For as long as nuclear power generation has existed United States Enrichment Corporation, USEC, has been the sole company to turn to for enrichment services that is physically located within the United States. Since the United States is the largest, in absolute terms, consumer of nuclear power generation in the world, this corresponds to having the largest home market for enrichment services in the world. 

Of course, presented with that inducement, many other enrichment companies worldwide would like to get in on the action.  Wait, not so fast.  Certainly USEC does not want to give up its throne just yet. 

USEC, originally a government corporation, was created as a result of the Energy Policy Act of 1992 to privatize uranium enrichment for civilian use. USEC later went public in 1998 through an IPO.

Aside from an USEC subsidiary that concerns itself with storage and transport of used nuclear fuel and some consulting services, USEC focuses entirely on uranium and uranium enrichment.  It controls the only facility currently operating in the United States for enrichment purposes – a gaseous diffusion facility in Paducah, Kentucky.

However, USEC’s efforts to remain competitive have been an uphill battle, because of the high cost of its outmoded gaseous diffusion technology.  In the ten-year period from 1994 to 2003, USEC saw its share of the US market fall from 80% down to 50%.  However, USEC has been very successful so far in staving off competition by relying on relief under US trade law, initially supporting the year 1991 antidumping and subsidy complaint against Soviet (and then Russian) uranium imports.  The resulting import restrictions have effectively kept Russia out of the U.S. market, except for the “wholesale deal” under which USEC itself benefits by using Tenex as half its supply source.  US trade restrictions are typically put in place for a limited time period, in order to give the particular US industry some “breathing room” to recover and become competitive. Time may be running out on USEC for protection from Russian competition.

Antidumping legislation is meant to protect American companies from unfair foreign trade practices.  If American companies believe that competitors are dumping merchandise in the United States or are being subsidized by foreign governments, they may file for relief with the U.S. Department of Commerce's International Trade Administration and the U.S. International Trade Commission. The US government reviews cases ranging from paper clips and frozen concentrate orange juice to metals such as magnesium and yes -uranium.

It can be enlightening to examine the dumping aspect further.  Here is an excerpt from the U.S. Department of Commerce International Trade Administration:

Now, this is where things become interesting.  USEC is currently the only operating uranium enrichment company physically located in the US.  While USEC may plausibly make the argument that any outside sales are a material threat, the argument can also be made that they are currently operating as a monopoly in the United States, ergo they can set their prices as they wish, to a certain degree.

Back in 1992, the US Department of Commerce (DOC) was evaluating antidumping concerns with regards to uranium products and services from some former Soviet Union states – Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Ukraine and Uzbekistan.  The US Department of Commerce had preliminarily concluded an affirmative dumping determination.  Before determinations became finalized though, the investigation was put on the shelf, as the US government entered into a “Suspension Agreement.”  Under this agreement, Russia and the other former Soviet countries “voluntarily” limited their exports to the USA under terms and conditions essentially dictated by the DOC. The intent was for Russia to get some market share in the USA, but even with several subsequent amendments this share has turned out to be minimal from straight commercial deals.


Russia has been able to participate in the US market indirectly by virture of the HEU - Megatons to Megawatts Program whereby uranium products and services, derived from the dismantlement of Russian nuclear warheads, are bought and sold by USEC for the enrichment content and the consortium of western uranium companies (Areva, Cameco and Nukem) for the uranium content, in accordance with the U.S./Russia HEU government-to-government agreement.  USEC is hence known as the executive agent in this program for the USA, and Tenex is the executive agent on the Russian side.

The suspended investigation of dumping by the US Department of Commerce has since undergone two five-year sunset reviews as required by law. These sunset reviews are to determine whether revoking the order would be likely to lead to continuation or recurrence of dumping or subsidies and of material injury. The official notes on the investigation can be found here. The most recent sunset review started in 2005 and ended in August 2006.

In the latest current court battle, Techsnabexport, or Tenex, the Russian company, which is responsible for exporting uranium and enrichment services, has challenged the US Department of Commerce’s classification of the enrichment stage of the nuclear fuel cycle in its second sunset review. While the review covers both the export of uranium and uranium enrichment services from Russia, Tenex contends that the inclusion of enrichment services in the review makes the review unlawful.

