-16113

Publication of a Report on the Effect of Imports of Uranium on the National Security: An Investigation Conducted Under Section 232 of the Trade Expansion Act of 1962, as Amended

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Published

August 2, 2021

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Commerce DepartmentIndustry and Security Bureau

Abstract

The Bureau of Industry and Security (BIS) in this notice is publishing a report that summarizes the findings of an investigation conducted by the U.S. Department of Commerce (the "Department") pursuant to Section 232 of the Trade Expansion Act of 1962, as amended ("Section 232"), into the effect of imports of uranium on the national security of the United States. This report was completed on April 14, 2019 and posted on the BIS website in July 2021. BIS has not published the appendices to the report in this notification of report findings, but they are available online at the BIS website, along with the rest of the report (see the ADDRESSES section).

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[Federal Register Volume 86, Number 145 (Monday, August 2, 2021)]
[Notices]
[Pages 41540-41610]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-16113]

[[Page 41539]]

Vol. 86

Monday,

No. 145

August 2, 2021

Part II

Department of Commerce

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Bureau of Industry and Security

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Publication of a Report on the Effect of Imports of Uranium on the
National Security: An Investigation Conducted Under Section 232 of the
Trade Expansion Act of 1962, as Amended; Notice

Federal Register / Vol. 86 , No. 145 / Monday, August 2, 2021 /
Notices

[[Page 41540]]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

RIN 0694-XC078

Publication of a Report on the Effect of Imports of Uranium on
the National Security: An Investigation Conducted Under Section 232 of
the Trade Expansion Act of 1962, as Amended

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Publication of a report.

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SUMMARY: The Bureau of Industry and Security (BIS) in this notice is
publishing a report that summarizes the findings of an investigation
conducted by the U.S. Department of Commerce (the ``Department'')
pursuant to Section 232 of the Trade Expansion Act of 1962, as amended
(``Section 232''), into the effect of imports of uranium on the
national security of the United States. This report was completed on
April 14, 2019 and posted on the BIS website in July 2021. BIS has not
published the appendices to the report in this notification of report
findings, but they are available online at the BIS website, along with
the rest of the report (see the ADDRESSES section).

DATES: The report was completed on April 14, 2019. The report was
posted on the BIS website in July 2021.

ADDRESSES: The full report, including the appendices to the report, are
available online at <a href="https://bis.doc.gov/232">https://bis.doc.gov/232</a>.

FOR FURTHER INFORMATION CONTACT: For further information about this
report contact Erika Maynard, Special Projects Manager, (202) 482-5572;
and Leah Vidovich, Trade and Industry Analyst, (202) 482-1819. For more
information about the Office of Technology Evaluation and the Section
232 Investigations, please visit: <a href="http://www.bis.doc.gov/232">http://www.bis.doc.gov/232</a>.

SUPPLEMENTARY INFORMATION:

The Effect of Imports of Uranium on the National Security

An Investigation Conducted Under Section 232 of the Trade Expansion Act
of 1962, As Amended

U.S. Department of Commerce

Bureau of Industry and Security

Office of Technology Evaluation

April 14, 2019

Table of Contents

I. Executive Summary
II. Legal Framework
A. Section 232 Requirements
B. Discussion
III. Investigation Process
A. Initiation of Investigation
B. Public Comments
C. Site Visits and Information Gathering Activities
D. Interagency Consultation
E. Review of the Department of Commerce 1989 Section 232
Investigation on Uranium Imports
IV. Product Scope of the Investigation
V. Background on the U.S. Nuclear Industry
A. Summary of the U.S. Uranium Fuel Cycle
B. Summary of U.S. Nuclear Power Generation Industry
VI. Global Uranium Market Conditions
A. Summary of the Global Uranium Market
B. Uranium Transactions: Book Transfers and Flag Swaps
C. The Effect of the Fukushima Daiichi Incident on U.S. and
Global Uranium Demand
D. The Effect of State-Owned Enterprises on Global Uranium
Supply
VII. Findings
A. Uranium Is Important to U.S. National Security
1. Uranium Is Needed for National Defense Systems
2. Uranium Is Required for Critical Infrastructure
B. Imports of Uranium in Such Quantities as Are Presently Found
Adversely Impact the Economic Welfare of the U.S. Uranium Industry
1. U.S. Utilities' Reliance on Imports of Uranium in 1989
2. U.S. Utilities' Reliance on Imports of Uranium Continue To
Rise
3. High Import to Export Ratio
4. Uranium Prices
5. Declining Employment Trends
6. Loss of Domestic Long Term Contracts Due to Imported Uranium
7. Financial Distress
8. Research and Development Expenditures
9. Capital Expenditures
C. Trade Actions: Anti-Dumping and Countervailing Duties
D. Displacement of Domestic Uranium by Excessive Quantities of
Imports Has the Serious Effect of Weakening Our Internal Economy
1. U.S. Production Is Well Below Demand and Utilization Rates
Are Well Below Economically Viable Levels
2. Domestic Uranium Production Is Severely Weakened and
Concentrated
3. Reduction of Uranium Production Facilities Limits Capacity
Available
E. Uranium Market Distortion by State-Owned Enterprises Is a
Circumstance That Contributes to the Weakening of the Domestic
Economy
1. Excess Russian, Kazakh, and Uzbek Production Adversely
Affects Global Markets and Creates a Dangerous U.S. Dependence on
Uranium From These Countries
2. The Increasing Presence of China in the Global Uranium Market
Will Further Weaken U.S. and Other Market Uranium Producers
3. Increasing Global Excess Uranium Production Will Further
Weaken the Internal Economy as U.S. Uranium Producers Will Face
Increasing Import Competition
VIII. Conclusion
A. Determination
B. Economic Impacts of 25 Percent U.S.-Origin Requirement
C. Public Policy Proposals

Appendices

Appendix A: Section 232 Investigation Notification Letter to
Secretary of Defense James Mattis, July 18, 2018
Appendix B: Federal Register Notices--Notice of Requests for Public
Comments on Section 232 National Security Investigation of Imports
of Uranium, July 25, 2018; Change in Comment Deadline for Section
232 National Security Investigation of Imports of Uranium, September
10, 2018
Appendix C: Summary of Public Comments
Appendix D: Survey for Data Collection (Front-End Uranium Industry)
Appendix E: Survey for Data Collection (Nuclear Electric Power
Generation Industry)
Appendix F: Uranium Product Specific Trade Flows
Appendix G: Summary of Commerce Department 1989 Section 232 Uranium
Investigation
Appendix H: The National Security Aspect of U.S. Uranium Industry
Regulation
Appendix I: The Role of State Owned Enterprises in the Global
Uranium Market
Appendix J. U.S. Naval and Nuclear Weapons Uses of Uranium
Appendix K: Glossary

Prepared by Bureau of Industry and Security

http://www.bis.doc.gov

I. Executive Summary

This report summarizes the findings of an investigation conducted
by the U.S. Department of Commerce (the ``Department'') pursuant to
Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C.
1862 (``Section 232'')), into the effect of imports of uranium \1\ on
the national security of the United States.
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\1\ See Figure 1 in Section IV, ``Product Scope of the
Investigation,'' for the uranium products addressed by this report.
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In conducting this investigation, the Secretary of Commerce (the
``Secretary'') noted the Department's prior investigations under
Section 232. This report incorporates the statutory analysis from the
Department's 2018 reports on the imports of steel and aluminum \2\ with
respect to applying the

[[Page 41541]]

terms ``national defense'' and ``national security'' in a manner that
is consistent with the statute and legislative intent.\3\
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\2\ U.S. Department of Commerce. Bureau of Industry and
Security. The Effect of Imports of Steel on the National Security
(Washington, DC: 2018) (``Steel Report'') and U.S. Department of
Commerce. Bureau of Industry and Security. The Effect of Imports of
Aluminum on the National Security (Washington, DC: 2018) (``Aluminum
Report'').
<a href="https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file">https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file</a>.
<a href="https://www.bis.doc.gov/index.php/documents/aluminum/2223-the-effect-of-imports-of-aluminum-on-the-national-security-with-redactions-20180117/file">https://www.bis.doc.gov/index.php/documents/aluminum/2223-the-effect-of-imports-of-aluminum-on-the-national-security-with-redactions-20180117/file</a>.
\3\ Steel Report at 13-14; Aluminum Report at 12-13.
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As required by the statute, the Secretary considered all factors
set forth in Section 232(d). In particular, the Secretary examined the
effect of imports on national security requirements, specifically:
i. Domestic production needed for projected national defense
requirements;
ii. the capacity of domestic industries to meet such requirements;
iii. existing and anticipated availabilities of the human
resources, products, raw materials, and other supplies and services
essential to the national defense;
iv. the requirements of growth of such industries and such supplies
and services including the investment, exploration, and development
necessary to assure such growth; and
v. the importation of goods in terms of their quantities,
availabilities, character, and use as those affect such industries; and
the capacity of the United States to meet national security
requirements.
The Secretary also recognized the close relation of the economic
welfare of the United States to its national security. Factors that can
compromise the nation's economic welfare include, but are not limited
to, the impact of ``foreign competition on the economic welfare of
individual domestic industries; and any substantial unemployment,
decrease in revenues of government, loss of skills, or any other
serious effects resulting from the displacement of any domestic
products by excessive imports.'' 19 U.S.C. 1862(d). In particular, this
report assesses whether uranium is being imported ``in such
quantities'' and ``under such circumstances'' as to ``threaten to
impair the national security.'' \4\
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\4\ 19 U.S.C. 1862(b)(3)(A).
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Findings

In conducting the investigation, the Secretary found:
A. Domestic Uranium Production Is Essential to U.S. National
Security.\5\
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\5\ Domestic uranium production refers to all stages of the
nuclear fuel cycle and their associated products, including uranium
mining, uranium milling, uranium conversion, uranium enrichment, and
nuclear fuel fabrication. Uranium mining and milling produce uranium
concentrate, uranium conversion produces uranium hexafluoride (UF6),
uranium enrichment produces enriched uranium product (EUP), and
nuclear fuel fabrication produces finished nuclear fuel assemblies.
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1. Domestic uranium is required, based on U.S. policy and
restrictions in international agreements on the use of most imported
uranium, to satisfy the U.S. Department of Defense (DoD) requirements
for maintaining effective military capabilities, including nuclear fuel
for the U.S. Navy's fleet of 11 nuclear powered aircraft carriers and
70 nuclear powered submarines, source material for nuclear weapons,
depleted uranium for ammunition, and other functions.
2. Uranium is also essential to maintaining U.S. critical
infrastructure sectors, specifically the nation's 98 reactors for
nuclear power generation to support the Nation's commercial power grid.
Nuclear reactors supply 19 percent of U.S. electricity consumed in the
U.S. and they support 15 of the 16 critical infrastructure sectors
identified by the Department of Homeland Security (DHS).\6\ Maintaining
a robust civilian nuclear power industry is essential to U.S. national
security, including both national defense and critical infrastructure
requirements. DoD installations in the U.S. rely on the commercial
power grid for 99 percent of their electricity needs.\7\ The entire
U.S. nuclear enterprise--weapons, naval propulsion, nonproliferation,
enrichment, fuels services, and negotiations with international
partners--depends on a robust U.S. civilian nuclear power industry.
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\6\ U.S. White House. Office of the Press Secretary. Critical
Infrastructure Security and Resilience. Presidential Policy
Directive 21. (Washington, DC: 2013) <a href="https://obamawhitehouse.archives.gov/the-press-office/2013/02/12/presidential-policy-directive-critical-infrastructure-security-and-resil">https://obamawhitehouse.archives.gov/the-press-office/2013/02/12/presidential-policy-directive-critical-infrastructure-security-and-resil</a>.
\7\ U.S. Department of Defense. Office of the Undersecretary of
Defense for Acquisition, Technology, and Logistics. Report of the
Defense Science Board Task Force on DoD Energy Strategy.
(Washington, DC: 2008), 18. <a href="https://apps.dtic.mil/dtic/tr/fulltext/u2/a477619.pdf">https://apps.dtic.mil/dtic/tr/fulltext/u2/a477619.pdf</a>.
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3. Domestic uranium production and processing, referred to in this
report as the ``front-end'' of the fuel cycle, depends on an
economically viable, competitive U.S. commercial uranium industry.\8\
The distinct stages of the U.S. nuclear fuel cycle extract uranium from
the ground and ultimately transform it into fuel suitable for civilian
nuclear power. The same stages of the U.S. nuclear fuel cycle are
needed to fulfill national defense requirements for uranium used in
naval nuclear fuel and tritium production in the future.
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\8\ For the purposes of this report, the front-end industry is
defined as companies owning or operating uranium mines, uranium
mills, uranium converters, uranium enrichers, and nuclear fuel
fabricators.
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4. Since 1946, U.S. legislation governing the uranium production
and nuclear power generation industries has consistently made explicit
written reference to these industries' national security functions.\9\
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\9\ Atomic Energy Act of 1946, as amended; Atomic Energy Act of
1954; 1964 Private Ownership of Special Nuclear Materials Act; The
Energy Policy Act of 1992; The United States Enrichment Corporation
Privatization Act of 1996.
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B. Imports in Such Quantities as Presently Found Adversely Affect the
Economic Welfare of the U.S. Uranium Industry
1. In 2018, almost all uranium used for civilian U.S. nuclear
electric power generation was imported, totaling approximately 94
percent of consumption. Between 2009 and 2018, U.S. nuclear electric
power generators increased their reliance on imported uranium products
from 85.8 percent to 93.3 percent of their annual requirements.\10\ In
comparison, the Department's 1989 Section 232 investigation into ``The
Effect of Imports of Uranium on the National Security'' found that
imported uranium satisfied just 51 percent of U.S. nuclear electric
power generators' requirements at that time. \11\
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\10\ U.S. Energy Information Administration, ``Table S1a.
Uranium purchased by owners and operators of U.S. civilian nuclear
power reactors, 1994-2017'', 2017 Uranium Marketing Annual Report
(May 31, 2018), <a href="https://www.eia.gov/uranium/marketing/pdf/umartableS1afigureS1.pdf">https://www.eia.gov/uranium/marketing/pdf/umartableS1afigureS1.pdf</a>.
\11\ U.S. Dept. of Commerce. Bureau of Export Administration;
The Effect of Imports of Uranium on the National Security; 1989
(``1989 Report'') available at <a href="https://www.bis.doc.gov/index.php/documents/section-232-investigations/88-uranium-1989/file">https://www.bis.doc.gov/index.php/documents/section-232-investigations/88-uranium-1989/file</a>.
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2. Uranium is imported into the United States in eight forms, with
the two largest categories being uranium concentrate and enriched
uranium. Uranium concentrate is primarily imported from Australia,
Canada, Kazakhstan, and Uzbekistan. Enriched uranium is primarily
imported from Russia, the United Kingdom, Germany, France, and the
Netherlands.
3. Between 2014 and 2018, an average of 52 percent of U.S. nuclear
electric power generator requirements of uranium concentrate was
provided by Australia and Canada, 25 percent from Kazakhstan and
Uzbekistan, and the remainder from Namibia (8.4 percent), Niger (2.5
percent), South Africa (2.2 percent), Malawi (1.4 percent), China (0.3
percent), and Russia (0.2 percent). The Department notes that between
2014 and 2018, an average of 24.2 percent of the uranium concentrate
provided by Australian and Canadian

[[Page 41542]]

companies to U.S. nuclear power generators was originally sourced from
Kazakhstan and Uzbekistan. In the same period, 20 percent of enrichment
services purchased by U.S. utilities were from Russia. While a
significant portion of imports come from Australia and Canada, the non-
market practices of state-owned enterprises (SOEs) have similarly
harmed the financial operations of uranium producers in these countries
and threaten their continued ability to supply uranium mined in
Australia or Canada to the U.S. market. China is also making steady
strides to become a major supplier in the U.S. and global nuclear fuel
market.
4. The entrance of China's state-owned nuclear fuel companies as
potential actors in the global nuclear fuel industry will further
intensify pressure on market economy producers in Canada, Australia,
Europe, and the U.S. By 2020, China could have enrichment capacity
beyond their domestic needs. U.S. utilities have reported purchases of
uranium concentrate and enrichment services from Chinese controlled
companies in the 2014-2018 period. China provided two percent of U.S.
utilities' enrichment services contracts during this period, and is
expected to supply even more in the coming years. Overall, the non-
market business practices of Russia, Kazakhstan, Uzbekistan, and
China's uranium industries continue to erode U.S. uranium mining and
processing capacity.
5. Import competition from state-owned uranium enterprises has
caused a significant atrophy in U.S. uranium infrastructure to the
point where production levels from front-end companies are no longer
economically sustainable. Documented declines in employment and skilled
workforce (front-end employment is down 47 percent since 2009), as well
as idling and closures of mining (13 since 2009), milling (only one of
five remaining U.S. mills is presently active), and uranium conversion
operations (the last U.S. facility is idled), demonstrate the steep
decline in U.S. production capacity. Additionally, loss of long-term
contracts with nuclear utilities, minimal market share, falling
marginal net income, and a tenuous financial outlook indicate a
moribund U.S. uranium industry.
C. Displacement of Domestic Uranium by Excessive Quantities of Imports
Has the Serious Effect of Weakening Our Internal Economy
1. U.S. nuclear electric power utilities and uranium suppliers face
multiple challenges. Federal Energy Regulatory Commission (FERC) market
rules do not compensate nuclear power and other fuel-secure generation
resources for their resilience value. In addition, subsidized renewable
energy and lower natural gas prices are causing premature retirements
of U.S. civilian nuclear power plants before the end of their useful
lives. To cut costs and remain viable in distorted U.S. electricity
markets, many nuclear power operators have ended long-term contracts
with higher-priced U.S. uranium producers and turned to foreign SOEs
for artificially low-priced uranium imports. The loss of long-term
contracts, which provided the revenue stability needed to adequately
support capital investment, research and development (R&D), and
facility expansion, as well as to maintain workforce and production,
has adversely impacted all elements of the U.S. uranium industry.
2. High dependence on uranium imports--averaging 93.3 percent of
annual U.S. nuclear power utility consumption in 2018--has caused all
elements of the U.S. uranium sector to shut down production capacity,
struggle to maintain financial viability, reduce workforce, cut R&D,
and slash capital expenditures. Excessive imports have dropped U.S.
uranium mining production to some of the lowest levels seen since
uranium mining began in the late 1940s.
3. Without a viable U.S. uranium industry, the United States cannot
effectively respond to moderate or extended national security
emergencies, or over the long-term meet the domestic uranium
requirements of the U.S. Department of Defense. Moreover, U.S. nuclear
electric power generators would not be able to operate at full capacity
and would not be able to support critical infrastructure electric power
needs if foreign nations, particularly Russia and other former Soviet
states, chose to suspend or otherwise end uranium exports to the United
States.
D. Uranium Market Distortion by State-Owned Enterprises Is a
Circumstance That Contributes to the Weakening of the Domestic Economy
1. The 2011 Fukushima Daichii incident prompted the shutdown and/or
idling of existing nuclear operators in Japan, Germany, and other
countries. Additionally, many proposed nuclear reactors around the
world, including in the United States, were cancelled. These actions
decreased global demand for uranium, creating a supply glut and low
uranium prices. This has severely affected the financial viability of
U.S. uranium mining and milling in particular, as uranium imports have
reached over 94 percent of U.S. utility consumption.
2. The Fukushima incident caused similar declines in other elements
of the U.S. front-end nuclear fuel business, including conversion,
enrichment, and fuel fabrication companies. [TEXT REDACTED] As of 2018,
the total domestic front-end uranium industry employs 4,958 workers,
compared to 9,232 workers in 2009, a decline of 47 percent.
3. During this same period SOEs in Russia, Kazakhstan, and
Uzbekistan undercut U.S. uranium producers with lower priced uranium.
SOEs in China also injected additional quantities of uranium into the
marketplace despite lower prices and a drop in overall demand. In
contrast, U.S. producers significantly cut production, shut down
capacity, and shrank workforce levels.
4. Market economy uranium producers such as Australia, Canada,
South Africa, France, Germany, the Netherlands, and the United Kingdom
have also been forced to curtail or suspend operations due to the
excess production by SOE uranium producers that has depressed global
uranium prices. SOE competition has displaced demand for Canadian and
Australian product. Between 2016 and 2017, Canada cut back domestic
production approximately 6.6 percent. Australia reduced output by 6.9
percent. In contrast, Russia and Kazakhstan decreased their production
by only 5.1 and 2.9 percent, respectively; but China increased
production by 16 percent. Uzbekistan made no production cuts.
5. U.S. nuclear electric power generators maintain only a limited
amount of nuclear fuel materials in reserve to address potential supply
disruptions. The U.S. Government maintains only a small stockpile of
enriched uranium for utility use in the event of a fuel supply
disruption. U.S. nuclear electric power generators are therefore
vulnerable to sudden and extended disruptions in the nuclear fuel
supply chain, especially product supplied through Russia and
Kazakhstan.

