Ken Silverstein | Aug 26, 2013

Unlike electric facilities that run on coal and natural gas, nuclear energy plants will never run out of fuel. Indeed the uranium to power those plants is abundant and relatively clean when burned. But that will soon change.

Now that the United States is losing access to its chief supplier, the country has reached a fork in the road: Alter its use of nuclear energy or explore for uranium at home. Under the terms of the Megatons to Megawatts (M2M) program, Russian nuclear warheads once aimed at the United States have been designated since 1993 for peaceful purposes -- to supply half of the uranium that is used here to produce electricity nuclear energy plants.

However, that M2M pact is set to expire at year-end. And now the big question is where will the 24 millions of tons low-enriched uranium per year come from? This country still has 102 nuclear energy units that it must feed.

“When the program was launched in 1993, it served a national security objective,” says former Energy Secretary Spencer Abraham, in a telephone interview. “It helped the Russian Federation to dispose of weapons-grade material. A lot of this has been addressed. There was also a need for Russia to generate revenue,” adds Abraham, now board chair of Uranium Energy.

Is that a smart decision by Russian leaders? Uranium prices have fallen by dramatically since their highs in 2007 and today, they are at least half of what they were during the peak years; Russia had thought that it could do better financially by selling its product on the spot market and by eschewing the safety of the long-term fixed pricing arrangement the United States.

With sinking prices, it might have been a wiser decision to stay the course. But Secretary Abraham says that those uranium prices will go up and down. If one looks at the underlying dynamics of the nuclear sector, a strong case could be made that the demand for nuclear power will jump and cause the demand for uranium to spike with it. With that, Russian has made its bet.

So, the question for the United States, as Abraham puts it, is whether this country will choose to explore more for its uranium or whether it will continue to import an essential fuel source. At present, the United States gets the balance of its uranium from Australia and Canada, as well as and Kazakstan and Nambia.

“Texas and the Rocky Mountain area are potentially rich sources,” he says, adding that small amounts are mined already in the western United States.

Tough Sell

Exploring for uranium is one issue. Enriching it is a completely different one. Older enrichment methods use a gaseous diffusion technology that is far more energy intensive that the modern style that uses centrifuge techniques. The Obama administration has established a loan guarantee fund to build some centrifuge facilities but that process is plodding along.

Consider the plight of the Bethesda, Md.-based USEC: Once part of the Department of Energy, it was spun off in 1998, although it still works closely with the federal agency. It was forced earlier this year to shut down its gaseous diffusion enrichment facility in Kentucky. Meanwhile, it has applied twice to receive a $2 billion federal loan guarantee so that it could build a centrifuge plant in Ohio, only to be told to do more work.

Two other nuclear enrichment projects are also in the works. One is by URENCO, which would be built in New Mexico and which is jointly owned by the British and the Dutch. And a second, which would be constructed in North Carolina and which is owned by General Electric. Both are asking for loan guarantees.

As for USEC, its centrifuge technology has advanced significantly since it was originally designed in the 1980s. But it has not reached the point where U.S. officials feel comfortable awarding the company a $2 billion loan guarantee. USEC does say that if it is able to win such a loan, then it would be able to nearly double its enrichment facility from 3.8 million "work units" to 7 million. That, in turn, would allow this country to grow its nuclear energy program.

“At the end of the day, you still need to engage in a conversion process,” says Abraham. “We need modern capabilities. Now, some processes are more expensive and outdated. We need to have more domestic enrichment, or centrifuge, facilities.”

It’s accurate to say that countries such as Russia, China and India will use increasing amounts of nuclear energy. And its also correct to predict an eventual rise in the global demand for uranium. However, it’s unclear which direction the United States will head. And while it may make economic sense to drill for more uranium here, it will remain an awfully tough sell politically.

Twitter: @Ken_Silverstein

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