DOE announces $2.7 billion boost to U.S. nuclear fuel supply chain

Under the RFP, DOE will purchase low-enriched uranium (“LEU”) from new or expanded enrichment facilities and sell the LEU to utilities operating U.S. reactors to support clean energy generation and sever reliance on Russian imports.  This is an interesting structure for DOE to encourage an activity. Typically DOE does not act in a procurement role for items that it does not need for its own use, but rather provides direct financial assistance to nudge commercial activities in a direction that it believes advances public policy.  Here, DOE seeks to incentivize construction of new enrichment facilities, by making sure upfront that there is a market for the LEU.  

Key RFP Information for Applicants

The purpose of the RFP is to support the development of new domestic enrichment capacity to increase the commercial availability of LEU for U.S. commercial nuclear companies.  Through the RFP, DOE plans to award two or more contracts, each of which may last up to ten years and has a minimum ordering guarantee of $2,000,000, for the production of LEU from domestic sources.  RFP Solicitation pp. 6, 8.  Each contract will be for an indefinite quantity and indefinite delivery of LEU, which DOE intends to purchase and hold until commercial demand emerges.  Id. at 2, 8.  DOE will then sell the LEU to utilities operating commercial light-water nuclear reactors in the United States.  Id. at 8-9.  See the full RFP here for additional details.

Who may apply:   Owners/operators of new, U.S.-based uranium enrichment production capacity, in the form of either a new facility or an expansion to capacity at an existing facility.  RFP Solicitation pp.8, 11.  The applicant may be a single corporation or a “contractor team arrangement” under FAR 9.601—for example, a limited liability company, limited liability partnership, joint venture, or similar entity or arrangement.  RFP Solicitation p.93.

When to apply:  Proposals are due by 5:00 p.m. EDT on August 26, 2024.  RFP Solicitation p.93.

How to apply:  Proposals must be submitted electronically through FedConnect.  Specific instructions are found in Section L, pp. 93-96, of the RFP Solicitation.

Important caveats:

• All LEU must be enriched and stored in the continental United States. DOE prefers mining, milling, and conversion to occur in the continental United States but will consider other countries that are allies or partners of the United States.  RFP Solicitation pp.10-11.
• The feed uranium for enrichment to UF6 must have been mined and converted.  It may not come from a source that was recycled or reprocessed.  However, the use of tails will not be restricted.  RFP Solicitation p.11.
• The LEU produced under this contract must meet the specifications of LEU fuel feedstock that is utilized by commercial light water reactors.  This is not a HALEU procurement RFP.  RFP Solicitation pp.8-9.
• Applicants with whom DOE signs a contract pursuant to this RFP will be responsible for storage of DOE-owned LEU at an NRC-licensed facility.  Specific storage requirements will be defined in individual contracts.  RFP Solicitation p.8.
• Because this is a DOE procurement, the “strings” that are attached are more extensive than under a financial assistance agreement, including many of the standard DOE and federal acquisition regulations, but the labor-friendly, community benefits and community engagement provisions common in financial assistance awards likewise apply.
• The RFP is nearly silent about the sale side of the transaction envisioned here, noting only that DOE will seek to recover “fair market value” for the LEU when it transfers it to the domestic utilities who will be the ultimate customers.  RFP Solicitation p.9.

Background on the RFP

Federal efforts to expand domestic nuclear fuel capabilities.  Last week’s request fits squarely within a broader federal effort to expand domestic enrichment and fuel production capabilities and move away from dependence on Russia, which has roughly 44% of the world’s uranium enrichment capacity and supplies approximately 35% of U.S. imports for nuclear fuel.  On the other hand, current U.S. enrichment capacity can meet only one-third of domestic needs and would need to increase by a factor of six to support a future, expanded nuclear industry.  Building out an alternative to Russian enriched uranium has become a policy priority for the United States and its allies to close this gap.  

This specific RFP is the result of Congressional efforts over the past years to develop domestic production of low-enriched uranium.  Last year, in the Nuclear Fuel Security Act of 2023, Congress directed DOE to “support domestic production of low-enriched uranium,” including high-assay low-enriched uranium for advanced reactors, such that the domestic enriched uranium market could “address a reasonably anticipated supply disruption.”  Congress appropriated funds for this RFP—see Sec. 312 of the Consolidated Appropriations Act—but made the release of any funds contingent on the federal government prohibiting or limiting importation of Russian enriched uranium products.  Those funds were unlocked by the May 2024 law prohibiting imports of low-enriched uranium from Russia except in certain cases, which we covered in a prior blog.  

DOE deployment of new incentive strategies.  Direct financial assistance awards and tax credits have long been the tools of the trade for the federal government to incentivize private sector activity. This is the second time recently that DOE has taken on the more active role of interim purchaser.  While LEU, the commodity at issue here, is quite different, the approach closely mirrors DOE’s Transmission Facilitation Program, under which DOE is entering into capacity contracts for badly needed interregional electric transmission facilities. The goal of both is the same:  to enable the private sector to finance capacity – whether it is enrichment or electric transmission – in advance of purchase commitments from the expected ultimate off-takers. It is an innovative approach to meeting the needs of the energy transition.

For more information, please contact Mary Anne Sullivan, Senior Counsel, Amy Roma, Partner, Stephanie Fishman, Senior Associate, or Cameron Tarry Hughes, Associate