Conclusion

Based on these findings, the Secretary of Commerce has concluded
that the present quantities and circumstance of uranium imports are
``weakening our internal economy'' and ``threaten to impair the
national security'' as defined in Section 232. An economically viable,
secure supply of U.S.-sourced uranium is required for national defense
needs. International obligations, including agreements with foreign
partners under Section 123 of the Atomic Energy Act of

[[Page 41543]]

1954, govern the use of most imported uranium and typically restrict it
to peaceful, non-explosive uses. As a result, uranium used for military
purposes must generally be domestically produced from mining through
the fuel fabrication process. Furthermore, the predictable maintenance
and support of U.S. critical infrastructure, especially the electric
power grid, depends on a diverse supply of uranium, which includes
U.S.-sourced uranium products and services.
The Secretary further recognizes that the U.S. uranium industry's
financial and production posture has significantly deteriorated since
the Department's 1989 Report. That investigation noted that U.S.
nuclear power utilities imported 51.1 percent of their uranium
requirements in 1987. By 2018, imports had increased to 93.3 percent of
those utilities' annual requirements. Based on comprehensive 2019
industry data provided by U.S. uranium producers and U.S. nuclear
electric power utilities to the Department in response to a mandatory
survey, U.S. utilities' usage of U.S. mined uranium has dropped to
nearly zero. [TEXT REDACTED] Based on the current and projected state
of the U.S. uranium industry, the Department has concluded that the
U.S. uranium industry is unable to satisfy existing or future national
security needs or respond to a national security emergency requiring a
large increase in domestic uranium production.
Absent immediate action, closures of the few remaining U.S. uranium
mining, milling, and conversion facilities are anticipated within the
next few years. Further decreases in U.S. uranium production and
capacity, including domestic fuel fabrication, will cause even higher
levels of U.S. dependence on imports, especially from Russia,
Kazakhstan, Uzbekistan, and China. Increased imports from SOEs in those
countries, and in particular Russia and China, which the 2017 National
Security Strategy noted present a direct challenge to U.S. influence,
are detrimental to the national security.\12\ The high risk of loss of
the remaining U.S. domestic uranium industry if the present excessive
level of imports continue threatens to impair the national security as
defined by Section 232.
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\12\ U.S. White House Office. National Security Strategy of the
United States of America. (Washington, DC: 2017), 2 <a href="https://www.whitehouse.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905-2.pdf">https://www.whitehouse.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905-2.pdf</a>.
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The Secretary has determined that to remove the threat of
impairment to national security, it is necessary to reduce imports of
uranium to a level that enables U.S. uranium producers to return to an
economically competitive and financially viable position. This will
allow the industry to sustain production capacity, hire and maintain a
skilled workforce, make needed capital expenditures, and perform
necessary research and development activities. A modest reduction of
uranium imports will allow for the revival of U.S. uranium mining and
milling, the restart of the sole U.S. uranium converter, and a
reduction in import challenges to fuel fabricators, while also
recognizing the market and pricing challenges confronting the U.S.
nuclear power utilities.

Recommendation

Due to the threat to the national security, as defined in Section
232, from excessive uranium imports, the Secretary recommends that the
President take immediate action by adjusting the level of these imports
through the implementation of an import waiver to achieve a phased-in
reduction of uranium imports. The reduction in imports of uranium
should be sufficient to enable U.S. producers to recapture and sustain
a market share of U.S. uranium consumption that will allow for
financial viability, and would enable the maintenance of a skilled
workforce and the production capacity and uranium output needed for
national defense and critical infrastructure requirements. The
reduction imposed should be sufficient to enable U.S. producers to
eventually supply 25 percent of U.S. utilities' uranium needs based on
2018 U.S. U308 concentrate annual consumption requirements.
Based on the survey responses, the Department has determined that
U.S. uranium producers require an amount equivalent to 25 percent of
U.S. nuclear power utilities' 2018 annual U308 concentrate consumption
to ensure financial viability. Based on the Department's analysis, if
U.S.-mined uranium supplied 25 percent of U.S. nuclear power utilities'
annual U308 concentrate consumption, U.S. uranium prices will increase
to approximately $55 per pound (see Figure 1A). The current spot price
is low due to distortions from SOEs.

[[Page 41544]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.002

The $55 per pound price will increase mine capacity to the point
where U.S. uranium mines can supply approximately 6 million pounds of
uranium concentrate per year, which is approximately 25 percent of U.S.
nuclear power utilities' consumption for U308 concentrate in any given
year.
The Secretary recommends that the import reduction be phased in
over a five-year period. This will allow U.S. uranium mines, mills, and
converters to reopen or expand closed or idled facilities; hire, train
and maintain a skilled workforce; and make necessary investments in new
capacity. This phased-in approach will also allow U.S. nuclear power
utilities time to adjust and diversify their fuel procurement contracts
to reintroduce U.S. uranium into their supply chains.
The Secretary recommends that either a targeted or global quota be
used to adjust the level of imports and that such quota should be in
effect for a duration sufficient to allow the necessary time needed to
stabilize and revitalize the U.S. uranium industry. According to survey
responses, the average time to restart an idle uranium production
facility is two to five years, and several additional years are needed
to add new capacity. Market certainty, which can be provided by long-
term contracts with U.S. nuclear power utilities, is needed to build
cash flow, pay down debt, and raise capital for site modernization;
workforce recruitment; and to conduct environmental and regulatory
reviews.

Option 1--Targeted Zero Quota

This targeted zero quota option would prohibit imports of uranium
from Kazakhstan, Uzbekistan, and China (the ``SOE countries'') to
enable U.S. uranium producers to supply approximately 25 percent of
U.S. nuclear power utility consumption. A U.S. nuclear power utility or
other domestic user would be eligible for a waiver that allows the
import of uranium from the SOE countries, with any import of uranium
from Russia subject to the Russian Suspension Agreement, after such
utility or user files appropriate documentation with the Department. In
the case of a U.S. nuclear power utility, the documentation must show
that such utility has a contract or contracts to purchase for their
consumption on an annual basis not less than the percentage of U.S.
produced uranium U308 concentrate shown in the phase-in table below.

Percent of Annual U308 Concentrate Consumption Required To Be Sourced From the U.S.
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2024 and
Year 2020 2021 2022 2023 beyond
----------------------------------------------------------------------------------------------------------------
Percent of Annual U308 Concentrate Consumption Required to be 5 10 15 20 25
Sourced from the U.S............................................
----------------------------------------------------------------------------------------------------------------

[[Page 41545]]

uranium imports from SOE countries for use by U.S. milling, conversion,
enrichment, and fuel fabrication services that produce uranium products
for export from the United States. A U.S. milling, conversion,
enrichment, or fuel fabricator seeking to import uranium from an SOE
country for use to produce uranium products for export would need to
file appropriate documentation with the Department to obtain a waiver
for the import of such uranium for export.
The Secretary believes that this option to impose a zero quota for
imports of uranium from SOE countries, while continuing to allow
unrestricted importation of uranium from Canada, Australia, and EURATOM
\13\ member countries based on their security and economic
relationships with the United States, should address the threatened
impairment of U.S. national security. This would be accomplished by
promoting the economic revival of the U.S. uranium industry, so long as
there is not significant transshipment or reprocessing of SOE country
uranium through these unrestricted countries.
---------------------------------------------------------------------------

\13\ As of April 2019, EURATOM includes all 28 members of the
European Union. The United Kingdom will cease to be a member of
EURATOM if and when it leaves the European Union. Should the United
Kingdom cease to be a member of EURATOM, the same preferential
treatment given to EURATOM members will also be applied to the
United Kingdom.
---------------------------------------------------------------------------

The Department will monitor these unrestricted imports to ensure
there is not significant transshipment, reprocessing, or book transfers
from SOE countries to unrestricted countries in an attempt to
circumvent and undermine the U.S. uranium producers' ability to provide
25 percent of U.S. annual U308 concentrate consumption. Many companies
in unrestricted countries supply uranium sourced from SOE countries.
Consequently, up to one-third of the materials delivered to U.S.
nuclear power utilities, at this time, is not sourced directly from the
country of import.
Imports of uranium from Russia under a waiver would also be
subjected to the Russian Suspension Agreement. This option assumes that
such agreement will continue to be in effect over the relevant time
period and would apply to any Russian uranium imports by U.S. nuclear
power utilities, thus holding Russian uranium imports to their current
level of approximately 20 percent of U.S. enrichment demand. In the
event that the Russian Suspension Agreement is not extended and
terminates, then the Secretary recommends that a quota on uranium
imports under a waiver of Russian Uranium Products (as defined in the
Russian Suspension Agreement) of up to 15 percent of U.S. enrichment
demand be imposed. If adopted this quota would be administered by the
Department in the same manner as the Russian Suspension Agreement is
presently administered.
The adjustment of imports proposed under this option would be in
addition to any applicable antidumping or countervailing duties
collections.
To complement the proposed trade action, the Secretary recommends
that the Federal Energy Regulatory Commission (FERC) should act
promptly to ensure that regulated wholesale power market regulations
adequately compensate nuclear and other fuel-secure generation
resources. Specifically, FERC should determine whether current market
rules, which discriminate against secure nuclear fuel generation
resources in favor of intermittent resources, such as natural gas,
solar, and wind, result in unjust, unreasonable, and unduly
discriminatory rates that distort energy markets, harm consumers, and
undermine electric reliability. If so, FERC should consider taking
appropriate action to ensure that rates are just and reasonable.
The Department of Commerce, in consultation with other appropriate
departments and agencies, will monitor the status of the U.S. uranium
industry and the effectiveness of this remedy and will make
recommendations to the President regarding whether it should be
modified, extended, or terminated.

Option 2--Global Zero Quota

This option would establish a zero quota on imports of uranium from
all countries until specific conditions are met to enable U.S.
producers to supply 25 percent of U.S. nuclear power utilities' annual
consumption of uranium U308 concentrate. A U.S. nuclear power utility
or other domestic user would be eligible for a waiver to import uranium
from any country after submitting appropriate documentation to the
Department. In the case of a U.S. nuclear power utility, the
documentation must show that such utility has a contract or contracts
to purchase for their consumption on an annual basis not less than the
percentage of U.S. produced uranium U308 concentrate shown in the
phase-in table below.

Percent of Annual U308 Concentrate Consumption Required To Be Sourced From the U.S.
----------------------------------------------------------------------------------------------------------------
2024 and
Year 2020 2021 2022 2023 beyond
----------------------------------------------------------------------------------------------------------------
Percent of Annual U308 Concentrate Consumption Required 5 10 15 20 25
to be Sourced from the U.S..............................
----------------------------------------------------------------------------------------------------------------

Phased-in incrementally over five years, this option will help
facilitate the reopening and expansion of U.S. uranium mining, milling,
and conversion facilities, and will ensure that U.S. uranium producers
can make investments required for future financial viability. This
option avoids undue financial harm to U.S. nuclear power utilities by
affording them sufficient time to adjust their fuel procurement
strategies.
The zero quota on uranium imports would not apply to uranium
imports for use by U.S. milling, conversion, enrichment, and fuel
fabrication services that produce uranium products for export from the
United States. A U.S. milling, conversion, enrichment, or fuel
fabricator seeking to import uranium for use to produce uranium
products for export would need to file appropriate documentation with
the Department to obtain a waiver for the import of uranium.
The Department will provide adequate time for U.S. industry to
receive a waiver prior to a zero quota being implemented globally.
Based on information received during the investigation, the Department
believes that this option will not cause undue burdens.
The Secretary believes that this option to impose a zero quota for
imports of uranium will address the threatened impairment of U.S.
national security by promoting the economic revival of the U.S. uranium
industry. This option also prevents the possibility of transshipment of
SOE overproduction through third countries and avoids

[[Page 41546]]

undue harm to U.S. enrichment and fuel fabrication export operations.
These domestic export operations rely on an ability to access working
uranium stock regardless of the specific mining origin of a given
uranium-based material.
Tennessee Valley Authority (TVA) purchases of Canadian
UO<INF>3</INF> natural uranium diluent in its execution of the National
Nuclear Security Administration's current highly-enriched uranium (HEU)
down-blending campaign would be excluded from the zero quota on imports
of uranium. In addition, any transfer pursuant to a Mutual Defense
Agreement that references special nuclear material would be excluded
from the zero quota on imports of uranium.
Imports of uranium from Russia under a waiver would also be
governed by the Russian Suspension Agreement. This option assumes that
such agreement will continue to be in effect over the relevant time
period and would apply to any Russian uranium imports by U.S. nuclear
power utilities, thus holding Russian uranium imports to their current
level of approximately 20 percent of U.S. enrichment demand. In the
event that the Russian Suspension Agreement is not extended and
terminates, then the Secretary recommends that a quota on uranium
imports under a waiver of Russian Uranium Products (as defined in the
Russian Suspension Agreement) of up to 15 percent of U.S. enrichment
demand be imposed. If adopted, this quota would be administered by the
Department in the same manner as the Russian Suspension Agreement is
presently administered.
The adjustment of imports proposed under this option would be in
addition to any applicable antidumping or countervailing duties
collections.
To complement the proposed trade action, the Secretary recommends
that the Federal Energy Regulatory Commission (FERC) should act
promptly to ensure that regulated wholesale power market regulations
adequately compensate nuclear and other fuel-secure generation
resources. Specifically, FERC should determine whether current market
rules, which discriminate against secure nuclear fuel generation
resources in favor of intermittent resources, such as natural gas,
solar, and wind, result in unjust, unreasonable, and unduly
discriminatory rates that distort energy markets, harm consumers, and
undermine electric reliability. If so, FERC should consider taking
appropriate action to ensure that rates are just and reasonable.
The Department of Commerce, in consultation with other appropriate
departments and agencies, will monitor the status of the U.S. uranium
industry and the effectiveness of this remedy to determine if it should
be modified, extended, or terminated.

Option 3--Alternative Action

Should the President determine that the threatened impairment of
national security does not warrant immediate adjustment of uranium
imports at this time but that alternative action should be taken to
improve the condition of the U.S. uranium industry to enable the U.S.
industry to supply 25 percent of U.S nuclear power utilities annual
consumption of uranium U308 concentrate, the President could direct the
Department of Defense (DOD) and the Department of Energy (DOE) to
report to the President within 90 days on options for increasing the
economic viability of the domestic uranium mining industry. The report
should include, but not be limited to, recommendations for: (1) The
elimination of regulatory constraints on domestic producers; (2)
incentives for increasing investment; and (3) ways to work with
likeminded allies to address unfair trade practices by SOE countries,
including through trade remedy actions and the negotiation of new rules
and best practices. The President could also direct the United States
Trade Representative to enter into negotiations with the SOE countries
to address the causes of excess uranium imports that threaten the
national security.
To complement the proposed alternative action, the Secretary
recommends that the Federal Energy Regulatory Commission (FERC) should
act promptly to ensure that regulated wholesale power market
regulations adequately compensate nuclear and other fuel-secure
generation resources. Specifically, FERC should determine whether
current market rules, which discriminate against secure nuclear fuel
generation resources in favor of intermittent resources, such as
natural gas, solar, and wind, result in unjust, unreasonable, and
unduly discriminatory rates that distort energy markets, harm
consumers, and undermine electric reliability. If so, FERC should
consider taking appropriate action to ensure that rates are just and
reasonable.
The Department of Commerce, in consultation with other appropriate
departments and agencies, will monitor the status of the U.S. uranium
industry and the effectiveness of this remedy and recommend to the
President if any additional measures are needed. Alternatively, the
Secretary may initiate another investigation under Section 232.
The Secretary also makes public policy recommendations for
additional measures that complement these three options.

II. Legal Framework

A. Section 232 Requirements

Section 232 provides the Secretary with the authority to conduct
investigations to determine the effect on the national security of the
United States of imports of any article. It authorizes the Secretary to
conduct an investigation if requested by the head of any department or
agency, upon application of an interested party, or upon his own
motion. See 19 U.S.C. 1862(b)(1)(A).
Section 232 directs the Secretary to submit to the President a
report with recommendations for ``action or inaction under this
section'' and requires the Secretary to advise the President if any
article ``is being imported into the United States in such quantities
or under such circumstances as to threaten to impair the national
security.'' See 19 U.S.C. 1862(b)(3)(A).
Section 232(d) directs the Secretary and the President to, in light
of the requirements of national security and without excluding other
relevant factors, give consideration to the domestic production needed
for projected national defense requirements and the capacity of the
United States to meet national security requirements. See 19 U.S.C.
1862(d).
Section 232(d) also directs the Secretary and the President to
``recognize the close relation of the economic welfare of the Nation to
our national security, and . . . take into consideration the impact of
foreign competition on the economic welfare of individual domestic
industries'' by examining whether any substantial unemployment,
decrease in revenues of government, loss of skills or investment, or
other serious effects resulting from the displacement of any domestic
products by excessive imports, or other factors, results in a
``weakening of our internal economy'' that may impair the national
security.\14\ See 19 U.S.C. 1862(d).
---------------------------------------------------------------------------

\14\ An investigation under Section 232 looks at excessive
imports for their threat to the national security, rather than
looking at unfair trade practices as in an antidumping
investigation.
---------------------------------------------------------------------------

Once an investigation has been initiated, Section 232 mandates that
the Secretary provide notice to the Secretary of Defense that such an
investigation has been initiated. Section 232 also

[[Page 41547]]

requires the Secretary to do the following:
(1) ``Consult with the Secretary of Defense regarding the
methodological and policy questions raised in [the] investigation;''
(2) ``Seek information and advice from, and consult with,
appropriate officers of the United States;'' and
(3) ``If it is appropriate and after reasonable notice, hold public
hearings or otherwise afford interested parties an opportunity to
present information and advice relevant to such investigation.'' \15\
See 19 U.S.C. 1862(b)(2)(A)(i)-(iii).
---------------------------------------------------------------------------

\15\ Department regulations (i) set forth additional authority
and specific procedures for such input from interested parties, see
15 CFR 705.7 and 705.8, and (ii) provide that the Secretary may vary
or dispense with those procedures ``in emergency situations, or when
in the judgment of the Department, national security interests
require it.'' Id., 705.9.
---------------------------------------------------------------------------

As detailed in the report, all of the requirements set forth above
have been satisfied.
In conducting the investigation, Section 232 permits the Secretary
to request that the Secretary of Defense provide an assessment of the
defense requirements of the article that is the subject of the
investigation. See 19 U.S.C. 1862(b)(2)(B).
Upon completion of a Section 232 investigation, the Secretary is
required to submit a report to the President no later than 270 days
after the date on which the investigation was initiated. See 19 U.S.C.
1862(b)(3)(A). The report must:
(1) Set forth ``the findings of such investigation with respect to
the effect of the importation of such article in such quantities or
under such circumstances upon the national security;''
(2) Set forth, ``based on such findings, the recommendations of the
Secretary for action or inaction under this section;'' and
(3) ``If the Secretary finds that such article is being imported
into the United States in such quantities or under such circumstances
as to threaten to impair the national security . . . so advise the
President . . . See 19 U.S.C. 1862(b)(3)(A).
All unclassified and non-proprietary portions of the report
submitted by the Secretary to the President must be published.
Within 90 days after receiving a report in which the Secretary
finds that an article is being imported into the United States in such
quantities or under such circumstances as to threaten to impair the
national security, the President shall:
(1) ``Determine whether the President concurs with the finding of
the Secretary''; and
(2) ``If the President concurs, determine the nature and duration
of the action that, in the judgment of the President, must be taken to
adjust the imports of the article and its derivatives so that such
imports will not threaten to impair the national security'' (see 19
U.S.C. 1862(c)(1)(A)).

