The production, handling and storage of uranium are subject to various levels of extensive governmental controls and regulations which are amended from time to time. UPC is unable to predict what additional legislation or amendments may be proposed that might affect the uranium business or when any proposals, if enacted, might become effective.
Outlined below are certain government controls and regulations which materially affect the uranium industry.
Treaty on the Non-Proliferation of Nuclear Weapons (the "NPT")
The NPT was established in 1970 and is an international treaty with the following objectives: to prevent the spread of nuclear weapons and weapons technology, to foster the peaceful uses of nuclear energy, and to further the goal of achieving general and complete disarmament. The NPT establishes a safeguards system under the responsibility of the International Atomic Energy Agency ("IAEA"). A number of countries are signatories to the NPT, including Canada, the U.S., the United Kingdom and France.
Article III of the NPT states that each party to the NPT will undertake not to provide fissionable material, or equipment designed for the processing of fissionable material, to other States unless the fissionable material will be subject to the safeguards of the NPT, as enforced by the IAEA.
Canadian Uranium Industry Regulation
The federal government of Canada has recognized that the uranium industry has special importance in relation to the national interest and therefore regulates the industry through regulations and policy announcements. The regulations and policy announcements apply to any uranium property or plant in Canada, which the Canadian Nuclear Safety Commission ("CNSC") may determine to be, or to have the capability of, producing or processing uranium for nuclear fuel application. The regulations require that the property or plant be owned legally or beneficially by a company incorporated pursuant to Canadian laws.
The control of the use and export of uranium is governed by the Nuclear Safety and Control Act (Canada) (the "NSCA") which authorizes the CNSC to make regulations governing all aspects of the development and application of nuclear energy, including uranium mining, milling, conversion and transportation. The most significant powers given to the CNSC are in the licensing area. The NSCA grants the CNSC licensing authority for all nuclear activities in Canada, including the issuance of new licenses and the amendment and renewal of existing licenses. A person may only possess or dispose of nuclear substances and construct, operate and decommission its nuclear facilities in accordance with the terms of a CNSC licence. The licence specifies conditions that licensees must satisfy in order to maintain the right to operate nuclear facilities.
The NSCA grants to the CNSC the power to act as a court of record, the right to require financial guarantees for nuclear waste management and decommissioning as a condition of granting a licence, order-making powers and the right to impose monetary penalties. The NSCA also grants the CNSC power to require nuclear power plant operator re-certification and to set requirements for nuclear facility security measures. The NSCA also provides for increased emphasis on environmental matters, including a requirement that licensing applicants make adequate provision for the protection of the environment. Additional regulatory priority is evident in the areas of quality assurance and human factor engineering and assessment.
A fundamental principle in nuclear regulation is that the licensee bears the responsibility for safety, with the CNSC setting safety objectives and auditing the licensee's performance against the objectives. The regulations made under NSCA include provisions dealing with a facility's licence requirements, radiation protection, physical security for all nuclear facilities and the transport of radioactive materials. The CNSC has also issued guidance documents to assist licensees in complying with regulatory requirements such as decommissioning, emergency planning, and optimization of radiation protection measures.
The Canadian operations of the Facilities, which may be used by UPC, are governed primarily by licenses granted by the CNSC and are subject to all applicable federal statutes and regulations and to all laws of general application in the province where the operation is located, except to the extent that such laws conflict with the terms and conditions of the licence or applicable federal laws. Failure to comply with licence conditions or applicable statutes and regulations may result in orders being issued which may cause operations to cease or be curtailed or may require installation of additional equipment, other remedial action or the incurring of additional capital or other expenditures to remain compliant.
The export of uranium is regulated by the Government of Canada, which establishes nuclear energy policy. Licenses and export permits, granted by the CNSC and the federal Department of Foreign Affairs and International Trade respectively, are required to be obtained for all exports. UPC will require that the Manager obtain any required permits for all such exports.
U.S. Uranium Industry Regulation
The uranium industry in the U.S. is primarily regulated by the Nuclear Regulatory Commission ("NRC") pursuant to the Atomic Energy Act of 1954, as amended by the Uranium Mill Tailings Radiation Control Act of 1978. The NRC's primary function is to regulate the various commercial and institutional uses of nuclear energy and to ensure the protection of employees, the public and the environment from radioactive materials. The NRC also regulates the movement of nuclear materials within the United States (10 CFR Part 71) and the regulations governing the import and export of uranium (10 CFR Part 110). A state, referred to as an "Agreement State", can be granted authority by NRC to implement certain of these regulatory functions through its own state regulations that incorporate the applicable aspects of 10 CFR.
