United States District Court, D. Columbia.
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[Copyrighted Material Omitted]
For CONVERDYN, Plaintiff: Tyson R. Smith, LEAD ATTORNEY, PRO HAC VICE, WINSTON & STRAWN LLP, San Francisco, CA; Brian Michael Serafin, Gordon A. Coffee, WINSTON & STRAWN, LLP, Washington, DC.
For ERNEST J. MONIZ, in his official capacity as Secretary of the United States Department of Energy, UNITED STATES DEPARTMENT OF ENERGY, Defendants: Daniel Edward Bensing, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Federal Programs Branch, Washington, DC.
For BABCOCK & WILCOX NUCLEAR OPERATIONS GROUP, Amicus: Thomas G. Allen, LEAD ATTORNEY, PILLSBURY WINTHROP SHAW PITTMAN, LLP, Washington, DC.
For Uranium Producers of America, NATIONAL MINING ASSOCIATION, Amici: Daniel G. Jarcho, LEAD ATTORNEY, MCKENNA LONG & ALDRIDGE, LLP, Washington, DC.
REGGIE B. WALTON, United States District Judge.
Plaintiff ConverDyn brings suit against the United States Department of Energy (" Department" ) and the Secretary of the Department, Ernest J. Moniz, in his official capacity, alleging that certain actions taken by the Department are arbitrary and capricious and were undertaken without notice and comment in violation of the Administrative Procedure Act (" APA" ), 5 U.S.C. § § 706(2)(A), 553 (2012), and the United States Enrichment Corporation Privatization Act (" Privatization Act" ), 42 U.S.C. § 2297h-10 (2012). Complaint (" Compl." ) ¶ ¶ 118-38. Shortly after filing its complaint, ConverDyn moved for a preliminary injunction. Following oral argument, the Court denied ConverDyn's motion for the reasons set forth below.
A. The Nuclear Fuel Cycle and Uranium Market
The production of nuclear fuel requires several steps: (1) uranium ore is mined and then milled and refined into uranium concentrate, referred to as " natural uranium," " yellowcake," or U308, (2) the natural uranium is converted into uranium hexafluoride (UF6 or UF6), or " feed uranium," which is a gas, and (3) the uranium hexafluoride is enriched to either become low-enriched uranium or high-enriched uranium, depending on the concentration of U235, the fissionable uranium isotope. Nuclear Fuel Cycle, www.energy.gov/ne/nculear-fuel-cycle (last visited July 23, 2014); see also USEC Inc. v. United States, 259 F.Supp.2d 1310, 1314, 27 Ct. Int'l Trade 489 (Ct. Int'l Trade 2003). Low-enriched uranium can be created from high-enriched uranium by diluting it through the addition of natural
or depleted uranium in a process called " down-blending." Defs.' Opp'n at 6 n.3.
Uranium is valued based on the cost of the different components of the product, each of which have separate market values and can be traded separately. Pl.'s Mot., Exhibit (" Ex." ) C (Declaration of Malcolm Critchley (" Critchley Decl." )) ¶ 32. The value of unenriched uranium hexafluoride has two components, the natural uranium and the cost of conversion, whereas the value of low-enriched uranium has three components, the natural uranium, the cost of conversion, and the cost of enrichment. Id. Uranium is valued in two ways: the " spot price" is the price for uranium and related services which will be delivered within twelve months of purchase, and the " term price" is the price for uranium and related services which will be delivered more than one year after purchase. Pl.'s Mot. at 3 n.2 (citing Pl.'s Mot., Ex. B (2014 Review of the Potential Impact of DOE Excess Uranium Inventory On the Commercial Markets (" 2014 Report" )) at 87.
Both ConverDyn and the Department are participants in the domestic uranium market. ConverDyn is the only domestic provider of conversion services. See Pl.'s Mot., Ex. B (2014 Report) at 11. It operates a conversion plant in Metropolis, Illinois called Metropolis Works.
See id. The Department " holds inventories of uranium in various forms and qualities, including highly enriched uranium . . . , low-enriched uranium . . . , natural uranium . . . , and depleted uranium . . . , that are currently held as excess and not dedicated to U.S. national security missions" that it sells from time to time. Defs.' Opp'n at 6 (citing Pl.'s Mot., Ex. L (July 2013 Excess Uranium Inventory Management Plan (" 2013 Plan" )) at iv). The remainder of the Department's inventory comes from government weapons programs and from the purchase of Russian-origin natural uranium. Id. (citing Pl.'s Mot., Ex. L (2013 Plan) at 8-12).
B. The Privatization Act
In 1996, Congress enacted the Privatization Act, which includes various provisions relating to the transfer of the interest in the United States Enrichment Corporation, a government corporation previously established by the Energy Policy Act of 1992. 42 U.S.C. § § 2297h-1 to -9, -12. The Act states that " [t]he Secretary shall not provide enrichment services or transfer or sell any uranium (including natural uranium concentrates, natural uranium hexafluoride, or enriched uranium in any form) to any person except as consistent with this section." Id. § 2297h-10(a). In addition to exceptions for transfers authorized under the Russian High Enriched Uranium Agreement, id. § 2297h-10(b), transfers to the United States Enrichment Corporation, id. § 2297h-10(c), and transfers within the federal government, id. § 2297h-10(e), the Privatization Act also provides that " the Secretary may, from time to time, sell natural and low-enriched uranium (including low-enriched uranium derived from highly enriched uranium) from the Department of Energy's stockpile." Id. § 2297h-10(d)(1). The Act further provides, however, that:
no sale or transfer of natural or low-enriched uranium shall be made unless--
(A) the President determines that the material is not necessary for national security needs,
(B) the Secretary determines that the sale of the material will not have an adverse material impact on the domestic uranium mining, conversion, or enrichment industry, taking into account the sales of uranium under the Russian [High Enriched Uranium] Agreement
and the Suspension Agreement, and
(C) the price paid to the Secretary will not be less than the fair market ...