B. Discussion

While Section 232 does not specifically define ``national
security,'' both Section 232, and the implementing regulations at 15
CFR part 705, contain non-exclusive lists of factors that the Secretary
must consider in evaluating the effect of imports on the national
security. Congress in Section 232 explicitly determined that ``national
security'' includes, but is not limited to, ``national defense''
requirements. See 19 U.S.C. 1862(d)).
The Department in 2001 determined that ``national defense''
includes both defense of the United States directly and the ``ability
to project military capabilities globally.'' \16\ The Department also
concluded in 2001 that, ``In addition to the satisfaction of national
defense requirements, the term ``national security'' can be interpreted
more broadly to include the general security and welfare of certain
industries, beyond those necessary to satisfy national defense
requirements, which are critical to the minimum operations of the
economy and government.'' The Department called these ``critical
industries.'' \17\ This report once again uses these reasonable
interpretations of `national defense'' and ``national security.''
However, this report uses the more recent 16 critical infrastructure
sectors identified in Presidential Policy Directive 21 \18\ instead of
the 28 industry sectors used by the Bureau of Export Administration in
the 2001 Report.\19\
---------------------------------------------------------------------------

\16\ Department of Commerce, Bureau of Export Administration;
The Effects of Imports of Iron Ore and Semi-Finished Steel on the
National Security; Oct. 2001 (``2001 Iron and Steel Report'') at 5.
\17\ Id.
\18\ Presidential Policy Directive 21; Critical Infrastructure
Security and Resilience; February 12, 2013 (``PPD-21'').
\19\ See Op. Cit. at 16.
---------------------------------------------------------------------------

Section 232 directs the Secretary to determine whether imports of
any article are being made ``in such quantities'' or ``under such
circumstances'' that those imports ``threaten to impair the national
security.'' See 19 U.S.C. 1862(b)(3)(A). The statutory construction
makes clear that either the quantities or the circumstances, standing
alone, may be sufficient to support an affirmative finding. They may
also be considered together, particularly where the circumstances act
to prolong or magnify the impact of the quantities being imported.
The statute does not define a threshold for when ``such
quantities'' of imports are sufficient to threaten to impair the
national security, nor does it define the ``circumstances'' that might
qualify.
Likewise, the statute does not require a finding that the
quantities or circumstances are impairing the national security.
Instead, the threshold question under Section 232 is whether those
quantities or circumstances ``threaten to impair the national
security.'' See 19 U.S.C. 1862(b)(3)(A). This makes evident that
Congress expected an affirmative finding under Section 232 before an
actual impairment of the national security. \20\
---------------------------------------------------------------------------

\20\ The 2001 Iron and Steel Report used the phrase
``fundamentally threaten to impair'' when discussing how imports may
threaten to impair national security. See 2001 Iron and Steel Report
at 7 and 37. Because the term ``fundamentally'' is not included in
the statutory text and could be perceived as establishing a higher
threshold, the Secretary expressly does not use the qualifier in
this report. The statutory threshold in Section 232(b)(3)(A) is
unambiguously ``threaten to impair'' and the Secretary adopts that
threshold without qualification. 19 U.S.C. 1862(b)(3)(A).
---------------------------------------------------------------------------

Section 232(d) contains a list of factors for the Secretary to
consider in determining if imports ``threaten to impair the national
security''\21\ of the United States, and this list is mirrored in the
implementing regulations. See 19 U.S.C. 1862(d) and 15 CFR 705.4.
Congress was careful to note twice in Section 232(d) that the list
provided, while mandatory, is not exclusive.\22\ Congress' illustrative
list is focused on the ability of the United States to maintain the
domestic capacity to provide the articles in question as needed to
maintain the national security of the United States.\23\ Congress broke

[[Page 41548]]

the list of factors into two equal parts using two separate sentences.
The first sentence focuses directly on ``national defense''
requirements, thus making clear that ``national defense'' is a subset
of the broader term ``national security.'' The second sentence focuses
on the broader economy and expressly directs that the Secretary and the
President ``shall recognize the close relation of the economic welfare
of the Nation to our national security.'' \24\ See 19 U.S.C. 1862(d).
---------------------------------------------------------------------------

\21\ 19 U.S.C. 1862(b)(3)(A).
\22\ See 19 U.S.C. 1862(d) (``the Secretary and the President
shall, in light of the requirements of national security and without
excluding other relevant factors . . .'' and ``serious effects
resulting from the displacement of any domestic products by
excessive imports shall be considered, without excluding other
factors . . .'').
\23\ This reading is supported by Congressional findings in
other statutes. See, e.g., 15 U.S.C. 271(a)(1)(``The future well-
being of the United States economy depends on a strong manufacturing
base . . . '') and 50 U.S.C. 4502(a)(``Congress finds that--(1) the
security of the United States is dependent on the ability of the
domestic industrial base to supply materials and services . . .
(2)(C) to provide for the protection and restoration of domestic
critical infrastructure operations under emergency conditions . . .
(3) . . . the national defense preparedness effort of the United
States government requires--(C) the development of domestic
productive capacity to meet--(ii) unique technological requirements
. . . (7) much of the industrial capacity that is relied upon by the
United States Government for military production and other national
defense purposes is deeply and directly influenced by--(A) the
overall competitiveness of the industrial economy of the United
States; and (B) the ability of industries in the United States, in
general, to produce internationally competitive products and operate
profitably while maintaining adequate research and development to
preserve competitiveness with respect to military and civilian
production; and (8) the inability of industries in the United
States, especially smaller subcontractors and suppliers, to provide
vital parts and components and other materials would impair the
ability to sustain the Armed Forces of the United States in combat
for longer than a short period.'').
\24\ Accord 50 U.S.C. 4502(a).
---------------------------------------------------------------------------

In addition to ``national defense'' requirements, two of the
factors listed in the second sentence of Section 232(d) are
particularly relevant in this investigation. Both are directed at how
``such quantities'' of imports threaten to impair national security See
19 U.S.C. 1862(b)(3)(A). In administering Section 232, the Secretary
and the President are required to ``take into consideration the impact
of foreign competition on the economic welfare of individual domestic
industries'' and any ``serious effects resulting from the displacement
of any domestic products by excessive imports'' in ``determining
whether such weakening of our internal economy may impair the national
security.'' See 19 U.S.C. 1862(d).
Another factor, not on the list, that the Secretary found to be
relevant is the presence of global excess supply of uranium. This
excess supply results in uranium imports occurring ``under such
circumstances'' that they threaten to impair the national security. See
19 U.S.C. 1862(b)(3)(A). The Secretary considers excess global uranium
supply as a relevant circumstance because state-owned enterprises have
maintained or increased uranium production, and reduced prices,
notwithstanding declining market conditions. At the same time, market
producers, including U.S. producers, have decreased production under
these market conditions. This excess supply means that U.S. uranium
producers, for the foreseeable future, face increasing competition from
state-owned uranium producers as well as foreign market-based
competitors.
After careful examination of the facts in this investigation, the
Secretary has concluded that excessive imports of uranium in the
present circumstances are weakening our internal economy and threaten
to impair the national security as defined in Section 232. Several
important factors support this conclusion, including the global excess
uranium supply due to non-market based production by state-owned
enterprises, the resulting near total dependence of U.S. nuclear power
production on uranium imports, and the impact that the loss of a
domestic U.S. uranium production capacity and workforce would have on
the nation's ability to respond to potential national emergencies.

III. Investigation Process

A. Initiation of Investigation

On January 16, 2018, Energy Fuel Resources (US) Inc. and UR-Energy
USA Inc. (hereafter ``Petitioners'') petitioned the Secretary to
conduct an investigation under Section 232 of the Trade Expansion Act
of 1962, as amended (19 U.S.C. 1862), to determine the effect of
imports of uranium on the national security.
Upon receipt of the petition, the Department carefully reviewed the
material facts outlined in the petition. Initial discussions were held
with other bureaus within the Department of Commerce as well as with
other interested parties at the Departments of Defense and Energy.
Legal counsel at the Department also carefully reviewed the petition to
ensure it met the requirements of the Section 232 statute and the
implementing regulations. Subsequently, on July 18, 2018, the
Department accepted the petition and initiated the investigation.
Pursuant to Section 232(b)(1)(b), the Department notified the U.S.
Department of Defense with a July 18, 2018 letter from Secretary Ross
to the Secretary of Defense, James Mattis (see Appendix A).
On July 25, 2018, the Department published a Federal Register
Notice (see Appendix B--Federal Register, Vol. 83, No. 143, 35,204-
35,205) announcing the initiation of an investigation to determine the
effect of imports of uranium on the national security. The notice also
announced the opening of the public comment period.

B. Public Comments

On July 25, 2018, the Department invited interested parties to
submit written comments, opinions, data, information, or advice
relevant to the criteria listed in Section 705.4 of the National
Security Industrial Base Regulations (15 CFR 705.4) as they affect the
requirements of national security, including the following:
(a) Quantity of the articles subject to the investigation and other
circumstances related to the importation of such articles;
(b) Domestic production capacity needed for these articles to meet
projected national defense requirements;
(c) The capacity of domestic industries to meet projected national
defense requirements;
(d) Existing and anticipated availability of human resources,
products, raw materials, production equipment, facilities, and other
supplies and services essential to the national defense;
(e) Growth requirements of domestic industries needed to meet
national defense requirements and the supplies and services including
the investment, exploration and development necessary to assure such
growth;
(f) The impact of foreign competition on the economic welfare of
any domestic industry essential to our national security;
(g) The displacement of any domestic products causing substantial
unemployment, decrease in the revenues of government, loss of
investment or specialized skills and productive capacity, or other
serious effects;
(h) Relevant factors that are causing or will cause a weakening of
our national economy; and
(i) Any other relevant factors.
The public comment period was originally scheduled to end on
September 10, 2018. Following requests from the general public, the
Department extended the deadline from September 10 to September 25 (see
Appendix B--Federal Register Vol. 83, No. 175, 45,595-45,596). The
Department received 1,019 written submissions concerning this
investigation. Representative samples were grouped together then 837
comments were posted on <a href="http://Regulations.gov">Regulations.gov</a> for public review. Parties who
submitted comments included firms representing all parts of the nuclear
fuel cycle, representatives of U.S. federal, state and local
governments, foreign governments, as well as other concerned
organizations. All public comments were carefully reviewed and factored
into the investigative process. The public comments of key stakeholders
are summarized in Appendix C, along

[[Page 41549]]

with a link to the docket (BIS-2018-0011) where all public comments can
be viewed in full on <a href="http://Regulations.gov">Regulations.gov</a>.
Due to the limited number of firms engaged in the U.S. uranium
industry and in nuclear power generation, it was determined that a
public hearing was not necessary in order to conduct a comprehensive
investigation. In lieu of holding a public hearing on this
investigation, the Department issued two separate mandatory surveys
(see Appendix D and Appendix E) to participants in the U.S. front-end
uranium industry and the U.S. nuclear power generation sector, which
collected both qualitative and quantitative information. The front-end
survey was sent to 34 companies engaged in uranium mining and milling,
uranium concentrate production, uranium enrichment, and nuclear fuel
fabrication. The nuclear power generation survey was sent to all 24
operators of U.S. nuclear power plants and covered 98 reactors.
The surveys provided an opportunity for organizations to disclose
confidential and non-public information needed by the Department to
conduct a thorough investigation. These mandatory surveys were
conducted using statutory authority pursuant to Section 705 of the
Defense Production Act of 1950, as amended (50 U.S.C. 4555), and
collected detailed information concerning factors such as imports/
exports, production, capacity utilization, employment, operating
status, global competition, and financial information. The resulting
aggregate data provided the Department with detailed industry
information that was otherwise not publicly available and was needed to
effectively conduct analysis for this investigation.
Responses to the Department's surveys were required by law (50
U.S.C. 4555). Information furnished in the survey responses is deemed
confidential and will not be published or disclosed except in
accordance with Section 705 of the DPA. Section 705 of the DPA
prohibits the publication or disclosure of this information unless the
President determines that the withholding of such information is
contrary to the interest of the national defense. Information will not
be shared with any non-government entity other than in aggregate form.

C. Site Visits and Information Gathering Activities

To obtain additional information on the U.S. uranium industry and
the U.S. nuclear power generation sector, the Department conducted site
visits to several uranium and nuclear power generation facilities:
1) Calvert Cliffs Nuclear Power Plant in Lusby, Maryland. This is a
double reactor facility.
2) Three uranium mines: La Sal (Utah--Conventional Mine), Nichols
Ranch (Wyoming--In Situ facility), and Lost Creek (Wyoming--In Situ
facility).
(3) White Mesa Mill in Blanding, Utah. This facility is the only
fully-licensed and operating conventional uranium mill in the U.S.
In order to gain insights into the U.S. uranium industry's
challenges, information gathering activities and meetings were held
with representatives of domestic and international uranium producers,
associations, power generators, foreign governments, and others
interested parties.

D. Interagency Consultation

The Department consulted with the Department of Defense including
the Office of Industrial Base, Defense Logistics Agency, and the
Department of the Navy regarding methodological and policy questions
that arose during the investigation.
The Department also consulted with other U.S. Government agencies
with expertise and information regarding the uranium industry including
the Department of Energy, the Energy Information Administration, the
National Nuclear Security Administration, the International Trade
Administration, the Department of State, the Office of the United
States Trade Representative, the Nuclear Regulatory Commission, the
U.S. Geological Survey, and the Federal Energy Regulatory Commission.

E. Review of the Department of Commerce 1989 Section 232 Investigation
on Uranium Imports

The Department reviewed the previous Section 232 Investigation on
the Effect of Uranium Imports on National Security from September 1989.
This investigation, requested by the Secretary of Energy, determined
that U.S. utilities imported a significant share of their uranium
requirements. In 1987, U.S. utilities imported approximately 51.1
percent of their requirements, and the investigation projected that
this level would reach 70.8 percent by 1993.\25\ The 1989 investigation
also found that U.S. uranium producers faced strong foreign
competition, particularly from the Soviet Union. It further reported
that employment in the domestic industry was steadily decreasing.\26\
---------------------------------------------------------------------------

\25\ 1989 Report, Letter Requesting 232 Investigation, also III-
21.
\26\ 1989 Report, III-2, III-25.
---------------------------------------------------------------------------

[TEXT REDACTED]\27\ Consequently, the Secretary concluded that
uranium was not being imported into the United States under such
quantities or circumstances that threatened to impair the national
security.
---------------------------------------------------------------------------

\27\ Ibid., V-4 to V-5.
---------------------------------------------------------------------------

The Department took note of the methodologies and analytic
approaches used to conduct the 1989 investigation and evaluated its
findings and conclusion in light of the current state of the U.S.
uranium industry. Further discussion of the September 1989 Section 232
Investigation is in Appendix G.

IV. Product Scope of the Investigation

The scope of this investigation defined uranium products at the
Harmonized Tariff Schedule of the United States (HTS) 10-digit level.
The eight product categories and related HTS codes covered by this
report (see Figure 1B) are produced by U.S. uranium companies engaged
in the nuclear fuel cycle, and are imported for use by U.S. nuclear
power operators. Detailed information was collected in the Department's
survey responses from U.S. uranium producers and U.S. nuclear power
operators regarding products covered by the HTS codes. These products
are used in, or otherwise support, various national defense and
critical infrastructure applications.

[[Page 41550]]

Figure 1B: Uranium Product Scope of the Investigation
------------------------------------------------------------------------
Heading/subheading/product 10 Digit HTS code
------------------------------------------------------------------------
Imports of uranium ores and concentrates, .........................
natural uranium compounds, and all forms of
enriched uranium:
<bullet> Uranium Ore and Concentrates.... 2612.10.00.00
<bullet> Uranium Compounds (Oxide, Oxide 2844.10.20.10
Hexafluoride, and Other). Hexafluoride
2844.10.20.25
Other 2844.10.20.55
<bullet> Uranium enriched in U235 and its Oxide 2844.20.00.10
compounds; alloys, dispersions Hexafluoride
(including cermets), ceramic products 2844.20.00.20
and mixtures containing uranium enriched Other 2844.20.00.30
in U235.
Imports of natural uranium metal and forms of .........................
natural uranium other than compounds:
<bullet> Uranium Metal................... 2844.10.10.00
<bullet> Other........................... 2844.10.50.00
Uranium depleted in U235 and its compounds; .........................
thorium and its compounds; alloys,
dispersions (including cermets), ceramic
products and mixtures containing uranium
depleted in U235, thorium, or compounds of
these products:
<bullet> Uranium Compounds (Depleted).... Oxide 2844.30.20.10
Fluorides 2844.30.20.20
Other 2844.30.20.50
<bullet> Other (Depleted)................ Uranium Metal
2844.30.50.10
Nuclear reactors; fuel elements (cartridges), .........................
non-irradiated, for nuclear reactors;
machinery and apparatus for isotopic
separation; parts thereof:
<bullet> Fuel elements (cartridges), non- 8401.30.00.00
irradiated, and parts thereof.
------------------------------------------------------------------------
Source: United States International Trade Commission and U.S. Department
of Commerce, Bureau of Industry and Security.