Pursuant to these regulations, a licensee who transfers, receives, or adjusts its inventory of uranium source material or who exports or imports uranium source material, must complete a Nuclear Material Transaction Report in accordance with NRC instructions. This report is the primary mechanism for tracking physical movements of U.S. or any other origin uranium to foreign and domestic buyers.
Other agencies are involved in the regulation of the uranium industry, either directly or indirectly, including the Environmental Protection Agency, the Department of Transportation, Department of Energy, the Department of Defense, the Department of Homeland Security, the Army Corps of Engineers, and the U.S. Fish and Wildlife Service, as well as state regulatory authorities.
All of the U.S. operations of the Facilities used by UPC will be governed primarily by licenses granted by the NRC and are subject to all applicable federal statutes and regulations and to all laws of general application in the state where the operation is located, except to the extent that such laws conflict with the terms and conditions of the license or applicable federal laws. Failure to comply with license conditions or applicable statutes and regulations may result in enforcement action against the Facility, which may cause operations to cease or be curtailed or may require installation of additional equipment, other remedial action or the incurring of additional capital or other expenditures to remain compliant.
The U.S. Government also enters into international agreements for nuclear co-operation and trade with specific countries (or political blocs such as the European Union), with the general goal of supporting the peaceful uses of nuclear energy while upholding specific U.S. foreign policy and non-proliferation objectives. The NRC participates in this process by providing comment and clearance or approval of the proposed international agreements. While specific sales contracts are not reviewed or approved, the NRC is responsible for issuing export and import licenses for the shipment of uranium out of and into the U.S.
French Uranium Industry Regulation
The Government of France, including the Prime Minister in conjunction with the Ministries of Environment and Industry, exercises the oversight authority and control over nuclear security matters. The Nuclear Policy Council was established in 2008 by presidential decree, and is chaired by the President and includes the Prime Minister as well as cabinet secretaries in charge of energy, foreign affairs, economy, industry, foreign trade, research and finance as well as the head of the French Atomic Energy Commission (FCEA), the secretary general of national defence and the military chief of staff are on the council. In March 2016, AREVA, Electricite de France and the FCEA announced the formation of the tripartite French Nuclear Platform (PFN) to improve the joint effectiveness of the three bodies and devise a shared vision of a medium-and long-term goal for the industry, supporting the Nuclear Policy Council (CPN).
In addition, the Nuclear Safety Authority ("ASN") is responsible to varying degrees, along with other government ministries, for the regulation of the various commercial and institutional uses of nuclear energy and for ensuring the protection of employees, the public and the environment from radioactive materials. ASN works with a number of other government agencies, such as the Institute for Radiological Protection and Nuclear Safety, and outside experts in order to formulate policies and make decisions. The ASN also helps to coordinate the nuclear related activities of various government agencies, creates various nuclear safety regulations to support the government's laws, and determines how to apply those regulations to specific situations. The ASN is supervised by several government ministers, including the Minister of Economy, Industry and the Digital Sector, the Minister of Social Affairs and Health and the Minister of Environment, Energy and Marine Affairs.
In order for a nuclear power plant or facility to be licensed for operation, a decree must be issued by the Prime Minister, after receiving reports from the applicable ministries and the ASN. Before this decree is granted, it is necessary for these ministries to review technical evaluation reports that are issued by the ASN.
France's regulations related to the import and export of nuclear materials are complex and are regulated and controlled by the Nuclear Policy Council. Trade in nuclear materials is strictly controlled by the government, with the highest levels of government making the relevant decisions on policy. Before nuclear materials can be imported or exported from France, the trade must be authorized: (i) by the Minister of Defense for the materials intended for defense purposes; and (ii) by the Minister of Energy for the materials intended for other purposes. The Minister of Defense and the Minister of Energy must both consult the Minister of Internal Affairs and the Minister of Foreign Affairs prior to granting authorization. An authorization is granted for a definite period of time, with materials and maximum quantities being specified.
France follows the non-proliferation safeguards created by the IAEA, and only exports nuclear materials to countries that have signed the International Convention on the Physical Protection of Nuclear Materials. The destination country is thus committed to enforce a level of protection in accordance with international regulations when the material reaches its territory.
All of the French operations of the Facilities, which may be used by UPC, will be governed primarily by licenses granted by the French Government and are subject to all applicable statutes and regulations and the oversight by the ASN. Failure to comply with license conditions or applicable statutes and regulations may result in enforcement action, which may cause operations to cease or be curtailed or may require installation of additional equipment, other remedial action or the incurring of additional capital or other expenditures to remain compliant.