Weapons Complex Vol 25 No 20
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Weapons Complex Monitor
Article 4 of 13
May 16, 2014

DOE Revamping Uranium Transfer Plans; Less to Go to Cleanup

By Mike Nartker

Uranium Producers Oppose DOE View That Transfers Won’t Impact Market

Mike Nartker
WC Monitor
5/16/2014

In a move that could have serious impacts for D&D efforts underway at the Portsmouth Gaseous Diffusion Plant, the Department of Energy is revamping how it manages its stocks of excess uranium, with less to be provided to help fund cleanup work and more material to go to the National Nuclear Security Administration. Late this week, DOE issued a new Secretarial Determination that its planned sales or transfers of uranium will not have “an adverse material impact” on the U.S. uranium mining, conversion or enrichment industries. According to the new determination, DOE plans to transfer a maximum of 2,705 metric tons of natural uranium equivalent material per year to help fund cleanup activities and for NNSA programs.

Previously, DOE had planned to provide up to 2,400 metric tons of material per year to cleanup contractors to help fund work, primarily at the Portsmouth site but also possibly at the Paducah site. According to the new determination, though, DOE now is looking to provide up to 2,055 metric tons of material for cleanup purposes from 2014 through 2021. In contrast, while DOE previously looked to provide NNSA with up to 400 metric tons of material annually, the Department now plans to provide up to 650 metric tons per year between 2014 and 2022. With the NNSA paying for its downblending activities by providing a portion of the produced low-enriched uranium, DOE is looking to provide NNSA with more material to help offset a drop in uranium prices, according to a market analysis DOE also released late this week. If the NNSA does not use its full 650 metric tons of material per year, the remainder can be provided for cleanup purposes.

Portsmouth Already Facing Funding Challenges

The drop in material set to be available to help pay for cleanup work at Portsmouth is likely to exacerbate the funding challenges the site currently faces. D&D work at the site is funded in two ways—annual Congressional appropriations and through DOE providing the site’s cleanup contractor, Fluor-B&W Portsmouth, LLC, with stocks of surplus uranium, which the contractor then sells and uses the proceeds for work. With a steady decrease in uranium prices, though, the barter arrangement has resulted in less funding for FBP than the contractor had anticipated.

In its Fiscal Year 2015 budget request, DOE sought $160 million for D&D work at Portsmouth, an increase of approximately $22 million from current funding levels. But while DOE is seeking an increase in funds next year, as a result of the current state of uranium prices, the request will not allow FBP to meet a goal for getting one of Portsmouth’s three former enrichment process buildings—X-326—ready for demolition by the time its initial contract ends in March 2016, FBP Site Project Director Dennis Carr told WC Monitor earlier this month. “The Department of Energy put in the request what they thought they needed. What has transpired has been a significant reduction in the spot market price for uranium,” Carr said. “We have seen a major deterioration in the price. We went in planning the year at a $95 a kilogram. If you pulled up the market analysis right now, you’d be at $85 a kilogram. So we’ve lost a significant funding potential coming from the barter as the result of the market.”

Producers: Domestic Industry ‘Struggling to Survive’

Meanwhile, U.S. uranium miners are pushing back against DOE’s determination that its planned uranium transfers will not harm the domestic market. “Our domestic uranium and conversion industries are struggling to survive. The price of uranium is now at a level not seen since 2005, falling more than 60 percent since the Fukushima accident,” Scott Melbye, Executive Vice President of Uranium One and President of the Uranium Producers of America, said in a statement issued late this week. “While there are many factors contributing to the current market conditions, it is disappointing our government’s response is to dump more uranium into the market than our industry produces each year. UPA and its members provided the Department substantial information about the current state of the industry. Although the Secretarial Determination acknowledges this input was provided, it does not appear to have been considered,” Melbye said.

DOE should stop or “severely” limit its transfer plans in the short-term to “ reduce the impact on the domestic industry and ensure taxpayers receive a fair value for this asset when market prices recover,” Melbye said. “We recognize the Department wants to use these transfers to fund ongoing decommissioning and clean-up work at a number of sites around the country. UPA is not opposed to the accelerated cleanup of legacy sites, but we are opposed to the industry having to compete against the federal government in this difficult market environment. This work can still continue with funds appropriated by Congress, which is the basis under which our Constitution directs resources to meet the financial needs of government,” he said.

End of Transfers Not Likely to Improve Market

The study DOE also released this week, prepared by Energy Resources International, acknowledges the poor state of current uranium market conditions. “The global uranium, conversion and enrichment industries are all in a state of considerable over-supply, with mainly discretionary near-term demand for nuclear fuel and a decline of long-term contracting over the past year. While long-term prospects for nuclear power growth and subsequent growth in fuel supply are generally viewed as positive, particularly for the uranium market, the amount of time it will take to recover from the post-Fukushima-driven state of the current markets is unclear,” the study says, adding, “It is clear that excess supply will need to be reduced before any recovery in market price can take place.”

However, the study questioned whether an end to DOE’s transfers would result in a significant improvement to the market. “It is clear that there have been production, employment and financial impacts on the domestic industry due to a variety of market factors culminating in the current oversupplied markets. Based on the analysis contained in this study, it is not clear that a reduction in DOE inventory releases would cause the overall market conditions to change enough to make a significant difference in the health and status of the domestic industries,” the study says.

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