A little-noticed US Supreme Court decision makes it more difficult to import low enriched uranium (LEU) into the US. In a unanimous decision, the court ruled that a French firm was guilty of dumping LEU at below-market prices in 2001 by means of a services contract instead of a contract for merchandise. Because the LEU was a "service", the French firm argued that it was not covered by anti-dumping laws.

LEU is made from newly mined uranium. But as uranium becomes harder to find and more expensive, reprocessing spent fuel may be a better way to go.  In France and a few other countries, spent fuel is reprocessed and is a routine method for handling nuclear waste. The spent fuel is reprocessed and used again instead of having to be disposed of. USEC Inc. (NYSE:USU) is the only US company that enriches uranium and is building a new enrichment plant in Ohio. The company applauded the court’s ruling.

In the US, reprocessing spent fuel was banned by Presidents Ford and Carter. President Reagan lifted the ban but commercial re-processing has not been funded, either by the government or the private sector. A project is now underway in South Carolina, but is still years away from completion.

This is not just a small potatoes kind of thing. Uranium is gettingharder to find and more costly to mine. The biggest problem, of course,is how to store safely the hundreds of tons of spent fuel that arecurrently spit out by the nuclear power industry. The Yucca Mountainfacility may never be built, and it’s hard to think of a single placein the US that would welcome the rest of the country’s nuclear waste.

Reprocessing nuclear waste also has the side benefit of reducing thelong-lived radioactivity present in spent fuel. Instead of taking athousand years to return to the radioactive levels of natural uranium,reprocessing cuts that time in half. Reprocessing also captures much ofthe high-grade plutonium that is present in spent nuclear fuel. Thisfeature alone could make reprocessing valuable because it significantlyreduces the amount of nuclear material that might fall into the handsof terrorist organizations.

A Japanese reprocessing plant was commissioned in 2007. It cost $20billion and took 13 years to build. Three such plants in the US couldreprocess nearly all the spent fuel that is headed for Yucca Mountain,at only a slight premium in cost.

USEC has made a repeat appearance as one of our top picks in the weekly "10 STOCKS UNDER $10" newsletter.  This is our top alternative energy pick even though it is nuclear, and this one has held up considerably better than other alternative energy and traditional energy stocks.

Paul Ausick
January 28, 2009

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