Request Under Consideration by Commerce Dept.
Kenneth Fletcher
RW Monitor
2/21/2014
The Department of Commerce is considering a request from USEC for an exemption to restrictions on storing Russian low enriched uranium in the United States, a proposal being fought by competitors AREVA and LES. As described in a set of documents obtained by RW Monitor, at issue is material that falls under a supply agreement USEC has with the Russian enrichment firm Tenex, and would be destined for Japanese customers. However, since most Japanese reactors are still offline following the Fukushima disaster, USEC would like permission to ship the LEU from Russia to the United States to be stored until needed by the Japanese. But that proposal that would go against the Russian Suspension Agreement, which requires LEU to be re-exported within 36 months. The Commerce Department did not respond to a request for comment this week.
USEC filed an initial request with the Commerce Department in December, and has said the deal is important for U.S.-Japan relations and is critical to the future of the company’s American Centrifuge project. “Japan has been a major supporter of the development of the next generation of American-owned enrichment. A Japanese company has made a direct investment in USEC to support the American Centrifuge Plant (ACP) and Japanese utilities have entered into contracts to purchase enriched uranium from USEC and its affiliates that provide important support for the ACP. USEC’s Japanese customers have consistently stated to USEC that they value this historic trading relationship between the United States and Japan and recognize the importance of the deployment of U.S. technology to this relationship,” states a Feb. 7 letter from USEC to the Commerce Department. It adds: “USEC’s contracts with its Japanese utility customers provide support through dedicated revenues for the development, financing, and deployment of the ACP.”
USEC said it should store the material as a show of good faith to Japan in a difficult situation. “The fundamental reason the United States should be the site of temporary storage is because of the long-term relationship between Japan and the United States in the nuclear fuel cycle. To the extent that USEC can provide storage for Japanese material pending restart of reactors and future fabrication of material, USEC can demonstrate its continued role as a partner who will fulfill its obligations to its customers,” USEC’s Feb. 7 letter states. “Japanese utilities are an important partner to the U.S. fuel cycle, and, therefore, accommodations to deal with the unprecedented situation in Japan should be made.”
USEC is also making a U.S. market case for storing the material, emphasizing in its letter that “storing the material in the United States will increase the likelihood that Japanese utilities utilize U.S. fabricators to fabricate their fuel.” It also states: “If USEC were (despite its need for revenue to support the deployment of the ACP) to release its customers from their obligations, the LEU the Japanese utilities would have received will have to be sold by USEC somewhere else in the commercial market worldwide, causing market uncertainty and instability. … Deliveries under these contracts cannot affect current market prices, while new sales can.”
AREVA Opposes Lifting of Re-Export Time Constraints
AREVA has told the Commerce Department that it opposes a lifting of the current time constraints on the re-export of material. “AREVA specifically objects to the request that the subject material no longer be subject to any time constraints for re-export. AREVA is subject to specific time restrictions on certain French imports and has worked with the Department to address the challenges created by the Japanese market,” states a Jan. 23 letter from AREVA to Commerce. “In that case, the Department insisted on both a limited number of extensions on the time to re-export and set a definitive time for the extension. USEC has provided no justification as to why the Department should ignore the Russian Suspension Agreement and establish an open-ended period for export in this ad hoc manner.”
LES has also expressed concern that granting USEC’s request would lead to unclear expectations with regards to both limits in the Russian Suspension Agreement and import limits in the so-called Domenici Amendment. “If the Department were to accept the request and establish a precedent that ad hoc requests for entry of Russian material outside the scope of the RSA or Domenici Amendment will be accepted if a party offers sufficient assurances, it becomes extremely difficult for market participants to determine what rules may apply to any subsequent requests,” LES wrote in a Jan. 29 letter to the Commerce Department. “If the quantitative limits and specified entry mechanisms of the RSA and Domenici Amendment are not observed, then neither framework will be able to achieve its primary goal of ensuring stability in the U.S. enrichment market.”
Who Will Have Title to the Material?
Another issue for AREVA is who will hold the title of the material if it is shipped from Russia. “AREVA is troubled by the lack of clarity as to title of the material. It is unclear why USEC should be allowed to import material it owns under this exemption without any specificity as to the ultimate foreign owner,” the letter states. “Given the troubles in the Japanese market, there is a very high likelihood that the Japanese customer would avoid taking title to such material for as long as possible. It appears USEC is trying to use the narrow exemption in the Suspension Agreement to create ‘holding accounts’ for foreign customers.”
In a Feb. 7 letter to the Commerce Department, though, USEC said, “The foreign owner of the LEU will be clear with each import, including through the submission of required certifications from the Japanese utility owner and the LEU will be held in the name of the Japanese utility as owner.”
USEC Says No Other Viable Storage Options
And though competitors have questioned whether alternative options for storing the material had been explored, USEC said that it has examined other possibilities. “USEC has explored storing the uranium in Russia, but, due to requirements of the Russian regulatory regime, including the Russian tax code, this is not a viable option. Russian regulators expect that Russian uranium delivered for export will actually be exported, making it impractical to store the uranium in Russia after USEC or a Japanese utility take possession,” USEC’s Feb. 7 states. In Japan, the problem is the lack of any viable storage locations, USEC said. “Should USEC find such storage and if Japanese utilities are prepared to use it, USEC would be prepared to notify the Department and adjust the proposal accordingly,” the reply states. “Please note, however, that Japanese utilities who use U.S. fabrication want to store the uranium near the U.S. fabrication facilities; it makes no sense to ship it to Japan and then return it to the United States later.”
The company has not publicly said where it will store the material—the locations were redacted in public versions of the Commerce Dept. documents. “The Japanese LEU would be stored in a licensed commercial facility in the United States, tracked and segregated in physical cylinders, not commingled or used while in storage and withdrawn from storage for re-export to Japan when needed to fuel restarted Japanese reactors—accordingly the LEU would not affect the U.S. market,” USEC spokesman Paul Jacobson said in a statement. He added, “The proposal directly benefits U.S. fuel cycle companies (uranium miners, convertors, and fabricators) who have Japanese customers by ensuring a delivery location and mechanism for their goods and services. We are awaiting the completion of Commerce’s review of our proposal along with comments provided by others and a decision once that review is complete.”
