Uranium Reserve Program Proposal: Policy Implications

Uranium Reserve Program Proposal: Policy Implications

April 16, 2020
Uranium Reserve Program Proposal: Policy Implications
DOE Budget Proposal
to impair the national security.” The domestic uranium
The President’s FY2021 budget request for the Department
companies’ petition called on the President to enact a quota,
of Energy’s (DOE’s) Office of Nuclear Energy includes
pursuant to Section 232, on uranium imports such that
$150 million for the purchase and development of a
“25% of the average historical consumption will be
Uranium Reserve (UR) program. For the UR program,
reserved for newly produced U.S. uranium.”
DOE would purchase uranium from domestic uranium
producers to develop a stockpile of uranium that would be
On July 18, 2018, Commerce began a Section 232
available for nuclear power operators in the event of a
investigation into uranium imports. In May 2019,
civilian nuclear fuel market disruption. According to DOE,
Commerce submitted a report to the President finding that
the UR program would also support U.S. strategic fuel
uranium imports posed a threat to national security and
cycle capabilities for defense purposes. The UR program
recommended the President take action under Section 232.
refers to DOE’s proposal to procure uranium and not the
According to a presidential memorandum released by the
development of a physical facility to store uranium.
Trump Administration on July 12, 2019, the President did
not concur with Commerce findings. Nonetheless, the
DOE’s proposal to purchase domestic uranium for a UR
Trump Administration expressed significant concerns
program would be a new initiative included in the FY2021
regarding national security and responded by establishing a
budget request. This In Focus describes the background and
Nuclear Fuel Working Group (NFWG), which included
current context for the proposal, as well as uranium
representatives from various executive branch agencies.
requirements for commercial power production and
The working group was tasked with examining domestic
defense-related applications, and analyzes the policy
nuclear fuel production and options to revive the entire
implications of appropriating funds for the establishment of
nuclear fuel supply chain. The NFWG was to provide a
the UR program.
report to the President within 90 days of the memorandum.
To date, neither Commerce’s report to the President based
Background
on its Section 232 investigation nor the recommendations of
During the 1950s and 1960s, the United States procured
the NFWG to the President have been made public.
uranium by funding domestic uranium mining and milling
operations and purchasing foreign-produced uranium
Commercial Fuel for Nuclear Reactors
concentrate largely in support of the production of U.S.
The front end of the nuclear fuel cycle includes multiple
nuclear weapons and other defense applications. Over time,
stages of processing uranium materials before it is capable
U.S. uranium needs changed from weapons production to
of producing electricity in a commercial nuclear power
commercial nuclear power production, supplied almost
reactor. These stages include uranium mining and milling,
exclusively by domestically produced uranium during the
uranium conversion, uranium enrichment, and nuclear fuel
1970s. According to the Energy Information Administration
fabrication. At each stage, uranium is processed chemically
(EIA), U.S. nuclear utilities and reactor operators have
or isotopically into different products. Generally, each of
purchased increasingly more foreign-origin uranium for
those uranium products or services may be bought, sold,
reactor fuel than domestically produced uranium since the
traded, or stockpiled throughout a global uranium market
late 1980s. In 1987, about half of uranium used in domestic
involving a host of international organizations. The global
nuclear reactors was foreign origin. By 2018, 93% of
uranium market operates with multiple industries
uranium used in U.S. nuclear reactors was foreign origin.
exchanging uranium products and services through
separate, non-direct, and interrelated markets. Nuclear
On January 16, 2018, two U.S. domestic uranium mining
utilities and reactor operators generally diversify fuel
companies petitioned the U.S. Department of Commerce to
sources and may acquire and stockpile uranium from
investigate whether uranium imports from foreign state-
multiple domestic and foreign suppliers and servicers.
owned enterprises—such as those in Russia, China, and
These transactions may involve multiple federal agencies
Kazakhstan—pose a threat to national security. The
and international agreements.
companies were asking Commerce to investigate foreign
uranium imports under Section 232 of the Trade Expansion
Domestic Production Capacity
Act of 1962 (19 U.S.C. §1862), which provides the
For calendar year 2019, EIA reported production of
President with the ability to impose restrictions on certain
173,875 pounds of domestic uranium concentrate (U3O8),
imports. Those decisions are subject to an affirmative
the lowest annual production amount since before 1949. As
determination by Commerce that the product under
of the fourth quarter of 2019, EIA reported three domestic
investigation “is being imported into the United States in
in-situ recovery (ISR) plants operating and three domestic
such quantities or under such circumstances as to threaten
conventional uranium mills on standby. Uranium
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Uranium Reserve Program Proposal: Policy Implications
concentrate purchased for the UR program may be
Tritium, an isotope of hydrogen used in nuclear weapons,
produced by operators of conventional uranium mining and
decays at a rate of 5% per year and must be periodically
milling operations or ISR facility operations. Currently, the