In addition to the uranium products identified in Figure 1, this
report examines the provision of three services in the nuclear fuel
cycle: Conversion,\28\ enrichment,\29\ and fuel fabrication.\30\
Transactions for these services are examined separately from
transactions involving uranium hexafluoride (UF6), enriched uranium
product (EUP) and finished fuel assemblies (fuel for nuclear power
plants). The Department made this distinction because U.S. nuclear
power operators, the end-consumer of most uranium products in the U.S.,
purchase services and finished products for UF6, EUP, and finished fuel
assemblies.
---------------------------------------------------------------------------

\28\ Conversion is defined as the conversion of uranium
concentrate (U3O8) to uranium hexafluoride (UF6).
\29\ Enrichment is defined as the process that increases the
concentration of Uranium-235 isotopes within a quantity of natural
uranium.
\30\ Fuel fabrication is defined as the process by which
enriched uranium is converted to uranium dioxide powder that is then
pressed into pellets and placed in fuel rods. Bundles of these fuel
rods become fuel assemblies that are placed in nuclear reactors.
---------------------------------------------------------------------------

A U.S. utility, for example, may opt to buy a specified amount of
UF6, EUP, or finished fuel assemblies directly from a producer.
Alternatively, it may directly contract for conversion, enrichment, or
fuel fabrication services using material owned by the utility. These
services are regularly procured both inside and outside the United
States.
The Department determined that assessing U.S. utilities'
procurement of UF6 or EUP through conversion, enrichment, and fuel
fabrication services was critical to understanding the effects of
imports of uranium products on U.S. national security. Information
regarding conversion, enrichment, and fuel fabrication services was
collected and incorporated into the investigation via the front-end
uranium industry survey.
This report also examines the state of the U.S. nuclear power
generation sector. The Department is aware that the principal customers
of uranium are nuclear power reactor operators, thus examination of the
U.S. nuclear power generation industry through a comprehensive
Department survey was necessary to ensure a complete analysis of the
effect of uranium imports on the national security. The Secretary's
recommendations consider the interdependence of the U.S. uranium
industry and the U.S. nuclear power generation sector.

V. Background on the U.S. Nuclear Industry

A. Summary of the U.S. Uranium Fuel Cycle

The processes that prepare uranium for use in nuclear power
generation constitute the front-end of the nuclear fuel cycle. In the
United States, these front-end processes consist of uranium mining,
milling, conversion, enrichment, and nuclear fuel fabrication. The
nuclear fuel cycle and its products at each stage are shown in Figure
2.

[[Page 41551]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.003

Uranium mining is the first step of the cycle. Several techniques
are used for uranium mining including open pit, underground, and in-
situ recovery (ISR). The ISR technique, used by all active U.S. uranium
mining operations today, involves pumping a slightly acidic solution
into ore bodies to dissolve uranium ore in preparation for
extraction.\31\
---------------------------------------------------------------------------

\31\ ``Nuclear Explained: The Nuclear Fuel Cycle.'' U.S. Energy
Information Administration. <a href="https://www.eia.gov/energyexplained/index.php?page=nuclear_fuel_cycle">https://www.eia.gov/energyexplained/index.php?page=nuclear_fuel_cycle</a>.
---------------------------------------------------------------------------

The ore-bearing solution recovered from uranium mining is then
transferred to a facility for processing into tri-uranium octoxide
concentrate (U3O8), commonly referred to as uranium concentrate. For
open pit and underground mines, uranium milling involves crushing ore
and treating it with chemicals in order to produce U3O8.\32\
---------------------------------------------------------------------------

\32\ ``Conventional Uranium Mills.'' United States Nuclear
Regulatory Commission. <a href="https://www.nrc.gov/materials/uranium-recovery/extraction-methods/conventional-mills.html">https://www.nrc.gov/materials/uranium-recovery/extraction-methods/conventional-mills.html</a>.
---------------------------------------------------------------------------

In 2018, all domestic uranium concentrate was produced by five ISR
facilities located in Nebraska and Wyoming, and one milling operation
located in Utah.\33\ These facilities were the only operating uranium
mines and mill in the U.S. in 2018, thus no uranium concentrate was
produced by conventional underground or open-pit mines during the same
year. Another five mines are currently licensed, but idled (see Figures
3 and 4).\34\
---------------------------------------------------------------------------

\33\ U.S. Energy Information Administration. 2017 Domestic
Uranium Production Report. (Washington, DC: 2017) <a href="https://www.eia.gov/uranium/production/annual/pdf/dupr.pdf">https://www.eia.gov/uranium/production/annual/pdf/dupr.pdf</a>.
\34\ ``Locations of Uranium Recovery Facilities.'' United States
Nuclear Regulatory Commission. <a href="https://www.nrc.gov/info-finder/materials/uranium/">https://www.nrc.gov/info-finder/materials/uranium/</a>.

Figure 3: U.S. Fuel Cycle Facilities--Mines
[In Situ Recovery]
----------------------------------------------------------------------------------------------------------------
Project name Company name Location [TEXT REDACTED]
----------------------------------------------------------------------------------------------------------------
Crow Butte Operation............. Cameco.............. Nebraska............. [TEXT REDACTED].
Lost Creek Project............... Ur-Energy (Lost Wyoming.............. [TEXT REDACTED].
Creek ISR LLC).
Smith Ranch-Highland Operation... Power Resource Inc., Wyoming.............. [TEXT REDACTED].
dba Cameco
Resources.
Ross CPP......................... Strata Energy Inc... Wyoming.............. [TEXT REDACTED].
Nichols Ranch ISR Project........ Energy Fuels Wyoming.............. [TEXT REDACTED].
Resources Corp.
(Uranerz Energy
Corporation).
Willow Creek Project (Christenson Uranium One USA, Inc Wyoming.............. [TEXT REDACTED].
Ranch & Irigaray).
Alta Mesa Project................ Energy Fuels Texas................ [TEXT REDACTED].
Resources Corp
(Mestena Uranium
LLC).
Hobson ISR Plant................. South Texas Mining Texas................ [TEXT REDACTED].
Venture.
La Palangana..................... South Texas Mining Texas................ [TEXT REDACTED].
Venture.

[[Page 41552]]

Goliad ISR Uranium Project....... Uranium Energy Corp. Texas................ [TEXT REDACTED].
----------------------------------------------------------------------------------------------------------------
Source: [TEXT REDACTED]; U.S. Energy Information Administration--Annual Domestic Uranium Production Report
(2018).
[TEXT REDACTED].

Figure 4: U.S. Fuel Cycle Facilities--Mills, 2018
----------------------------------------------------------------------------------------------------------------
Project name Company name Location [TEXT REDACTED]
----------------------------------------------------------------------------------------------------------------
White Mesa Mill.................. EFR White Mesa LLC.. Utah................. [TEXT REDACTED].
Shootaring Canyon Uranium Mill... Anfield Resources... Utah................. [TEXT REDACTED].
Sweetwater Uranium Project....... Kennecott Uranium Wyoming.............. [TEXT REDACTED].
Company.
Pinon Ridge Mill................. Western Uranium/ Colorado............. [TEXT REDACTED].
Pinon Ridge
Resources
Corporation.
Sheep Mountain................... Energy Fuels Wyoming Wyoming.............. [TEXT REDACTED].
Inc.
----------------------------------------------------------------------------------------------------------------
Source: [TEXT REDACTED] U.S. Energy Information Administration--Annual Domestic Uranium Production Report
(2018).
[TEXT REDACTED].

U.S.-based mining and milling facilities have dramatically declined
over recent years, falling from eighteen mines and four mills in 2009
to five operating mines and one operating mill in 2018. These
facilities have shut down or idled for several reasons, including
competition from subsidized foreign imports, low spot prices, as well
as costs and delays associated with the U.S. permitting process.
Similarly, production of uranium concentrate (U308) in the United
States has declined, dropping 95 percent from 43.7 million pounds in
1980 \35\ to 1.97 million in 2018. Kazakhstan, Canada, and Australia
were the top suppliers in 2017, producing roughly 46.8, 26.2, and 11.8
million pounds of uranium concentrate, respectively.\36\
---------------------------------------------------------------------------

\35\ ``Annual Energy Review 2011.'' U.S. Energy Information
Administration (Washington, DC: 2012). <a href="https://www.eia.gov/totalenergy/data/annual/showtext.php?t=ptb0903">https://www.eia.gov/totalenergy/data/annual/showtext.php?t=ptb0903</a>.
\36\ ``Uranium Production Figures, 2008-2017.'' World Nuclear
Association. <a href="http://www.world-nuclear.org/information-library/facts-and-figures/uranium-production-figures.aspx">http://www.world-nuclear.org/information-library/facts-and-figures/uranium-production-figures.aspx</a>.
---------------------------------------------------------------------------

The third step in the fuel cycle is conversion, where a gas is used
to facilitate enrichment of the U-235 isotope in uranium concentrate
into natural uranium (UF6). ConverDyn, the sole U.S. uranium conversion
facility, is currently in standby/idled (see Figure 5).

Figure 5: U.S. Fuel Cycle Facilities--Conversion, 2018
----------------------------------------------------------------------------------------------------------------
Project name Company name Location Operating status
----------------------------------------------------------------------------------------------------------------
ConverDyn Metropolis Works........ Honeywell Energy/ Metropolis, IL............ Standby/Idle.
ConverDyn.
----------------------------------------------------------------------------------------------------------------
Source: [TEXT REDACTED] U.S. Nuclear Regulatory Commission.

ConverDyn began producing UF6 for commercial use in the 1960s and
supplied commercial conversion services to the U.S. and global uranium
market, competing against suppliers in Canada, Russia, France, and
China.\37\ However, it announced a suspension of operations in late
2017 related to ongoing challenges facing the nuclear fuel
industry.\38\ [TEXT REDACTED] Furthermore, the Russians, Chinese, and
French bundle conversion services as part of their nuclear fuel sales.
[TEXT REDACTED] \39\
---------------------------------------------------------------------------

\37\ ``Conversion and Deconversion.'' World Nuclear Association.
<a href="http://www.world-nuclear.org/information-library/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/conversion-and-deconversion.aspx">http://www.world-nuclear.org/information-library/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/conversion-and-deconversion.aspx</a>.
\38\ U.S. Energy Information Administration. 2017 Domestic
Uranium Production Report. (Washington, DC: 2017) <a href="https://www.eia.gov/uranium/production/annual/pdf/dupr.pdf">https://www.eia.gov/uranium/production/annual/pdf/dupr.pdf</a>.
\39\ [TEXT REDACTED].
---------------------------------------------------------------------------

Uranium enrichment, the fourth stage in the fuel cycle, produces
material to be used in the operation of nuclear reactors. Natural
uranium (UF6) consists of three distinct isotopes: U-234, U-235, and U-
238. The enrichment process alters the isotopic makeup in order to
increase the prevalence of the U-235 isotope. The U-235 isotope must be
enriched so that fission, or splitting of the U-235 atoms, can occur to
produce energy.40 41 Gaseous centrifuges are the industry
standard for uranium enrichment into low-enriched uranium (LEU) or
high-enriched uranium (HEU). LEU is used by commercial power reactors
as fuel where the U-235 is enriched to between three and five percent.
HEU is used in naval ships, submarines, nuclear weapons, and some
research reactors,42 43 with enrichment at 20 percent.
---------------------------------------------------------------------------

\40\ ``Uranium Enrichment.'' United States Nuclear Regulatory
Commission. <a href="https://www.nrc.gov/materials/fuel-cycle-fac/ur-enrichment.html">https://www.nrc.gov/materials/fuel-cycle-fac/ur-enrichment.html</a>.
\41\ ``Uranium Enrichment.'' World Nuclear Association. <a href="http://www.world-nuclear.org/information-library/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/uranium-enrichment.aspx">http://www.world-nuclear.org/information-library/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/uranium-enrichment.aspx</a>.
\42\ ``Uranium Downblending.'' WISE Uranium Project. <a href="http://www.wise-uranium.org/eudb.html">http://www.wise-uranium.org/eudb.html</a>.
\43\ Highly Enriched Uranium (HEU) is uranium with U-235 content
of at least 20 percent. Naval reactors and weapons applications
utilize HEU enriched to more than 90 percent U-235.

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

[[Page 41553]]

The United States first used gaseous diffusion uranium enrichment
plants in the 1940s during the Second World War. Additional plants were
built in the 1950s for defense needs and later opened for commercial
enrichment use. These plants are located in Paducah, Kentucky and
Piketon, Ohio, but both closed by 2013.\44\ Today, URENCO USA (UUSA) is
the only uranium enrichment company operating in the United States,
serving the commercial power reactor market. UUSA is a subsidiary of
URENCO Group, a consortium owned by the governments of the United
Kingdom and the Netherlands, as well as two German utilities (see
Figure 6). UUSA employs gas centrifuge enrichment at its Louisiana
Energy Services (LES) plant in Eunice, New Mexico to produce LEU for
nuclear reactor fuel.\45\ Per the 1992 Washington Agreement governing
the LES facility's construction and operation, the plant cannot be used
to produce enriched uranium for U.S. defense purposes. However, in
January 2019, DOE announced plans to reopen the Piketon facility to
demonstrate a U.S.-origin centrifuge technology for production of High-
Assay Low Enriched Uranium (HALEU) in support of advanced reactor
development efforts.\46\
---------------------------------------------------------------------------

\44\ ``Nuclear Power in the USA.'' World Nuclear Association.
<a href="http://www.world-nuclear.org/information-library/country-profiles/countries-t-z/usa-nuclear-power.aspx">http://www.world-nuclear.org/information-library/country-profiles/countries-t-z/usa-nuclear-power.aspx</a>.
\45\ ``Uranium Enrichment.'' United States Nuclear Regulatory
Commission. <a href="https://www.nrc.gov/materials/fuel-cycle-fac/ur-enrichment.html">https://www.nrc.gov/materials/fuel-cycle-fac/ur-enrichment.html</a>.
\46\ ``DOE Plans $115M Investment in Uranium Enrichment
Project.'' U.S. News & World Report, January 8, 2019. <a href="https://www.usnews.com/news/best-states/ohio/articles/2019-01-08/doe-plans-115m-investment-in-uranium-enrichment-project">https://www.usnews.com/news/best-states/ohio/articles/2019-01-08/doe-plans-115m-investment-in-uranium-enrichment-project</a>.

Figure 6: U.S. Fuel Cycle Facilities--Enrichment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Project name Company name Ownership Enrichment type Location Operating status
--------------------------------------------------------------------------------------------------------------------------------------------------------
Louisiana Energy Services (LES). URENCO USA......... United Kingdom, the Gas Centrifuge.......... New Mexico.............. Operating.
Netherlands,
Germany.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: U.S. Nuclear Regulatory Commission.

The fifth and final step in the front-end nuclear fuel cycle is
fuel fabrication, where enriched uranium is formed into pellets and
then fabricated into fuel rods for fuel assemblies. Three active fuel
fabrication plants in the U.S. are licensed to transform low-enriched
uranium into fuel assemblies for commercial power reactors:
Westinghouse, GE, and Framatome (see Figure 7).
Naval reactors require HEU fuel and their fuel assemblies come from
a different supply base. All uranium used in the manufacture of naval
fuel assemblies is from the Department of Energy's stockpile and is not
currently purchased on the commercial market. The naval fuel is
manufactured by BWX Technologies (BWXT) at its Nuclear Fuel Services
(NFS) facility in Tennessee. Additionally, BWXT downblends high-
enriched uranium (HEU) to produce low-enriched uranium (LEU), which is
needed to produce the tritium required for nuclear weapons.\47\
---------------------------------------------------------------------------

\47\ ``Nuclear Fuel Fabrication--Current Issues (USA).'' WISE
Uranium Project.

Figure 7: U.S. Fuel Cycle Facilities--Fuel Fabrication, 2018
----------------------------------------------------------------------------------------------------------------
Company name Ownership NRC category Location Operating status
----------------------------------------------------------------------------------------------------------------
BWXT Nuclear Operations Group... United States..... Category 1........ Virginia.......... Operating.
Nuclear Fuel Services, Inc...... United States..... Category 1........ Tennessee......... Operating.
Framatome, Inc.................. France............ Category 3........ Washington........ Operating.
Global Nuclear Fuel--Americas United States..... Category 3........ North Carolina.... Operating.
LLC (General Electric).
Westinghouse.................... United States..... Category 3........ South Carolina.... Operating.
----------------------------------------------------------------------------------------------------------------
Category 1: High Strategic Significance.
Category 3: Low Strategic Significance (commercial services).
Source: U.S. Nuclear Regulatory Commission.

B. Summary of U.S. Nuclear Power Generation Industry

The first U.S. commercial nuclear reactor came online in 1958, and
most active U.S. reactors were built between 1967 and 1990. Originally
certified for 40 years of operation, the lifespans of 85 reactors have
been extended by the Nuclear Regulatory Commission (NRC) for an
additional 20 years. These certifications followed assessments
confirming that they were safe to continue operating well after the end
of their original design life.
As of October 2018, 98 reactors were located at 58 different
facilities in 28 states across the country \48\ (see Figure 8). The two
main commercial reactor designs used for power generation are
pressurized-water reactors (PWR) and boiling-water reactors (BWR), with
65 and 33 operating in the U.S., respectively. These reactors have
varying designs, dimensions, and numbers of fuel rods in each fuel
assembly based on the six commercial power reactor manufacturers in the
United States: Allis-Chalmers, Babcock & Wilcox, Combustion
Engineering, General Atomics, General Electric, and Westinghouse.\49\
---------------------------------------------------------------------------

\48\ ``Monthly Energy Review March 2019.'' U.S. Energy
Information Administration. <a href="https://www.eia.gov/totalenergy/data/monthly/pdf/sec7_5.pdf">https://www.eia.gov/totalenergy/data/monthly/pdf/sec7_5.pdf</a>.
\49\ ``Fuel Fabrication.'' United States Nuclear Regulatory
Commission. <a href="https://www.nrc.gov/materials/fuel-cycle-fac/fuel-fab.html">https://www.nrc.gov/materials/fuel-cycle-fac/fuel-fab.html</a>.

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[[Page 41554]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.004

These reactors are important to produce steady-state baseload power
to the U.S., in contrast to hydro, solar, and wind, which have
fluctuating generating capabilities.50 51 Despite providing
a significant portion of the nation's electricity (more than 19
percent), a number of U.S. utilities have prematurely retired their
nuclear power reactors due to cost pressures resulting from distortions
in wholesale electricity market pricing mechanisms, subsidized
renewable energy, and lower natural gas prices. Since 2013, U.S.
electric utilities have permanently closed six nuclear power plants.
Another eight reactors are slated to be retired between 2019 and
2025.\52\ However, two new reactors are scheduled to come online by
2022. The domestic uranium industry is challenged by this shrinking
customer demand for their product in the United States (see Figures 9
and 10).
---------------------------------------------------------------------------

\50\ ``Frequently Asked Questions.'' U.S. Energy Information
Administration. <a href="https://www.eia.gov/tools/faqs/faq.php?id=207&t=3">https://www.eia.gov/tools/faqs/faq.php?id=207&t=3</a>.
\51\ ``Nuclear Power in the USA.'' World Nuclear Association.
<a href="http://www.world-nuclear.org/information-library/country-profiles/countries-t-z/usa-nuclear-power.aspx">http://www.world-nuclear.org/information-library/country-profiles/countries-t-z/usa-nuclear-power.aspx</a>.
\52\ U.S. Energy Information Administration. ``America's oldest
operating nuclear power plant to retire on Monday'' (September 14,
2018), <a href="https://www.eia.gov/todayinenergy/detail.php?id=37055">https://www.eia.gov/todayinenergy/detail.php?id=37055</a>.