Tenex’s legal challenge arises from what one may think an unlikely source: a separate USEC antidumping and subsidy complaint filed against EURODIF and its subsequent legal challenge by AREVA, the operator of EURODIF. One of the major players in the enrichment business in the world is EURODIF, or European Gaseous Diffusion Uranium Enrichment Consortium. Various countries own the consortium.  At the beginning, France (AREVA), Belgium, Italy and Spain were owners in the company, but later Italy exited and Iran became a part owner, through a separate French-Iranian company named Sofidif.  EURODIF supplies some 100 nuclear reactors in France and throughout the world including EDF, Electricite de France, which is France's national electric power company.

As a result of this legal challenge, it was determined that enrichment was a service, and not a product.  Utilities retain ownership of uranium throughout the conversion, enrichment and fabrication process.  Enrichment is simply a service needed in the nuclear fuel cycle. (Editors note: Please see the addendum to this feature for an overview of the entire nuclear fuel process.)

It should be noted for curious onlookers that it isn’t just non-US enrichment companies who do not wish for USEC to curtail competition via the U.S. Department of Commerce's International Trade Administration.  Ad Hoc Utilities Group 2 (AHUG), an industry group comprised of owners and operators of U.S. nuclear power plants attempted to participate in the sunset review of the EURODIF case, but was denied interested party status.  Members of AHUG include: Constellation Energy Group, Inc., Dominion Energy Kewaunee, Inc., Dominion Nuclear Connecticut, Inc., Duke Energy Corp., Entergy Services, Inc., Exelon Generation Co., LLC, Nebraska Public Power District, Pacific Gas & Electric Co., PPL Susquehanna, LLC, Progress Energy Carolinas, Inc., Progress Energy Florida, Inc., Southern California Edison Co., Southern Nuclear Operating Co., Union Electric Co. (d/b/a/ Ameren UE), TXU Generation Co. LP, and Virginia Electric & Power Co.

What difference does it make if enrichment is classified as a service or a good?  It’s a huge difference, in legal terms.  The antidumping duty statue applies to goods and products, but not services.

The number of companies who encompass the market of uranium enrichment services is quite small. Tenex and Russian HEU currently comprise a major share of the world's enrichment service supply. Russian HEU shaded above is bought and sold by USEC. Once the U.S./Russia HEU agreement expires, USEC's share of the world market is expected to decrease substantially. Source: US Department of Energy.

Tenex’s challenge is a result of this precedent being ignored in the second sunset review.  In addition, Russia’s newly acquired status as a market-economy, a designation granted by the US Commerce Department back in 2002, was not incorporated into the review.  This designation brings with it a different set of rules on how to treat international commerce versus commerce with a non market-economy country.  Tenex is contesting this oversight and insists new data should be incorporated in the review.

Last Wednesday, September 26, 2007, the United States Court of International Trade agreed on the issue of SWU (enrichment) and remanded the case.  In its 22-page court document, it states:

As a result, the US Department of Commerce must re-examine data in regards to the antidumping review.   Its results are due by November 26, 2007.

USEC’s official comments on the ruling assert they were expecting this ruling. Not surprisingly though, USEC agrees with the conclusion of the last sunset review.  USEC believes that, “termination of the suspended antidumping investigation would lead to a recurrence of Russian uranium dumping in the U.S. market, and expects the DOC again to issue an affirmative determination after the remand is complete.”

In the end, despite all these efforts to curtail competition, whether fair or unfair, that USEC may face, it may all be for naught. While USEC has been accustomed to being the only US enricher, it is no longer the case – at least not for long.  LES, or Lousiana Energy Services is currently constructing an enrichment plant in New Mexico (link to SI article) and AREVA NC is expect to submit an application for an enrichment facility in the US in the near future. In addition, General Electric has bought the rights to an even newer laser-based enrichment technology called SILEX, and on October 3 announced that it has signed letters of intent to provide enrichment services to two US utility companies: Exelon and Entergy.

Traditionally, utilities buy uranium from uranium producers, companies such as AREVA and Cameco. This uranium is in the form of yellowcake, or uranium oxide, its chemical formula being U3O8. Utilities, however, have no use for uranium in this form.  The uranium must first be converted and enriched so that it can be utilized in nuclear power plants.  The issue at stake is the prevalence of certain isotopes occurring in natural uranium. 