replaced in existing nuclear weapons. According to DOE,
three operational ISR facilities (solution mining operations
LEU inventories are sufficient to sustain tritium production
in which a solvent is pumped through underground ore
through 2041.
bodies to recover uranium) are located in Wyoming. Three
conventional uranium mills and 12 other ISR facilities on
DOE does not currently enrich uranium to produce LEU for
standby or partially licensed are located in Nebraska, New
the production of tritium or to produce HEU fuel for naval
Mexico, South Dakota, Texas, Utah, and Wyoming. After
propulsion. For uranium purchased for the UR program to
mining and milling, the next stage for developing uranium
be suitable for these defense-related applications, the
into nuclear fuel is uranium conversion. During uranium
federal government would need to establish domestic
conversion, U3O8 is used to generate uranium hexafluoride
enrichment capability or continue to supply this material
(UF6), which is needed for the subsequent stage in the fuel
from surplus stocks as it does now. In addition to uranium
cycle: uranium enrichment. There is currently one domestic
processing, the federal government would be required to
uranium conversion facility, the Honeywell plant in
manage some resulting wastes, including depleted uranium
Metropolis, IL, which has been on standby since 2017 due
produced during enrichment and high-level wastes
to poor market conditions. According to Converdyn—the
generated after use from either defense-related application.
executive sales agent at the Honeywell conversion
facility—the plant, when operational, has the capacity to
Policy Implications
deliver approximately 40% of domestic conversion
According to the FY2021 President’s budget request, one
requirements. On standby, the Honeywell facility in
policy objective of the UR program is to provide assurance
Metropolis currently operates as a warehouse, and the
of the availability of uranium for nuclear fuel supplies in
company serves as an international trading platform for UF6
the event of a market disruption or for defense purposes.
and uranium concentrate. According to the FY2021
DOE does not identify what would constitute a market
proposal for the UR program, the DOE Office of Nuclear
disruption, criteria for providing uranium material to
Energy would be responsible for procuring U3O8 through
commercial utilities, or the price at which the uranium from
contracts with domestic uranium producers, contracting
the stockpile would be sold. For the requested $150 million,
services for uranium conversion, and providing oversight
DOE could purchase approximately 6 million pounds of
over the UR program. According to DOE, this funding
U3O8 from domestic producers (using the March 20, 2020,
would support at least two domestic uranium mines and the
uranium spot price of $24.90). According to EIA, between
reestablishment of domestic uranium conversion. DOE
2009 and 2018, the annual U3O8 equivalents loaded into all
indicates that funding for uranium mines would be granted
domestic nuclear power plants averaged 47.2 million
on a competitive basis. The budget request does not indicate
pounds. The amount of U3O8 would be lower than 6 million
the contract purchase price, which would be a major factor
pounds annually if DOE contracts at a higher contract price
in determining the amount of U3O8 that could be procured
with domestic producers, allocates a portion of that funding
from domestic producers.
toward conversion, or apportions funding for storage and
administrative costs. DOE’s budget request does not
Defense Uranium Requirements
consider additional costs of uranium enrichment, fuel
Uranium is used for naval nuclear reactor propulsion fuel,
fabrication, and waste disposal.
nuclear warheads, and the production of tritium for nuclear
warheads. The amount of uranium required for these
DOE and domestic uranium producers would need to
defense applications is lower than annual commercial
negotiate the contract price, the quantity of U3O8, and
nuclear power plant requirements. DOE’s budget proposal
contract duration, among other information. The margin
did not identify an immediate national security need for
between the contract price and the cost to produce uranium
uranium for defense-related nuclear applications.
would affect the cost-effectiveness to produce uranium for
domestic producers. Given this assumption, DOE would
The United States does not currently use enriched uranium
need to purchase less uranium at a higher contract price
produced through the civilian nuclear fuel cycle for
than currently available in the spot market and would likely
defense-related applications. The U.S. Navy relies
have to continue the purchases for longer than one year. If
exclusively on federal defense stockpiles of highly enriched
DOE purchases less U3O8, than it could at the spot price,
uranium (HEU) for nuclear-powered naval propulsion for
total conversion and management costs would be reduced
all U.S. aircraft carriers and submarines. DOE’s National
proportionally. However given that scenario, the total
Nuclear Security Administration estimated this supply to be
amount of uranium available for nuclear utilities or DOE to
sufficient until 2060. The federal defense stockpiles of
limit a potential market disruption or for defense-related
HEU were developed largely after World War II. The
applications would be relatively less.
United States discontinued production of HEU for nuclear
weapons by 1964 due to the buildup of sufficient defense
Lance N. Larson, Analyst in Environmental Policy
stockpiles and ended all production of HEU by 1992.
Additionally, DOE requires a domestic source of low-
IF11505
enriched uranium (LEU) for the production of tritium.

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Uranium Reserve Program Proposal: Policy Implications

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