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[[Page 41555]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.005

----------------------------------------------------------------------------------------------------------------
[TEXT REDACTED]
-----------------------------------------------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED]
----------------------------------------------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED]
[TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED]
[TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED]
[TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED]
[TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED]
[TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED] [TEXT REDACTED]
----------------------------------------------------------------------------------------------------------------
Source: [TEXT REDACTED].
[TEXT REDACTED].

The majority of the plants shut down due to cost-driven factors,
including competition from alternative generation sources such as
natural gas, solar, and wind, as well as additional capital
expenditures needed to meet NRC regulatory requirements. [TEXT
REDACTED]
Only one new reactor has been completed in the United States since
1996--Tennessee Valley Authority's Watts Bar 2 plant, which began
operating in 2016. Construction started on two commercial PWR reactors
in Georgia in 2013 and those are scheduled to begin operation in 2021.
In South Carolina, construction of two commercial reactors began in
2013, but cost overruns caused the projects to be abandoned in
2017.53 54 While the U.S. nuclear power industry is
declining, global demand for nuclear power plants is rising with no
less than 50 new reactors under construction in 15 countries. A
majority of the new builds are in Russia, China, India, the United Arab
Emirates, and South Korea.\55\
---------------------------------------------------------------------------

\53\ ``Nuclear Power in the USA.'' World Nuclear Association.
<a href="http://www.world-nuclear.org/information-library/country-profiles/countries-t-z/usa-nuclear-power.aspx">http://www.world-nuclear.org/information-library/country-profiles/countries-t-z/usa-nuclear-power.aspx</a>.
\54\ Stelloh, Tim. ``Construction Halted at South Carolina
Nuclear Power Plant.'' NBC News, July 31, 2017. <a href="https://www.nbcnews.com/news/us-news/construction-halted-south-carolina-nuclear-power-reactors-n788331">https://www.nbcnews.com/news/us-news/construction-halted-south-carolina-nuclear-power-reactors-n788331</a>.
\55\ ``Plans for New Reactors Worldwide.'' World Nuclear. <a href="http://www.world-nuclear.org/information-library/current-and-future-generation/plans-for-new-reactors-worldwide.aspx">http://www.world-nuclear.org/information-library/current-and-future-generation/plans-for-new-reactors-worldwide.aspx</a>.
---------------------------------------------------------------------------

VI. Global Uranium Market Conditions

A. Summary of the Global Uranium Market

Uranium, in various forms (``uranium''), is a globally-traded
commodity supplied primarily through privately negotiated contracts
with varying durations. Short-term contracts usually span less than two
years, mid-term contracts run between two to five years, and long-term
contracts can be in force for five years or more. Additionally, uranium
can be bought on ``spot,'' which are contracts with a one-time uranium
delivery (usually) for the entire contract, where the delivery occurs
within one year of contract execution. The spot market can be lower or
higher than the contract market. Since 2011, the number of spot, mid-
term, and long-term contracts for all front-end industry participants
has varied (see Figure 11). Of note, long-term contracts have declined
from 35 to just 19, and no short-term contracts were reported.

[[Page 41556]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.006

The spot market price of a pound of uranium averaged only $28.27 in
the last three months of 2018, and dropped even further to $25.75 in
April 2019. This is a 74 percent reduction since the recent price high
of $99.24 per pound in 2007.
According to Department survey respondents, the main factor causing
the current low spot market price of uranium is global excess uranium
supply, much of which is attributed to continued production of uranium
from state-owned enterprises in the aftermath of the Fukushima
incident. Low spot prices have significantly impacted the viability of
U.S. uranium producers. Mining companies operating in the U.S. have
been forced to idle operations due to low spot prices, and since 2009,
four companies have closed 10 mines with the intention to permanently
halt operations.
Additionally, the U.S. has approximately 1.28 million metric tons
of uranium in prognosticated uranium resources (the largest reserves in
the world \56\), much of which has not been developed specifically due
to low spot prices (see Figure 12).
---------------------------------------------------------------------------

\56\ Susan Hall and Margaret Coleman, U.S. Geological Survey,
Critical Analysis of World Uranium Resources, (2013) pp. 26-27.
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BILLING CODE 3510-33-P

[[Page 41557]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.007

Nuclear fuel prices are, however, impacted by more than just the
uranium spot market price. On the supply side, uranium prices are
affected by mine closures and the release of existing inventory for
sale. On the demand side, price is impacted by new reactor startups and
reactor closures (see Figure 13).
[GRAPHIC] [TIFF OMITTED] TN02AU21.008

[[Page 41558]]

Additionally, converters, enrichers, and fuel fabricators
experience specific market pressures, resulting in uranium products
that have slightly different price considerations. Department survey
data indicates that, on average, aggregate fuel acquisition accounts
for 25 percent of total facility operating costs. When looking at fuel
acquisition as a percentage of a nuclear power utilities' total
facility operating costs, the contribution of each stage of the front-
end nuclear fuel cycle is relatively small: Mining/milling and uranium
concentrate acquisition (10 percent), enrichment (8 percent), fuel
fabrication (5 percent), and conversion (2 percent) (see Figure 14).
[GRAPHIC] [TIFF OMITTED] TN02AU21.009

B. Uranium Transactions: Book Transfers and Flag Swaps

Unlike many commodities, exchanges of uranium between suppliers and
customers often take place without physical movement of material. This
occurs through book transfers and flag swaps.
Book Transfer
For the purposes of this investigation, a book transfer is defined
as a ``change of ownership of two quantities of material with all other
characteristics of the material being unchanged.'' \57\ Book transfers
are used to exchange material between two customers at a third-party
producer without having to physically ship or otherwise move material
(see Figure 15).
---------------------------------------------------------------------------

\57\ Swaps in the International Fuel Market, 7. World Nuclear
Association. <a href="http://www.world-nuclear.org/uploadedFiles/org/WNA/Publications/Working_Group_Reports/swaps-report-2015.pdf">http://www.world-nuclear.org/uploadedFiles/org/WNA/Publications/Working_Group_Reports/swaps-report-2015.pdf</a>, 7.

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[[Page 41559]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.010

Book transfers also can be used to convey payment for conversion or
enrichment services (see Figure 16).\58\
---------------------------------------------------------------------------

\58\ Ibid.
[GRAPHIC] [TIFF OMITTED] TN02AU21.011

Flag Swap
In certain cases, utilities and uranium industry producers may find
it necessary to conduct ``obligation swaps'' of material, a practice
commonly known as ``flag swapping.'' \59\ In the uranium industry,
obligations are defined as conditions assigned by a particular
country's government to a specific set of nuclear material. These
conditions control the use of nuclear material, including uranium, and
may restrict where it is shipped. For example, if such material has a
United States obligation, the material can only be used in accordance
with conditions established by the United States government.\60\
---------------------------------------------------------------------------

\59\ ``Swaps in the International Fuel Market.'' World Nuclear
Association. (2015). <a href="http://www.world-nuclear.org/uploadedFiles/org/WNA/Publications/Working_Group_Reports/swaps-report-2015.pdf">http://www.world-nuclear.org/uploadedFiles/org/WNA/Publications/Working_Group_Reports/swaps-report-2015.pdf</a>
\60\ In this example, the United States obligations associated
with material are established in U.S. peaceful nuclear cooperation
agreements, also known as 123 agreements. Section 123 of the Atomic
Energy Act of 1954 generally requires the entry into force of a
peaceful nuclear cooperation agreement prior to significant exports
of U.S. nuclear material or equipment. As of 2019, the United States
has in force approximately 23 of these agreements with foreign
partners. Congressional Research Service. Nuclear Cooperation with
Other Countries: A Primer, 1. (Washington, DC: 2019). <a href="https://crsreports.congress.gov/product/pdf/RS/RS22937">https://crsreports.congress.gov/product/pdf/RS/RS22937</a>
---------------------------------------------------------------------------

Depending on the parties involved in the uranium exchange, it is
possible for a given quantity and type of uranium to acquire multiple
obligations. If material is mined in Canada, converted in the United
States, enriched in Germany,

[[Page 41560]]

and fabricated into nuclear fuel in Japan, then the uranium would then
acquire obligations from Canada, the United States, the European Atomic
Energy Community (EURATOM), and Japan. The uranium can only be used in
accordance with regulations imposed by the above countries and EURATOM.
Customers and producers engage in obligation swaps to ease
administrative burdens on the maintenance of material. By exchanging in
obligation swaps, customers and producers can minimize the number of
obligations that must be adhered to for the tracking and ultimate use
of uranium materials (see Figures 17 and 18).
Note that the exchange of obligations does not change the origin.
Although origin swaps are usually not permitted by regulatory
authorities, it is possible to de facto origin swap through a change of
obligation and ownership. These combination obligation/ownership swaps
have in the past been used to circumvent uranium import restrictions,
as previously encountered with South African and Soviet-origin uranium
in the late 1980s.\61\
---------------------------------------------------------------------------

\61\ In these cases, South African and Soviet producers used
third-party brokers to facilitate origin swaps that would circumvent
restrictions on imports of these materials. DOC 1989 investigation,
also, Written Question by Mr. Paul Saes (V) to the Commission of the
European Communities, 26 February 1990, <a href="http://publications.europa.eu/resource/cellar/a6838643-4b6d-4f39-aebb-d538ff795091.0004.01/DOC_1">http://publications.europa.eu/resource/cellar/a6838643-4b6d-4f39-aebb-d538ff795091.0004.01/DOC_1</a>.
[GRAPHIC] [TIFF OMITTED] TN02AU21.012

[GRAPHIC] [TIFF OMITTED] TN02AU21.013

Book transfers and flag swaps are also advantageous because of the
specialized nature of the nuclear fuel cycle. Nuclear fuel facilities
are concentrated in only a few countries: five nations have uranium
conversion facilities (the United States, Canada, China, France, and
Russia) and eight enrichment facilities \62\ (the aforementioned
countries as well as Germany, the United Kingdom, and the Netherlands).
Consequently, book transfer and flag swaps ensure that converters and
enrichers can quickly process customer orders.
---------------------------------------------------------------------------

\62\ Ibid.
---------------------------------------------------------------------------

Furthermore, the nature of the uranium industry's manufacturing
processes mean that an individual

[[Page 41561]]

company's inventories of material are not kept separately at their
facilities. Instead, materials are stored at converters, enrichers, and
fuel fabricators (see Figures 19 and 20).\63\ At these facilities,
customers are assigned a particular share of the facility's product
proportional to the amount specified in their contract. In this sense,
uranium industry transactions function in the same way as banking
transactions. An individual bank customer withdrawing $100 from an ATM
does not receive the same physical $100 that he or she deposited at an
earlier point. Similarly, a utility customer does not receive an end
product--whether UF6, SWU, or fabricated fuel assemblies--to be the
source material that the utility supplied to the producer.
---------------------------------------------------------------------------

\63\ Ibid.
[GRAPHIC] [TIFF OMITTED] TN02AU21.014

BILLING CODE 3510-33-C
The Department incorporated its understanding of book transfers and
flag swaps to its survey instrument and interpretation of responses.
The Department is particularly cognizant of the reality that many
imports of uranium into the United States do not necessarily occur
through physical transportation of materials into the country. As
described above, U.S. uranium producers and U.S. utilities can acquire
and exchange materials without them ever entering the country.
Consequently, the Department accounts for these types of transfers in
assessing the overall impact of imported uranium on the national
security.

C. The Effect of the Fukushima Daiichi Incident on U.S. and Global
Uranium Demand

Reduction in global uranium demand in recent years can be traced to
several factors including the impacts of Japan's T[omacr]hoku
earthquake and the subsequent meltdown at the Fukushima Daiichi Nuclear
Power Plant. This event profoundly affected the economics of the
nuclear industry by reducing global demand for uranium. Some
governments in the developed world reacted to the Fukushima incident by
closing existing reactors and cancelling plans for new construction.
Japan cancelled plans for 14 new reactors and shut down all 50 operable
reactors by 2012 to reassess safety standards. Since then, only nine
have restarted.\64\ Germany decided to shut down all 17 of its reactors
by 2022 \65\ and France announced plans to shut down 14 reactors by
2035.\66\ As of 2019, Germany has closed 10 reactors, while France has
not yet closed any.\67\ Consequently, the global uranium market was
flooded with uranium products after a significant reduction in nuclear
power plants operating worldwide.
---------------------------------------------------------------------------

\64\ ``Nuclear Power in Japan.'' World Nuclear Association.
<a href="http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/japan-nuclear-power.aspx">http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/japan-nuclear-power.aspx</a>.
\65\ Annika Breidthart, ``German government wants nuclear exit
by 2022 at latest'', Reuters (May 30, 2011), <a href="https://uk.reuters.com/article/idINIndia-57371820110530">https://uk.reuters.com/article/idINIndia-57371820110530</a>.
\66\ ``Nuclear Power in France.'' World Nuclear Association.
<a href="http://www.world-nuclear.org/information-library/country-profiles/countries-a-f/france.aspx">http://www.world-nuclear.org/information-library/country-profiles/countries-a-f/france.aspx</a>.
\67\ ``Nuclear Power in Germany.'' World Nuclear Association.
<a href="http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/germany.aspx">http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/germany.aspx</a>.

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

[[Page 41562]]

Twelve projects primed for construction in the United States,
encompassing seventeen new nuclear reactors, were canceled/postponed
following the post-Fukushima upgrades mandated by the Nuclear
Regulatory Commission. The new NRC requirements, coupled with the
resurgence in public opposition to nuclear power, have been deterrents
to future construction. Intense competition from other energy
generation methods, paired difficulties in securing financing, also
increased costs of new construction (see Figure 21). The number of
active nuclear power plants worldwide reached a low in 2014 of 435
operating reactors. Although the number of reactors has since increased
to 453 in 2018, the oversupply of uranium that remains in the market
has continued to depress global prices.

Figure 21: Cancelled Nuclear Projects Since 2009
----------------------------------------------------------------------------------------------------------------
Projected
generation Reason for
Facility name Location capacity Date of cancellation cancellation
(MW)
----------------------------------------------------------------------------------------------------------------
Bellefonte 2-4................ Hollywood, AL............. 3,435 August 2009......... Unfavorable
market
conditions.
Victoria County Station....... Victoria, TX.............. 3,070 August 2012......... Unfavorable
market
conditions,
competition from
natural gas.
Shearon Harris 2-3............ New Hill, NC.............. 2,017 May 2013............ Regulatory
concerns,
unfavorable
market
conditions.
Comanche Peak 3-4............. Glen Rose, TX............. 3,400 November 2013....... Delay in reactor
design review.
Nine Mile Point 3............. Scriba, NY................ 1,600 November 2013....... Unfavorable
market
conditions.
Calvert Cliffs 3.............. Lusby, MD................. 1,600 July 2015........... Unfavorable
market
conditions,
inability to
secure
financing.
Callaway 2.................... Steedman, MO.............. 1,600 August 2015......... Regulatory
concerns,
unfavorable
market
conditions.
Grand Gulf 3.................. Port Gibson, MS........... 1,520 September 2015...... Unfavorable
market
conditions.
River Bend 3.................. St. Francisville, LA...... 1,520 December 2015....... Unfavorable
market
conditions.
Bell Bend 1................... Salem Twp., PA............ 1,600 August 2016......... Suspension of
reactor design
certification.
Bellefonte 1.................. Hollywood, AL............. 1,100 May 2016............ Unfavorable
market
conditions.
V.C. Sumner 2-3............... Jenkinsville, SC.......... 2,500 July 2017........... Unfavorable
market
conditions, cost
overruns.
Levy County Nuclear Power Levy County, FL........... 2,234 August 2017......... Unfavorable
Plant. market
conditions,
public
opposition.
----------------------------------------------------------------------------------------------------------------
Source: U.S. Nuclear Regulatory Commission.

D. The Effect of State-Owned Enterprises on Global Uranium Supply

The business practices of state-owned enterprises (SOEs) cause
significant challenges for U.S. uranium producers. SOEs are insulated
from market pressures in which the U.S. and other market producers,
namely those in Australia and Canada, must contend. Specifically, a
steep drop in uranium spot market prices can adversely affect miners'
ability to cover their operating costs. In contrast, SOEs often produce
uranium regardless of price because state support enables SOEs to make
business decisions insensitive to market conditions. For example,
although global uranium production declined by six percent between 2012
and 2014, Kazakhstan's production of uranium increased by seven percent
over the same time period.\68\ In Kazakhstan's case, state support
includes state-financed exploration services \69\ and employee
training, as well as currency devaluation to artificially depress
prices of all exports, including uranium.\70\ State-owned suppliers
dominate the list of leading global uranium producers (see Figure 22).
---------------------------------------------------------------------------

\68\ IAEA Red Book, 102, 2016.
\69\ Global Business Reports, ``Kazakhstan's mining industry:
Steppe by Steppe'', Engineering and Mining Journal (September 2015),
p. 83, <a href="https://www.gbreports.com/wp-content/uploads/2015/09/Kazakhstan_Mining2015.pdf">https://www.gbreports.com/wp-content/uploads/2015/09/Kazakhstan_Mining2015.pdf</a>.
\70\ In August 20, 2015 the National Bank of Kazakhstan allowed
the national currency--the tenge--to float freely. Immediately, the
tenge fell in value. Before the transition, the tenge had limited
ability to move within a range determined by the national bank,
resting at 185.7 KZT per USD. With the introduction of a free
floating exchange rate, the currency has been consistently devaluing
and resides at 380.1 KZT per USD (Department of Treasury). The
switch to a free floating exchange rate was motivated in part to an
effort to prop-up Kazak oil and resource sectors. The transition has
successfully boosted growth in mining and resource markets. For
more, consult Andrew E. Kramer, ``Kazakhstan's Currency Plunges'',
New York Times (August 20, 2015) <a href="https://www.nytimes.com/2015/08/21/business/international/kazakhstans-currency-plunges.html">https://www.nytimes.com/2015/08/21/business/international/kazakhstans-currency-plunges.html</a>.

Figure 22: Leading Global Uranium Producers
----------------------------------------------------------------------------------------------------------------
Uranium
Company Ownership production (in Global market
tons of MT) share (%)
----------------------------------------------------------------------------------------------------------------
KazAtomProm................................... Kazakhstan...................... 12,093 20
Cameco........................................ Private......................... 9,155 15
Orano......................................... France.......................... 8,031 13
Uranium One................................... Russia.......................... 5,102 9
CNNC & CGN.................................... China........................... 3,897 7
ARMZ.......................................... Russia.......................... 2,917 5
Rio Tinto..................................... Private......................... 2,558 4
Navoi......................................... Uzbekistan...................... 2,404 4
BHP Billiton.................................. Private......................... 2,381 4

[[Page 41563]]

Energy Asia................................... Private......................... 2,218 4
General Atomics/Quasar........................ Private......................... 1,556 3
Sopamin....................................... Niger........................... 1,118 2
Paladin....................................... Private......................... 970 2
----------------------------------------------------------------------------------------------------------------
Italicized = State Ownership.
Not Italicized = Private Ownership.
Source: World Nuclear Association--World Uranium Mining Production, 2017.