U 235 is the fissionable isotope of uranium, and its concentration is what differentiates natural uranium, or U3O8, from lowly enriched uranium, or LEU, and from highly enriched uranium, or HEU.  Natural uranium is comprised of approximately 99.284% of the U 238 isotope and a mere 0.72 % of the U 235 isotope. LEU is what the nuclear power plants utilize, and the U 235 isotope generally needs to be concentrated to approximately 3 % – 5 % of the volume in order to be useful for the means of power production.  HEU, or highly enriched uranium is of course weapons grade uranium, and demands a much higher level of U 235, or approximately 90% or more of U 235 concentration.

The nuclear fuel cycle in the United States is suspended at step six - storage of spent fuel. A reprocessing plant has not been approved and long term storage at Yucca Mountain has still not yet materialized.

In order to process this natural uranium, U3O8, to LEU, utilities arrange for the yellowcake to go directly to a conversion facility. At the conversion plant, impurities are removed and the uranium is combined with fluorine to create pure uranium hexafluoride (UF6) gas. This gas is pressurized until it cools into a liquid state, and then placed in cylinders.  After being placed in cylinders, approximately 14-ton each, the liquid gas solidifies in about five days and is sent on to an enrichment facility. Conversion costs are based upon kilogram of yellowcake processed. The Long-Term Price Indicator for North American delivery is $12.25 per kgU as UF6. (Courtesy of TradeTech)

It should be noted that UF6 is also a substitute for yellowcake, or U3O8, in that there is a distinct market for the UF6 product..  The recent US Department of Energy auction was for UF6, not U3O8, and accordingly, those buyers who obtained the UF6 would have less demand for the primary product, or yellowcake.

Next step along the route from yellowcake to power plant is at the enrichment plant.  Enrichment facilities use either gaseous diffusion or gas centrifuge technology to enrich the solid UF6 into LEU.  Most facilities are now switching to a gas centrifuge technology, as it is much more energy efficient. EURODIF’s switch is imminent and USEC is following suit as well.  

But here is where it can get interesting.  Utilities have discretion in ordering how much tails can be leftover from their uranium purchases and to which percentage they need for U 235 concentration (3%, 4 % or 5 %, etc). Tails can be a strange concept to grasp but it need not be.  One uranium expert once compared this to juicing oranges.  If you’ve ever used a juicer, you can understand the concept of tails.  The fruit is placed in the juicer and then it’s turned on.  The leftover matter is comparable to tails.  One may place this fiber through once again and obtain yet more juice.  The amount of the tails assays leftover is a measure of how hard you want to squeeze  - or how much desire you have to enrich all of your initial product, or UF6. The UF6 is run through diffusion or centrifugation stages repeatedly until the desired tails and enrichment percentage is reached.

Utilities weigh the cost of reducing tails assays, which is the concentration of U-235 in the leftover tails, versus the cost of more initial product, yellowcake or UF6.  In this sense, as the price of yellowcake climbs higher, utilities may reduce the tails assay and hence reduce the amount of yellowcake required for their energy needs to produce the equal amount of end product, or LEU, necessary for energy generation.  They would be substituting more enrichment services for less yellowcake. 

A fuel assembly being loaded into a nuclear power reactor.

Now, in exchange for the uranium enrichment, utilities are required to pay fees based upon the amount of energy consumed in the process.  This is measured in SWU, or Separative Work Unit.  The energy required, or SWU, is found by using a mathematical equation with the variables of the original amount of uranium, tails and desired end quantity of LEU.  This value, or SWU, is then used to determine how much it will cost for the enrichment services. Long-Term SWU price indicator was last determined to be at  $143.00 per SWU. (Courtesy of TradeTech)

Once the UF6 is enriched to desired specifications, the LEU is then sent on to fuel fabricators who process the LEU into uranium oxide pellets and fabricate them into fuel assemblies. The assemblies are then delivered to the utilities for use in nuclear power plants. 

A full listing of all of the licensed sites for the nuclear fuel cycle in the US can be found here: http://www.nrc.gov/info-finder/materials/fuel-cycle/