The leading global uranium producers account for about 92 percent
of current world uranium production. Of these, SOEs in the former
Soviet Union and China control about 45 percent of the global market.
These companies are insulated from market and regulatory pressures
experienced by market producers, placing U.S. uranium mines at a
distinct disadvantage.
Uranium-related SOEs, however, have broader roles than sales of
uranium products. Many countries leverage their SOEs' integration of
the nuclear fuel cycle and nuclear power generation to further
geopolitical ambitions. Rosatom, a Russian state-owned enterprise that
participates in every step of the nuclear fuel cycle, including power
generation, uses this leverage. With virtually complete control over
the Russian nuclear industry, Rosatom can offer prices for nuclear
plant construction and fuel services that are significantly below that
of market-based suppliers. Generous financing packages, usually
consisting of low-cost loans underwritten by the Russian government,
also incentivize deals with Rosatom.\71\ China emulates Rosatom's model
of pairing subsidized nuclear construction with state-supported
financing, as seen with its construction of reactors in Pakistan and
Romania. Summaries of individual countries' non-market economy nuclear
activities are discussed more in Appendix I.
---------------------------------------------------------------------------

\71\ Russia has recently finished construction of Iran's only
operating nuclear reactor at Bushehr, and Rosatom is the sole fuel
supplier for the plant. Rosatom is also actively constructing the
Akkuyu nuclear plant in Turkey, and is pursuing projects in Finland,
Hungary, Bangladesh, Egypt and Belarus. <a href="http://www.world-nuclear.org/information-library/current-and-future-generation/plans-for-new-reactors-worldwide.aspx">http://www.world-nuclear.org/information-library/current-and-future-generation/plans-for-new-reactors-worldwide.aspx</a>.
---------------------------------------------------------------------------

Uranium-related SOEs also have a deleterious impact on U.S.
nonproliferation objectives. U.S. exports of nuclear technologies and
supplies, including uranium products, are generally governed by Section
123 agreements.\72\ These agreements, which include peaceful use
restrictions and other nonproliferation requirements, ensure that the
U.S. nuclear industry can play a role in the global nuclear fuels trade
without contributing to nuclear weapons development. However, if the
U.S. uranium industry cannot compete with SOEs, particularly Russia and
China, the U.S. contribution to global nuclear nonproliferation regimes
will substantially diminish. As former Secretary of Energy Enest Moniz
remarked in July 2017:
---------------------------------------------------------------------------

\72\ ``Nuclear Cooperation with Other Countries: A Primer.''
Congressional Research Service. (January 15, 2019). <a href="https://fas.org/sgp/crs/nuke/RS22937.pdf">https://fas.org/sgp/crs/nuke/RS22937.pdf</a>.

``A world in which Russia and China come to have dominant
positions in the global nuclear supply chain will almost certainly
see a weakening of requirements, just as nuclear technology and
materials spread to many countries.'' \73\
---------------------------------------------------------------------------

\73\ Ernest J. Moniz, ``The National Security Imperative for
U.S. Civilian Nuclear Energy Policy'', Energy Futures Initiative
(July 12, 2017), <a href="https://energyfuturesinitiative.org/news/2017/7/12/moniz-the-national-security-imperative-for-us-civilian-nuclear-energy-policy">https://energyfuturesinitiative.org/news/2017/7/12/moniz-the-national-security-imperative-for-us-civilian-nuclear-energy-policy</a>.

U.S. utilities contract with uranium-related SOEs in Russia,
Kazakhstan, Uzbekistan, and China primarily because of concerns with
price and diversity of supply. These utilities believe that with the
limited number of worldwide uranium producers, particularly in the
conversion and enrichment stages, any additional competition is
welcome. Most of the 24 utility respondents indicated that price and
reliability of delivery considerations were the chief drivers of their
fuel procurement policies; only [TEXT REDACTED] alluded to geopolitical
considerations as a significant factor. Domestic utilities' desire to
cut costs includes support for increased market penetration by China.
[TEXT REDACTED]
Utilities' emphasis on diversity of supply also underpins their
rationale for purchasing Russian uranium. [TEXT REDACTED] \74\ Several
utilities suggested that if current restrictions on Russian imports
were eliminated, they would purchase more Russian material.\75\
---------------------------------------------------------------------------

\74\ [TEXT REDACTED].
\75\ Commerce Department Survey of U.S. Nuclear Power Generation
Sector, 2019.
---------------------------------------------------------------------------

France
Respondents have also raised concerns about the activities of
French state-owned enterprises. There are two principal French
companies participating in the nuclear fuel cycle: Orano and Framatome.
Orano, previously a part of Areva SA, is minority-owned by the French
state and has direct ownership of uranium mines in Niger, Kazakhstan,
and Canada. It also owns and operates all uranium enrichment and
conversion facilities in France. Framatome, which is majority owned by
the French government's electric utility [Eacute]lectricit[eacute] de
France, operates fuel fabrication and reactor construction businesses.
U.S. producers acknowledge that state support gives Orano and
Framatome a competitive edge over U.S. and other European firms. [TEXT
REDACTED] expressed concerns that, if U.S. anti-dumping duties on
French enriched uranium were lifted, Orano's state backing would allow
it to sell to utilities below-market cost.
The U.S. International Trade Commission has previously concluded
that French state-owned enterprises have undersold U.S. producers of
enriched uranium (see Chapter VII). Unlike SOEs in Russia, Kazakhstan,
Uzbekistan, and China, French nuclear entities are partially owned by
private companies and are somewhat subject to market pressures.
Furthermore, the French nuclear market is not closed off to the U.S. or
other uranium producers, and U.S. companies reported sales to France
between 2014 and 2018. In contrast, U.S. uranium producers cannot sell
into the Russian or Chinese markets, as these countries are served only
by their state-owned enterprises.

[[Page 41564]]

E. Market Uranium Producers: Canada and Australia

Market uranium producers in Canada and Australia have historically
performed better than their U.S. counterparts. Between 2014 and 2016,
Canada and Australia increased their production of uranium by 59
percent and 26 percent, respectively.\76\ In 2014, Canada opened the
Cigar Lake mine and Australia opened the Four Mile mine,\77\ both
increasing overall production numbers.
---------------------------------------------------------------------------

\76\ Nuclear Energy Agency & International Atomic Energy Agency.
Uranium 2018--Resources, Production and Demand, 55. 2018. <a href="http://www.oecd-nea.org/ndd/pubs/2018/7413-uranium-2018.pdf">http://www.oecd-nea.org/ndd/pubs/2018/7413-uranium-2018.pdf</a>.
\77\ Ibid.
---------------------------------------------------------------------------

These mines also exhibit positive geologic factors. Cigar Lake has
an average ore grade of 14.5 percent uranium, one of the highest in the
world. Higher ore grades require less processing to recover uranium
from the ore, reducing overall production costs. Australia's largest
mine, Olympic Dam, is also a significant producer of copper, gold, and
silver.\78\ Production of these commodities can therefore support
continued uranium extraction even in the face of lower global spot
prices.
---------------------------------------------------------------------------

\78\ Ibid., 134.
---------------------------------------------------------------------------

Despite these geologic advantages, Canadian and Australian
producers are also subject to the same market pressures caused by SOEs'
overproduction. For example, McArthur River, estimated to have the
world's largest deposit of high-grade uranium,\79\ was idled in
November 2017 by Cameco Resources due to poor economic conditions.\80\
Australian mines have also cut production in response to poor market
conditions between 2016 and 2018, most notably Olympic Dam cut
production by eight percent and the Ranger mine by 10 percent.\81\ As a
result, between 2014 and 2018, 24.2 percent of uranium concentrate
provided by Australian and Canadian companies to U.S. nuclear power
generators came from Kazakhstan and Uzbekistan.\82\
---------------------------------------------------------------------------

\79\ Ibid., 159.
\80\ ``Cameco: uranium prices too low to restart McArthur River
mine operation.'' MRO Magazine, August 3, 2019. <a href="https://www.mromagazine.com/2018/08/03/cameco-uranium-prices-too-low-to-restart-mcarthur-river-mine-operation/">https://www.mromagazine.com/2018/08/03/cameco-uranium-prices-too-low-to-restart-mcarthur-river-mine-operation/</a>.
\81\ ``Australia's Uranium Mines.'' World Nuclear Association.
<a href="http://www.world-nuclear.org/information-library/country-profiles/countries-a-f/appendices/australia-s-uranium-mines.aspx">http://www.world-nuclear.org/information-library/country-profiles/countries-a-f/appendices/australia-s-uranium-mines.aspx</a>.
\82\ U.S. Department of Commerce, Bureau of Industry and
Security, Nuclear Power Generator Survey, Question 9.
---------------------------------------------------------------------------

Like their U.S. counterparts, Canadian and Australian producers
cannot produce without regard for spot market price. SOEs' continued
price-insensitive production therefore threatens all market uranium
producers, including the U.S., Canada, and Australia.

VII. Findings

A. Uranium Is Important to U.S. National Security

As discussed in Part II, ``national security'' under Section 232
includes both (1) national defense and (2) critical infrastructure
needs.
1. Uranium Is Needed for National Defense Systems
An assured supply of U.S.-origin uranium is critical to national
defense for the purpose of nuclear weapons and the naval fleet. Nuclear
reactors provide propulsion and electricity for key elements of the
nation's naval fleet: 11 aircraft carriers and 70 submarines. Uranium
is also vital for producing tritium, a radioactive gas used in U.S.
nuclear weapons.
Many international nuclear cooperation agreements to which the
United States is a party, including Section 123 agreements on civil
nuclear cooperation, restrict the use of nuclear material imported
under those agreements to peaceful uses. The United States requires
U.S.-origin uranium and nuclear technologies for use in the production
of uranium-based products for U.S. defense systems, with no foreign
obligations that restrict the uses of such nuclear material.\83\ At
this time, there is only one functional enrichment facility in the
United States. Located in Eunice, New Mexico and operated by the
British-German-Dutch consortium URENCO, this enrichment facility may
only enrich uranium for civil purposes; the material it produces may
not be used for U.S. nuclear weapons or naval reactors.\84\
---------------------------------------------------------------------------

\83\ U.S. Department of Energy. Tritium And Enriched Uranium
Management Plan Through 2060, iv. Report to Congress. (Washington
DC: 2015) <a href="http://fissilematrials.org/library/doe15b.pdf">http://fissilematrials.org/library/doe15b.pdf</a>.
\84\ Agreement Between the Three Governments of the United
Kingdom of Great Britain and Northern Ireland, the Federal Republic
of Germany and the Kingdom of the Netherlands and the Government of
the United States of America Regarding the Establishment,
Construction and Operation of an Uranium Enrichment Installation in
the United States, Washington, 24 July 1992, Treaty Series No 133
(2000).
---------------------------------------------------------------------------

However, the U.S. has three defense systems that require highly-
enriched uranium (HEU) (see Figure 23). The Department of Energy
currently meets requirements for HEU by drawing on its stockpile. DOE
also satisfies its ongoing need for HEU by recycling components from
retired nuclear weapons. DOE is estimated to have approximately 575
tons of HEU and 80.8 tons of plutonium. Russia, in contrast, has an
estimated 679 tons of HEU and 128 tons of plutonium.\85\
---------------------------------------------------------------------------

\85\ U.S. Department of Energy. Tritium And Enriched Uranium
Management Plan Through 2060. Report to Congress. (Washington DC:
2015) <a href="http://fissilematrials.org/library/doe15b.pdf">http://fissilematrials.org/library/doe15b.pdf</a>.
---------------------------------------------------------------------------

Furthermore, U.S.-origin uranium with no foreign obligation is
required for the manufacture of tritium for defense purposes (see
Figure 24). Tritium, a hydrogen isotope, is used in nuclear warheads to
boost explosive yield. Tritium must be continually replenished in
warheads because it has a short half-life of 12.3 years, decaying at a
rate of 5.5 percent per year. The Department of Energy has an
Interagency Agreement with the Tennessee Valley Authority (TVA) for
production of tritium using the TVA's Watts Bar 1 commercial power
reactor. TVA's Watts Bar 2 commercial power reactor will soon be used
for tritium production as well.\86\
---------------------------------------------------------------------------

\86\ February 2019 discussion between U.S. Department of Energy,
National Nuclear Security Administration, Office of Major
Modernization Programs and the U.S. Department of Commerce, Bureau
of Industry and Security.

Figure 23: Defense Requirements for U.S.-Origin Uranium-Based Products
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Submarines (70)--HEU Fuel.................. Nuclear-Powered Aircraft Carriers Tritium Nuclear Weapons 3,800 +/-
(11)--HEU Fuel. *.
----------------------------------------------------------------------------------------------------------------
* Includes 1,700 warheads on missiles and strategic bombers; 2,100 warheads in reserve; 150 warheads in Europe.
An additional 2,500 warheads are slated for dismantlement.
Sources: U.S. Navy, International Panel on Fissile Materials (<a href="http://www.fissilematerials.org">www.fissilematerials.org</a>).
See Appendix J for entire chart.

[[Page 41565]]

Figure 24: Uranium Requirements for U.S. National Defense
----------------------------------------------------------------------------------------------------------------
Material Defense application Other application
----------------------------------------------------------------------------------------------------------------
Natural Uranium (NU)....................... Enrichment....................... Materials Research Reactors.
Low Enriched Uranium (LEU)................. Tritium Production for Nuclear Medical Isotope Production.
Weapons.
Highly Enriched Uranium.................... Reactor Fuel for Aircraft U.S. High Performance Research
Carriers and Submarines. Reactors.
Depleted Uranium U-235..................... Munitions--Kinetic Energy Mixed-Oxide Reactor Fuel.
Penetrators.
Munitions--Armor................. Triuranium Octoxide (U3O8).
Radiation Shielding.............. Uranium Hexafluoride (UF6).
Targets for Pu-239 Production.... Aircraft Parts.
----------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Commerce, Bureau of Industry and Security; U.S. Department of Energy, February 2019.

Low-enriched uranium (LEU) \87\ is used to produce tritium and to
supply fuel to U.S. research reactors. DOE meets some of its internal
demands for LEU by downblending HEU into LEU.\88\ DOE uses a bartering
program of uranium derived from HEU as payment for services to defray
cleanup costs at the Portsmouth Gaseous Diffusion Plant in Piketon,
Ohio.\89\ The downblending practice also provides high assay low-
enriched uranium (HALEU),\90\ which is used in research reactors and
medical isotope production reactors.
---------------------------------------------------------------------------

\87\ Low-enriched uranium (LEU) is uranium enriched to less than
20% U-235. (Uranium used in power reactors is usually 3.5-5.0% U-
235). High-enriched uranium (HEU) is uranium enriched to 20% U-235
or more. (Uranium used in weapons is about 90% enriched U-235.)
\88\ For the purposes of this 232 investigation, downblending is
the reduction of uranium enrichment levels to less than 20 percent,
a low enriched uranium (LEU), which cannot be used in weapons, but
is suitable for use as fuel in nuclear power plants and naval
nuclear reactors.
\89\ U.S. Government Accountability Office. Nuclear Weapons:
NNSA Should Clarify Long-Term Uranium Enrichment Mission needs and
Improve Technology Cost Estimates, Report to Congressional
Committees. 14. [GAO-18-126], February 2018. <a href="https://www.gao.gov/products/GAO-18-126">https://www.gao.gov/products/GAO-18-126</a>.
\90\ High assay low-enriched uranium (HALEU)--Low-enriched U-235
uranium product that has enrichment levels higher than the 3.5-5%.
HALEU U-235 uranium product can have enrichment levels approaching
20%, depending on the application.
---------------------------------------------------------------------------

Lastly, DOE's downblending program for production of LEU fuel used
in TVA reactors requires a supply of natural uranium trioxide (UO3) to
be used as a diluent in the downblending process. As of 2019, there is
no U.S. production of UO3; consequently, TVA has to import it from
Canada and swaps unobligated flags from DOE stocks of natural uranium
in other physical forms. DOE does not maintain a stockpile of
unprocessed uranium of any type. Furthermore, the stockpile of HEU
allocated to production of HALEU is expected to be depleted by 2060
\91\ and DOE's supply of LEU will be exhausted around 2041. The
Department anticipates that its HEU stockpile, at current projected
rates of consumption for naval reactor operations, will be depleted
between 2050 and 2059.\92\
---------------------------------------------------------------------------

\91\ U.S. Department of Energy, National Nuclear Security
Administration, Office of Major Modernization Programs, February
2019 discussion with the U.S. Department of Commerce, Bureau of
Industry and Security.
\92\ ``Estimate of Global HEU Inventories as of January 2017.''
International Panel on Fissile Materials. <a href="http://fissilematerials.org">http://fissilematerials.org</a>.
---------------------------------------------------------------------------

The National Nuclear Security Administration maintains the American
Assured Fuel Supply (AFS), which is a stock of low-enriched uranium for
use by U.S. and foreign utilities during a serious fuel supply
disruption.\93\ The AFS contains 230 tons of LEU that was downblended
from DOE's HEU stockpile.\94\ This stock is not available for use by
DOE/NNSA. Only civilian nuclear power plant operators may use the AFS.
---------------------------------------------------------------------------

\93\ In 2005, the U.S. Department of Energy set up the American
Assured Fuel Supply (formerly Reliable Fuel Supply) with $49.5
million in funding from Congress. This entity supports the
International Atomic Energy Agency's International Fuel Bank
initiative--a back-up source of uranium for global supply
disruptions.
\94\ U.S. Department of Energy. Notice of Availability: American
Assured Fuel Supply, Federal Register 76 no. 160, August 18, 2011,
51358.
---------------------------------------------------------------------------

U.S. national security relies on credible nuclear deterrence. A
shortage of HEU to fuel aircraft carriers and submarines and LEU to
support tritium production would undermine U.S. defense operations and
readiness. Likewise, an inability to supply HALEU to research reactors
and medical isotope manufacturers would be detrimental to several
critical infrastructure sectors.\95\ The supply of U.S.-mined uranium
will be critical as a feedstock for producing LEU and HEU in an
enrichment facility that is planned to serve national defense needs.
Without economically viable uranium mining operations in the United
States, the enrichment of nuclear materials for DOE defense missions
will not be possible under present law and policies. Defense needs for
uranium are not enough to financially sustain the U.S. front-end
uranium industry.
---------------------------------------------------------------------------

\95\ U.S. Department of Energy. National Nuclear Security
Administration. Report to Congress: Fiscal Year 2019 Stockpile
Stewardship and Management Plan--Biennial Plan Summary. (Washington,
DC: 2018). <a href="https://www.energy.gov/sites/prod/files/2018/10/f57/FY2019%20SSMP.pdf">https://www.energy.gov/sites/prod/files/2018/10/f57/FY2019%20SSMP.pdf</a>.
---------------------------------------------------------------------------

Future Defense Needs: Microreactors
DoD is pursuing the deployment of small modular reactors and
microreactors that will require HALEU fuel as early as 2027. DoD
microreactors may require fuel that is free from peaceful use
restrictions, including the peaceful use restrictions that are
generally applied by foreign suppliers of nuclear material to the
United States. The 2019 National Defense Authorization Act requires the
Secretary of Defense to issue requirements for a pilot program to
design, test, and operate micro-reactors by December 31, 2027.\96\
---------------------------------------------------------------------------

\96\ For this report, micro-reactors are defined as reactors
generating no more than 50 megawatts (MWe) Section 327, John S.
McCain National Defense Authorization Act 2019 (Pub. L. 115-233),
<a href="https://www.congress.gov/bill/115th-congress/house-bill/5515/text?format=txt">https://www.congress.gov/bill/115th-congress/house-bill/5515/text?format=txt</a>.
---------------------------------------------------------------------------

DoD's need for microreactors stems from its facilities' reliance on
commercial electric power. At present, DoD installations consume 21
percent of total federal energy consumption in the United States, at a
cost of approximately $3.7 billion per year. Fifty-three percent of all
energy consumed by DoD is delivered as electricity, 99 percent of which
is provided via the commercial grid.\97\
---------------------------------------------------------------------------

\97\ Defense Science Board. Department of Defense. ``Report of
the Defense Science Board Task Force on DoD Energy Strategy, More
Fight--Less Fuel,'' 2. (Washington, DC: 2008). <a href="https://www.acq.osd.mil/dsb/reports/2000s/ADA477619.pdf">https://www.acq.osd.mil/dsb/reports/2000s/ADA477619.pdf</a>.
---------------------------------------------------------------------------

In the event of a power outage, many DoD installations have only
diesel generators and a limited supply of on-site diesel fuel. An
extended grid failure could severely limit DoD's ability to carry out
domestic and foreign operations.\98\ Microreactors would be expected to
operate 24 hours per day without disruption and do not require frequent
refueling. DoD installations could therefore continue normal operations
in the event of an extended commercial grid disruption.
---------------------------------------------------------------------------

\98\ Ibid.

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[[Page 41566]]

DoD aims to deploy microreactors in 2027, or shortly thereafter.
This timeline assumes that there are no major technical hurdles to
overcome. In addition, there are environmental and reactor siting
reviews to address. Should microreactors become viable on a commercial
scale, large-scale adoption of microreactors will require significant
amounts of HALEU. DoD currently can only supply its HALEU needs through
DOE's downblending of highly-enriched uranium, the supply of which is
limited.\99\ Future deployment of micro-reactors for defense purposes
will increase national defense requirements for uranium and emphasizes
the need for a viable U.S. commercial uranium industry.
---------------------------------------------------------------------------

\99\ Roadmap for the Deployment of Micro-Reactors for U.S.
Department of Defense Domestic Installations.'' Nuclear Energy
Institute. October 4, 2018. <a href="https://www.nei.org/CorporateSite/media/filefolder/resources/reports-and-briefs/Road-map-micro-reactors-department-defense-201810.pdf">https://www.nei.org/CorporateSite/media/filefolder/resources/reports-and-briefs/Road-map-micro-reactors-department-defense-201810.pdf</a>.
---------------------------------------------------------------------------

A healthy U.S. commercial uranium industry is essential for defense
needs. As DoD does not anticipate requiring newly-mined uranium for
some years, it is impractical to suggest that a privately-owned mine
could afford to operate on standby awaiting future DoD purchases. DoD
analysts have noted that it ``can be difficult to reconstitute a
material capability if all expertise and market share is lost,'' as
most recently seen with U.S. rare earth mineral producers. U.S. uranium
producers must be able to attract sufficient commercial (i.e. nuclear
power generator) business in the present market to ensure their
availability for defense requirements in the future.
Future Defense Needs: Proposed Nuclear Submarine Production
The Department of the Navy recently submitted its Fiscal Year 2020
President's Budget, recommending the construction of 55 new battle
force ships over the next five years.\100\ Fourteen of these are
nuclear-powered: Eleven Virginia-class submarines, two Columbia-class
submarines, and one Gerald R. Ford-class aircraft carrier.
---------------------------------------------------------------------------

\100\ ``Report to Congress on the Annual Long-Range Plan for
Construction of Naval Vessels for Fiscal Year 2020.'' Office of the
Chief of Naval Operations. March 2019. <a href="https://www.secnav.navy.mil/fmc/fmb/Documents/20pres/PB20%2030-year%20Shipbuilding%20Plan%20Final.pdf">https://www.secnav.navy.mil/fmc/fmb/Documents/20pres/PB20%2030-year%20Shipbuilding%20Plan%20Final.pdf</a>.
---------------------------------------------------------------------------

The Virginia-class and Columbia-class submarines both house
reactors which contain enough fuel to last the life of the ship,
roughly 33 and 40 years respectively, unlike previous models which
required refueling and overhaul.\101\ The Ford-class aircraft carrier
requires refueling, but at a significantly lower rate than the Nimitz-
class aircraft carriers it will replace. DOE's current projection of
HEU stockpile consumption for naval reactors does not take into account
the addition of these 14 new nuclear-powered vessels. If these vessels
are built, the total naval demand for HEU fuel will increase beyond
what NNSA has anticipated, thus accelerating the date by which the HEU
stockpile will be depleted.
---------------------------------------------------------------------------

\101\ S9G Nuclear Reactors: <a href="http://www.world-nuclear.org/information-library/non-power-nuclear-applications/transport/nuclear-powered-ships.aspx">http://www.world-nuclear.org/information-library/non-power-nuclear-applications/transport/nuclear-powered-ships.aspx</a>.
---------------------------------------------------------------------------

The Role of National Security in Nuclear Regulation
Since Congress passed the Atomic Energy Act in 1946, all
legislation governing the nation's uranium and nuclear power generation
industries has been written with an emphasis on national security
functions. As envisioned by Congress, regulation of the U.S. uranium
and nuclear power generation industries is to be conducted in support
of national security objectives. Consequently, Congress has empowered
federal agencies to intervene in support of continued domestic U.S.
uranium production capacity on several occasions. A brief history of
this legislation can be found in Appendix H.
2. Uranium Is Required for Critical Infrastructure
Uranium is also required to satisfy requirements associated with
the 16 critical infrastructure sectors identified by the U.S.
Government in the 2013 Presidential Policy Directive 21 (PPD-21) \102\
(see Figure 25). Critical infrastructure, as defined by PPD-21,
provides the ``essential services that underpin American society'' and
``are vital to public confidence and the Nation's safety, prosperity,
and well-being.'' \103\
---------------------------------------------------------------------------

\102\ U.S. White House. Office of the Press Secretary. Critical
Infrastructure Security and Resilience. Presidential Policy
Directive 21. (Washington, DC: 2013) <a href="https://obamawhitehouse.archives.gov/the-press-office/2013/02/12/presidential-policy-directive-critical-infrastructure-security-and-resil">https://obamawhitehouse.archives.gov/the-press-office/2013/02/12/presidential-policy-directive-critical-infrastructure-security-and-resil</a>.
\103\ Ibid.

Figure 25: Critical Infrastructure Sectors
------------------------------------------------------------------------
Chemical Commercial facilities Communications
------------------------------------------------------------------------
Critical Manufacturing........ Dams.................. Defense
Industrial
Base.
Emergency Services............ Energy (Including Financial
Electric Power Grid). Services.
Food and Agriculture.......... Government Facilities. Healthcare and
Public Health.
Information Technology........ Nuclear Reactors, Transportation
Materials, and Waste. Systems.
Water and Wastewater Systems.. ...................... ................
------------------------------------------------------------------------
Source: PPD-21; Department of Homeland Security.

U.S. nuclear power generators are specifically included in the
Nuclear Reactors, Materials, and Waste sector. Additionally, as U.S.
nuclear power generators are integral to the nation's commercial
electric grid, they are also part of the Energy sector. PPD-21
specifically notes that the Energy sector supports all other sectors
because of its ``enabling function.'' \104\ Consequently, as all
critical infrastructure sectors are dependent on reliable supplies of
electricity, 19 percent of which is provided by the nation's 98 nuclear
reactors. Thus, uranium is needed to support all U.S. critical
infrastructure sectors.
---------------------------------------------------------------------------

\104\ Ibid.
---------------------------------------------------------------------------

Changing Electricity Generation Markets Affect U.S. Nuclear Generators
One of the primary challenges to the viability of the U.S. uranium
industry is the closure of U.S. nuclear power plants. The front-end
U.S. uranium industry relies on nuclear power plant operators for
approximately 98 percent of its business. Consequently, the uranium
industry cannot survive without a healthy U.S. nuclear power generation
sector. Between January 2013 and September 2018, U.S. utilities retired
seven reactors at six nuclear power facilities--a loss of more than
5,000 megawatts (MW) of generation capacity. Another 12 reactors with a
combined generation capacity of 11.7

[[Page 41567]]

gigawatts (GW) are scheduled to close within the next seven years.\105\
---------------------------------------------------------------------------

\105\ ``America's oldest operating nuclear power plant to retire
on Monday.'' U.S. Energy Information Administration. September 14,
2018. <a href="https://www.eia.gov/todayinenergy/detail.php?id=37055">https://www.eia.gov/todayinenergy/detail.php?id=37055</a>.
---------------------------------------------------------------------------

A majority of the current nuclear fleet was constructed in the
1970s and 1980s when large-scale bulk power generators, including
nuclear plants, were considered the most cost-effective means of
providing reliable electricity. Although these plants required
significant capital expenditures for construction, low fuel and
operating costs made them practical to operate on a near-constant
basis.\106\ Energy planners particularly recognized that large scale
plants were well equipped to provide baseload generation capacity.\107\
---------------------------------------------------------------------------

\106\ ``Advancing Past ``Baseload'' to a Flexible Grid- How Grid
Planners and Power Markets Are Better Defining System Needs to
Achieve a Cost-Effective and Reliable Supply Mix,'' 1. The Brattle
Group. June 26, 2017. <a href="http://files.brattle.com/system/publications/pdfs/000/005/456/original/advancing_past_baseload_to_a_flexible_grid.pdf?1498246224">http://files.brattle.com/system/publications/pdfs/000/005/456/original/advancing_past_baseload_to_a_flexible_grid.pdf?1498246224</a>.
\107\ Roughly defined, baseload generation capacity refers to
generation capacity that can provide ``relatively low-cost
electricity production to meet around-the-clock electricity loads''.
Ibid., 5.
---------------------------------------------------------------------------

However, lower-than-projected electrical consumption growth rates,
combined with aggressive energy conservation efforts, prevented many
utilities from operating the baseload nuclear power plants at optimal
levels. Distorted electricity markets caused by current FERC-approved
market rules and increased adoption of renewable energy resources, such
as solar and wind, which are subsidized through Federal and state tax
incentives, are resulting in increased cost sensitivity within the
nuclear power industry and premature retirements of nuclear power
generation units.\108\
---------------------------------------------------------------------------

\108\ The Federal Energy Regulatory Commission (FERC or the
Commission) has recognized that there are deficiencies in the way
the regulated wholesale power markets price power (``price
formation,'' i.e., energy, capacity, and ancillary services) and has
developed an extensive record on price formation in the Commission-
approved ISOs and RTOs.
---------------------------------------------------------------------------

[TEXT REDACTED] In this decreased demand environment, wind
generators were able to compete through the Production Tax Credit (PTC)
that allows them to produce at negative cost. Nuclear generators, in
contrast, generally do not receive similar subsidies.

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In addition to renewables, the introduction of highly efficient
turbine gas generators and the wide availability of low cost natural
gas, has changed the competitive landscape. Ten survey respondents
indicated that their nuclear facilities faced significant challenges to
their viability from natural gas-fired generators. Under current
wholesale electricity pricing mechanisms, natural gas-fired generators
are able to sell their electricity to the grid at lower costs than
nuclear operators. This is partially due to the intermittent nature of
natural-gas fired generation; natural gas-fired generators can be
activated and deactivated as needed, whereas nuclear power generators
have less operational flexibility. Similarly, subsidized renewable
sources, such as solar and wind, are intermittent operators (e.g.,
during daytime hours for solar, and favorable wind conditions for wind)
and can be sold at a lower cost than constantly-running nuclear
generators.
These factors create a situation that substantially disadvantages
nuclear power generators. A 2017 IHS Markit study observed that,
``generating resources providing security of supply receive negative
market-clearing prices because distorted market conditions drive rival
subsidized suppliers to bid against each other to avoid the loss of
output-based subsidy payments.'' \109\ FERC, recognizing challenges
faced by nuclear and other baseload generators, opened a proceeding in
January 2018 to examine the relationship between grid reliability and
wholesale market rules.\110\ The proceeding will examine grid
resilience pricing and consider how valuation deficiencies lead to
premature retirements of fuel-secure generation, including nuclear.
FERC, has not yet taken action to address the inequities of the markets
that threaten the resilience of the Nation's electricity system.
---------------------------------------------------------------------------

\109\ ``Ensuring Resilient and Efficient Electricity Generation:
The Value of the current diverse US power supply portfolio.'' IHS
Markit. April 2018. [hereinafter IHS Ensuring Resilient and
Effective Electricity Generation].
\110\ FERC acknowledges that that there are deficiencies in the
way the regulated wholesale power markets price power (``price
formation,'' i.e., energy, capacity, and ancillary services) and has
developed an extensive record on price formation in the Commission-
approved ISOs and RTOs. FERC ``Grid Resilience in Regional
Transmission Organizations and Independent System Operators,''
Docket No. AD18-7-000 (January 2018)
---------------------------------------------------------------------------

Increased state energy efficiency standards and the predominance of
the service sector in the economy, which does not consume as much
energy as other sectors such as manufacturing, have slowed electricity
demand growth. In 2017, the North American Electric Reliability
Corporation (NERC) reported that the annual growth rate of peak demand
reached record lows of 0.61 percent in summer and 0.59 percent in
winter.\111\ Slower growth in electricity demand places increased
economic pressures on large-scale generators, including nuclear power
plants.\112\
---------------------------------------------------------------------------

\111\ ``Long Term Reliability Assessment,'' 12. North American
Reliability Electric Reliability Corporation. December 2018. <a href="https://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/NERC_LTRA_2018_12202018.pdf">https://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/NERC_LTRA_2018_12202018.pdf</a>.
\112\ In 1990, the compound annual growth rate in demand for
both summer and winter exceeded 2%. Ibid.
---------------------------------------------------------------------------

The increased presence of natural gas-fired and renewable power
plants in the nation's electric generation grid does not obviate the
need for nuclear power baseload generators. In fact, there is a
continued role for nuclear power plants because they can provide a
constant

[[Page 41568]]

flow of electricity to the grid and do not require constant deliveries
of fuel from external sources. Nuclear power plants can produce at
near-full capacity when solar and wind generation facilities cannot
produce electricity.
Similarly, natural gas plants are reliant on ``just-in-time''
deliveries of natural gas, and natural gas storage capacity in the U.S.
is severely limited in many regions.\113\ A North American Electric
Reliability Corporation (NERC) report noted that only 27 percent of
U.S. natural gas-fired generation capacity installed since 1997 is
capable of dual fuel usage, which uses alternative fuel such as diesel
to maintain generation.\114\ Natural gas pipelines are also vulnerable
to cyberattack, which can disable pipeline operations and cut off gas
supply.\115\
---------------------------------------------------------------------------

\113\ ``Special Reliability Assessment: Potential Bulk Power
System Impacts Due to Severe Disruptions on the Natural Gas
System,'' 10. North American Electric Reliability Corporation.
November 2017. <a href="https://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/NERC_SPOD_11142017_Final.pdf">https://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/NERC_SPOD_11142017_Final.pdf</a>.
\114\ Ibid.
\115\ Blake Sobczak, Hannah Northey, and Peter Behr, ``Cyber
raises threat against America's energy backbone'', E&E News (May 23,
2017), <a href="https://www.eenews.net/stories/1060054924/">https://www.eenews.net/stories/1060054924/</a>.
---------------------------------------------------------------------------

In contrast, nuclear generators are not subject to similar
potential disruptions or energy storage limitations since they have
long refueling cycles between 18 and 24 months, and do not require
constant fuel deliveries. These refueling operations are planned well
in advance, allowing both plant and transmission system operators to
make arrangements for alternative generation capacity. All survey
respondents indicated that they could maintain normal generation
operations even with a missed delivery of uranium concentrate, uranium
hexafluoride, or enriched uranium. Respondents indicated that they
maintain sufficient inventory of the above products and have layered
contracts with multiple suppliers. Any single missed delivery could
therefore be addressed with existing inventory.
Respondents identified missed deliveries of fabricated fuel prior
to a scheduled refueling as the greatest threat to continue operation.
[TEXT REDACTED]
Based on the nature of the nuclear supply chain, nuclear power
generators are comparatively more resilient than other power generation
sources that require constant fuel deliveries. As presented in Chapter
VII, U.S. nuclear power generators can use U.S.-sourced uranium to meet
their power needs, potentially avoiding situations where U.S. utilities
would be reliant on last-minute imports of natural gas or other
materials to address shortfalls.\116\ Leveraging the unique operational
characteristics of nuclear power generators and the unused capacity of
the U.S. uranium industry can ensure greater grid reliability.
---------------------------------------------------------------------------

\116\ During extreme cold temperatures in January 2018,
Distrigas of Massachusetts had to import liquefied natural gas from
Russia to address a gas shortage in the region.
Chesto, Jon. ``Russian LNG Is Unloaded in Everett; the Supplier
(but Not Gas) Faces US Sanctions.'' Boston Globe, January 30, 2018.
<a href="https://www.bostonglobe.com/business/2018/01/29/tanker-unloads-lng-everett-terminal-that-contains-russian-gas/rewj1wKjajaKtLp79irzTI/story.html">https://www.bostonglobe.com/business/2018/01/29/tanker-unloads-lng-everett-terminal-that-contains-russian-gas/rewj1wKjajaKtLp79irzTI/story.html</a>.
---------------------------------------------------------------------------

B. Imports of Uranium in Such Quantities as Are Presently Found
Adversely Impact the Economic Welfare of the U.S. Uranium Industry

1. U.S. Utilities' Reliance on Imports of Uranium in 1989
In September 1989, the Secretary completed a Section 232
investigation on the effect of uranium imports on the national
security. The investigation, requested by the Secretary of Energy,
determined that U.S. utilities imported a significant share of their
uranium requirements. At the time, imports of uranium concentrate
accounted for roughly 51 percent of domestic utility demand.\117\ The
1989 investigation also found that U.S. uranium producers faced strong
foreign competition, particularly from the Soviet Union. It further
reported that employment in the industry was steadily decreasing.\118\
---------------------------------------------------------------------------

\117\ 1989 Report, I-2.
\118\ Id. III-10 and III-27.
---------------------------------------------------------------------------

[TEXT REDACTED] \119\
---------------------------------------------------------------------------

\119\ Ibid., V-4 to V-5.
---------------------------------------------------------------------------

Consequently, the Secretary concluded that uranium was not being
imported into the United States under such quantities or circumstances
that threatened to impair the national security. For more discussion of
the 1989 Section 232 investigation, refer to Appendix G.
2. U.S. Utilities' Reliance on Imports of Uranium Continue To Rise
U.S. utilities' reliance on foreign suppliers to meet their uranium
product and service requirements have continued to increase since the
1989 uranium 232 investigation. In 2018, U.S. nuclear utility operators
relied on foreign suppliers for 93.3 percent of their uranium
concentrate requirements, 85.5 percent of their uranium hexafluoride
requirements, and 97.6 percent of their enriched uranium hexafluoride
(UF6) requirements. As for uranium service requirements, U.S. nuclear
utility operators relied on foreign suppliers for 42.3 percent of their
conversion service requirements and 61.5 percent of their enrichment
service requirements from 2014 to 2018 (see Figure 27).
BILLING CODE 3510-33-P

[[Page 41569]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.015

In 2018, U.S. imports of uranium products reached a 10-year low in
terms of both total quantity and aggregate value. Imports peaked in
both terms in 2011, when 40 million pounds of uranium products were
imported, at a total value of $5.3 billion USD.\120\ However, the
Fukushima incident occurred in the same year, and both figures have
since declined, reaching a total of just over 19 million pounds in 2018
(a 52 percent decrease), for a combined value of $2.2 billion USD (a 58
percent decrease) \121\ (see Figures 28 and 29).
---------------------------------------------------------------------------

\120\ USITC Dataweb.
\121\ USITC Dataweb.
---------------------------------------------------------------------------

BILLING CODE 3510-33-P

[[Page 41570]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.016

BILLING CODE 3510-33-C
The HTS codes that represent uranium products are broken out by
materials that represent the different stages of the fuel cycle that
uranium ore goes through to become a nuclear fuel assembly. The total
composition of 2018 imports of uranium products was comprised of a
little over half (56.4

[[Page 41571]]

percent) of uranium compounds (oxide, hexafluoride, and other) and
about one-third (29.5 percent) of enriched uranium (see Figure 30).
Fuel assemblies are not listed in Figure 30 due to the fact that from
2014 to 2018, no fuel assemblies imported into the U.S. were for actual
use by U.S. nuclear electric power operators. During this time period
imported fuel assemblies where either test assemblies or products that
were being returned to the original manufacture.\122\
---------------------------------------------------------------------------

\122\ Department of Energy, Nuclear Security Administration,
Nuclear Materials Management and Safeguard System.
[GRAPHIC] [TIFF OMITTED] TN02AU21.017

3. High Import to Export Ratio
U.S. imports of uranium products, which displace demand for
domestic uranium and lower production at U.S. mines, reached 2.7 times
the level of exports of U.S. uranium products in 2013 (see Figure 31).
In 2018, U.S. import levels were 2.2 times the level of exports of U.S.
uranium products. Uranium production from state owned enterprises
continues to depress world uranium spot prices, making it increasingly
difficult for U.S. companies to export their uranium products. In 2018,
98 percent of U.S. uranium exports were made up of ``uranium compounds,
uranium metal, and other forms of natural uranium,'' 1.8 percent was
``enriched uranium'', and 0.2 percent was ``depleted uranium'' (see
Figure 32).
BILLING CODE 3510-33-P

[[Page 41572]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.018

BILLING CODE 3510-33-C
4. Uranium Prices
The Department's 1989 uranium 232 investigation identified several
trends responsible for the decline in global uranium prices, including
increased production from lower-cost ore bodies in Canada, Australia,
and South Africa; dumping of Russian, Kazakh, and Uzbek material on the
global enriched uranium market; and cancellations of proposed reactors
in the U.S. and other Western nations.\123\
---------------------------------------------------------------------------

\123\ 1989 Report. III-12 to III-14 and III-26 to III-27.
---------------------------------------------------------------------------

Many of these trends persisted well after 1989, and following the
dissolution of the Soviet Union, uranium sales from Russia, Kazakhstan,
and Uzbekistan continued to influence both the U.S. and global uranium
markets. As detailed in the end of this section, the U.S. Government
addressed the impact of these sales of subsidized uranium through anti-
dumping investigations and the imposition of suspension agreements.

[[Page 41573]]

At the same time, other imports from the former Soviet Union
continued to depress uranium prices. Under the 1993 Megatons to
Megawatts program \124\ (officially the ``Agreement Between the
Government of the United States of America and the Government of the
Russian Federation Concerning the Disposition of Highly Enriched
Uranium Purchase Agreement''), the U.S. and Russian governments agreed
to the conversion of 500 metric tons of HEU from dismantled ex-Soviet
nuclear weapons into LEU, which was ultimately sold to U.S. utilities.
Between 1993 and 2013, this program resulted in the introduction of
14,000 metric tons of LEU into the U.S. nuclear fuel market, directly
competing with U.S. uranium production.
---------------------------------------------------------------------------

\124\ ``Megatons to Megawatts program will conclude at the end
of 2013.'' U.S. Energy Information Administration. (Washington, DC:
2013). <a href="https://www.eia.gov/todayinenergy/detail.php?id=13091">https://www.eia.gov/todayinenergy/detail.php?id=13091</a>.
---------------------------------------------------------------------------

Demand in the United States for nuclear power also stagnated after
1989. The Tennessee Valley Authority's Watts Bar 1, which came online
in 1996, was the only nuclear reactor completed in the United States
between 1989 and 2016. Between 1989 and 2000, nine reactors were
decommissioned and no new reactors were authorized. Lack of domestic
demand, spurred in part by competition from other generation sources
and public opposition to new nuclear power projects after the Three
Mile Island and Chernobyl incidents, were factors that contributed to
low uranium prices during this period. By November 2000, uranium spot
market prices had fallen to $7.13 per pound; a 56 percent decrease from
the July 1996 high of $16.50 and a 39 percent decrease from the January
1989 price of $11.60.
Uranium prices then began to climb beginning in fall 2001, and by
November 2001, the spot price reached $9.43. The price then climbed
exponentially thereafter, reaching $13.18 in November 2003, $33.55 in
November 2005, and a record $136.22 in June 2007--a 1,810 percent
increase on the November 2000 price. The principal driver of this price
increase was a trend widely referred to as the ``nuclear renaissance,''
which anticipated the construction of dozens of reactors worldwide.
Influenced, in part, by increasing oil and natural gas prices, as
well as, public concern about carbon emissions, many Western
governments adopted policies intended to promote the construction of
new nuclear power generators. In the United States, the Energy Policy
Act of 2005 provided financial incentives for the construction of new
nuclear plants, including a production tax credit and guarantees for
construction loans.\125\ U.S. utilities took advantage of these policy
changes and applied for construction and operating licenses for 25 new
reactors between 2007 and 2009.\126\
---------------------------------------------------------------------------

\125\ ``Nuclear Power in the USA.'' World Nuclear Association.
<a href="http://world-nuclear.org/information-library/country-profiles/countries-t-z/usa-nuclear-power.aspx">http://world-nuclear.org/information-library/country-profiles/countries-t-z/usa-nuclear-power.aspx</a>.
\126\ Rascoe, Ayesha. ``U.S. Approves First New Nuclear Plant in
a Generation.'' Reuters, February 9, 2012. <a href="https://www.reuters.com/article/us-usa-nuclear-nrc/u-s-approves-first-new-nuclear-plant-in-a-generation-idUSTRE8182J720120209">https://www.reuters.com/article/us-usa-nuclear-nrc/u-s-approves-first-new-nuclear-plant-in-a-generation-idUSTRE8182J720120209</a>.
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Most of these reactors, however, were not built. As discussed
earlier, the March 2011 Fukushima incident prompted a groundswell of
public opposition to new nuclear power generation. Additionally,
competition from low-cost gas fired turbine generators made plans for
many nuclear plants economically unfeasible. Of the 25 reactor
applications submitted between 2007 and 2009, only three will be
completed by 2022. The remaining reactor plans were cancelled due to a
variety of factors, including public reaction to the Fukushima incident
and falling electricity prices.
The Fukushima incident and subsequent cancellation of proposed new
reactors created a global uranium oversupply. The uranium spot market
price fell from $63.50 in March 2011 to $42.28 by March 2013. By March
2017, the price had fallen to $24.55--a 61 percent decline from the
March 2011 price (see Figure 33).
[GRAPHIC] [TIFF OMITTED] TN02AU21.019

[[Page 41574]]

In the years following the Fukushima incident, U.S. uranium
producers closed or idled 22 facilities, including mining, milling,
conversion, enrichment, fuel fabrication, and R&D operations. As U.S.
uranium producers ceased production due to poor market conditions,
state-owned uranium enterprises increased output. According to
available data, Kazakh and Chinese output had strong increases during
the 2011 to 2016 period, even when global spot market prices were
decreasing post-Fukushima incident (see Figure 34).
[GRAPHIC] [TIFF OMITTED] TN02AU21.020

Between 2011 and 2016, Kazakhstan's uranium production increased by
26 percent.\127\ Similarly, China increased domestic uranium production
by 83 percent during the same period.\128\ These increases in
production during a 61 percent decline in global uranium spot market
prices further increased imports into the U.S., and highlights the
ability of state-owned uranium enterprises to distort markets and
disadvantage U.S. producers.
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\127\ ``Uranium and Nuclear Power in Kazakhstan.'' World Nuclear
Association. <a href="http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/kazakhstan.aspx">http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/kazakhstan.aspx</a>.
\128\ ``Uranium Production Figures, 2008-2017.'' World Nuclear
Association. <a href="http://www.world-nuclear.org/information-library/facts-and-figures/uranium-production-figures.aspx">http://www.world-nuclear.org/information-library/facts-and-figures/uranium-production-figures.aspx</a>.
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5. Declining Employment Trends
Employment in the U.S. front-end uranium industry has experienced
steady declines over the surveyed years of 2014 to 2018. Data regarding
employment in 2009 was collected in order to observe the levels of
employment pre-Fukushima and post-Fukushima. As anticipated, between
2009 and 2018, miners, millers, converters, and enrichers experienced
drastic decreases in workforce numbers. Overall employment in the
front-end uranium industry declined by 45.8 percent over this period
(see Figure 35).

[[Page 41575]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.021

U.S. Front-End Uranium Industry Employment
For uranium miners, the decline in employment has been evident
since the 1989 uranium 232 investigation. Indeed, the peak of uranium
mining employment was 21,951 workers in 1979, but by 1989, employment
had fallen 91 percent to just 2,002 workers.\129\ Survey data shows
that employment has further decreased since the 1989 uranium 232
investigation and steadily declined by 54.6 percent between 2009 and
2018, with further declines projected for 2019 (see Figure 36).
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\129\ 1989 Report. III-10.
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BILLING CODE 3510-33-P

[[Page 41576]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.022

Events in the nuclear electric utility sector over the past 40
years have adversely affected uranium mining industry employment
levels. Notably, the 1979 Three Mile Island accident and the 2011
Fukushima incident prompted significant downturns in the industry and
caused steep declines in mining employment.
Mining employment is also affected by spot market prices. High spot
market prices correspond with higher employment, while lower prices
cause mines to idle and increased unemployment. The combined
repercussions of the Fukushima incident and low spot market prices can
be seen in the U.S. front-end uranium industry, as companies continue
to cut workforce numbers and idle production.

[TEXT REDACTED]
[TEXT REDACTED]
[TEXT REDACTED] \130\
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\130\ [TEXT REDACTED].
[GRAPHIC] [TIFF OMITTED] TN02AU21.023

[[Page 41577]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.024

Fuel fabricators have seen a 19.8 percent decrease in workforce
numbers since 2009. This moderate decrease is expected, as the vast
majority of fabrication of fuel assemblies is still produced
domestically due to the highly engineered nature of the final products.
Decreases in domestic demand and poor market conditions have affected
domestic fuel fabricators, and workforce cuts were made in response to
financial difficulties and reported bankruptcies (see Figure 39).
[GRAPHIC] [TIFF OMITTED] TN02AU21.025

The substantial decreases observed in the front-end domestic
uranium industry can have adverse effects on competitiveness and long-
term production in the industry. The entirety of the front-end uranium
industry

[[Page 41578]]

requires a specialized workforce which consists of a wide range of
expertise and education levels. Some skillsets within the industry are
transferable to other applications. However, an aging workforce can
mean the loss of knowledge and skillsets specific to the uranium
industry as workers continue to transfer industries and retire.
According to the Department's 2019 survey data, the average age of
specialized workers in the front-end industry is roughly 50 years old.
Should workforce numbers continue to decrease, specialized workers will
become increasingly difficult to hire or re-hire in the event of a
market upswing due to both retirement and competition from other
industries. Department survey data indicates various difficulties in
hiring and retaining workers in the front-end uranium industry (see
Figure 40).
Front-end uranium companies may be able to fill vacancies should
production resume or increase, but difficulties in obtaining skilled
employees will take time and investment. A lack of available skilled
employees will require training new hires, thus adding additional
costs. [TEXT REDACTED]
Efforts to recruit personnel are also complicated by the remote
location of many uranium mines. Over half of the mining/milling
respondents indicated that their facilities' rural location imposed a
significant barrier to recruitment and retention. [TEXT REDACTED]
[GRAPHIC] [TIFF OMITTED] TN02AU21.026

In the event of a major production increase, current employment
levels and the trending decline in employment in all industries
associated with the front-end uranium industry indicate that production
needs would not be met by the current workforce, and significant
additional hiring would be required (see Figure 41).

[[Page 41579]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.027

6. Loss of Domestic Long Term Contracts Due to Imported Uranium
Front-end uranium industry companies in the U.S. have experienced a
decline in new or renewed contracts over the last decade. From 2010 to
2018, the number of active contracts for domestic front-end uranium
industry companies, including miners, millers, converters, enrichers,
and fuel fabricators, declined by 46.7 percent (see Figure 42).
[GRAPHIC] [TIFF OMITTED] TN02AU21.028

[[Page 41580]]

These expiring contracts are not being offset by new contracts.
From 2010 to 2018, the total number of new contracts extended to front-
end companies fell by 76.2 percent. [TEXT REDACTED] This is evident by
the decline in newly formed long-term contracts. Long-term contracts
have fallen by 92.3 percent since 2010 and only one contract was signed
in 2018.
In particular, long-term contracts for U.S. miners and millers fell
by 71.4 percent, with just two active long-term contracts in 2018 (see
Figure 43). The number of contracts that front-end companies retain is
likely to fall further, as long-term contracts from previous years are
set to expire. [TEXT REDACTED]
[GRAPHIC] [TIFF OMITTED] TN02AU21.029

7. Financial Distress
The 1989 uranium 232 investigation found that the front-end uranium
industry was not financially viable during the period of the
investigation.\131\ Since these findings, increasing volumes of
imported uranium have further crippled the financial health of the
domestic front-end uranium industry. Uranium miners, converters, and
enrichers have all felt the detrimental effects of decreasing market
shares due to drastically increasing levels of imports. According to
survey data, key points in the front-end uranium industry experienced
increasing debt ratios and critically low profit margins during the
2014 to 2018 period. An assessment of financial risk for all surveyed
uranium miners, converters, enrichers, and fuel fabricators is shown in
Figures 44a and 44b.\132\
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\131\ 1989 Report. I-2.
\132\ Financial risk is evaluated based on survey data including
balance sheets and income statements. Many of the companies
classified as Low/Neutral Risk provided no information or do not
incur many costs due to being idled, shutdown or having undeveloped
deposits. Low/Neutral Risk is not necessarily an indication that
they are not financially struggling but indicates in the near term
they are unlikely to go out of business.

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[[Page 41581]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.030

[TEXT REDACTED] Uranium Miners
The financial health of uranium mining companies has deteriorated
to even more unsustainable levels than at the time of the 1989 uranium
232 investigation.\133\ As a result of the consolidation and
homogenization of the industry in the past 30 years, financial
struggles during market downturns have been magnified. U.S. uranium
mining companies continue to struggle to compete in a market with low
spot market prices that do not cover production costs, increasing
imports from SOEs, and static/declining domestic demand. Should current
market conditions continue, U.S. uranium miners will not be able to
sustain operations for much longer.
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\133\ 1989 Report III-1 to III-2.
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The 1989 Uranium 232 Investigation found that a, ``characteristic
of the uranium mining industry is that few companies are exclusively
dependent on the production and sale of the ore. Uranium production is
usually a relatively small part or byproduct of other major activities
of the firm.'' \134\ This is a material difference between the state of
uranium mining during the 1989 uranium 232 investigation and the
uranium mining industry today. According to Department survey data, a
majority of the 20 companies in today's domestic uranium mining
industry depend exclusively on uranium mining for financial viability,
and do not have the support of diverse business lines that would offset
losses in their uranium mining activities.
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\134\ 1989 Report. III-2.
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The trend in industry debt ratios for the 2014 to 2018 period is
worsening (see Figure 45). The increasing average and stable median for
approximately half of the companies surveyed implies poor performance
in managing debt. [TEXT REDACTED] The increase in debt

[[Page 41582]]

ratios one observes can reasonably be attributed to companies actively
engaged in unprofitable uranium mining operations.
[GRAPHIC] [TIFF OMITTED] TN02AU21.031

Average quick ratios and average current ratios indicate whether,
on average, companies are able to cover near term liabilities in the
short term. Values greater than one indicate that a company's assets
can cover their near term liabilities, but it does not ensure that a
company is able to cover long term liabilities with assets (see Figure
46).
[GRAPHIC] [TIFF OMITTED] TN02AU21.032

Uranium miners have also suffered from low profit margins (see
Figure 47) and persistently negative net income (see Figure 48). The
average gross profit margin for the surveyed companies is strongly
negative and when paired with the average net income it shows that
miners are losing money on operations at an alarming rate.

[[Page 41583]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.033

[GRAPHIC] [TIFF OMITTED] TN02AU21.034

Both gross profit margin and net income should be interpreted in
the context of the few actively operating companies currently suffering
the largest losses. Many of the idled companies reported negative net
income due to the cost of maintaining permits and machinery. [TEXT
REDACTED] \135\ This is in fact the case with other miners as well. In
order to fulfill contracts, miners have purchased off the spot market
to mitigate the financial losses from producing themselves or
fulfilling contracts with their

[[Page 41584]]

inventories. [TEXT REDACTED] \136\ To this end financial statements do
not fully capture the cost cutting implementations being made to remain
solvent.
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\135\ [TEXT REDACTED].
\136\ [TEXT REDACTED].
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Without a decrease in imports and an increase in prices and demand,
mining operations will continue to have surmounting financial
struggles. If current market conditions continue to exist, mining
companies will begin to exit the market and this vital component of the
fuel cycle will be lost.
Uranium Converters
There is only one location in the U.S. that has conversion
services. This is an integral point in the fuel cycle, yet it is not
immune to financial struggles faced by the miners. [TEXT REDACTED]
\137\
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\137\ [TEXT REDACTED].
[GRAPHIC] [TIFF OMITTED] TN02AU21.035

[[Page 41585]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.036

Uranium Enrichers
Urenco USA and Centrus Energy are the only uranium enrichers in the
U.S., though only Urenco currently operates in that capacity. [TEXT
REDACTED] \138\
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\138\ [TEXT REDACTED].
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[TEXT REDACTED]

[[Page 41586]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.037

[GRAPHIC] [TIFF OMITTED] TN02AU21.038

[[Page 41587]]

Enrichment is a key part of the nuclear fuel cycle and these two
companies represent the entire U.S. capability to commercially enrich
nuclear material. Retaining their vital capabilities is necessary to
preserve the domestic fuel cycle, as their financial struggles are
driven by the current state of the market.
Fuel Fabricators
The fuel fabricators are largely unaffected by financial struggles
in other sectors of the industry. Debt ratios show that most cover the
majority of their liabilities (see Figure 53).
[GRAPHIC] [TIFF OMITTED] TN02AU21.039

[TEXT REDACTED]
[GRAPHIC] [TIFF OMITTED] TN02AU21.040

[TEXT REDACTED] Over the longer term, the fuel fabricators are
concerned that Russia and Chinese SOEs will sell fabricated fuel
directly to the nuclear electric power operators, bypassing the need
for U.S. domestic fuel fabricators.

[[Page 41588]]

[GRAPHIC] [TIFF OMITTED] TN02AU21.041

8. Research and Development Expenditures
Research and development (R&D) is critical to the future
competitiveness of the U.S. uranium industry. Across all sectors, from
initial mining through final fuel fabrication, consistent R&D
expe

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