A nuclear fuel production plant and research lab Iran is constructing will be underground, the State Department said Friday.

Department spokesman Richard Boucher said satellite imagery showed that some structures at the Natanz plant in central Iran already are being covered with earth.

"Iran clearly intended to harden and bury that facility," Boucher said. "That facility was probably never intended by Iran to be a declared component of the peaceful (nuclear) program."

Instead, he said, "Iran has been caught constructing a secret underground site where it could produce fissile material."

An Iranian government spokesman, Abdollah Ramezanzadeh, said Friday in Tehran that Natanz "is not under the ground." He insisted that Iran's nuclear facilities are for peaceful purposes even as Iran canceled a U.N. visit to Natanz and another construction site.

Boucher said reports of the secret facilities Iran is constructing "reinforce our already grave concern that Iran is seeking technology to produce fissile material for nuclear weapons."

He said a state as rich in oil and gas as Iran would not gain economically by building costly nuclear fuel facilities.

"I'd point out that Iran flares more gas (from its oil fields) annually than the equivalent energy its desired reactors would produce," Boucher said.

He urged Iran to cooperate fully with the International Atomic Energy Agency and comply with its rules requiring complete disclosure of plant design information no later than 180 days before construction starts.

"Iran has not accepted that obligation," Boucher said. "As a first step, that's something they should do."

Boucher said the United States will continue to work with other countries to get them to refrain from nuclear cooperation with Iran and block Tehran's covert efforts to buy or acquire sensitive nuclear equipment and expertise.

He said he did not know if Secretary of State Colin Powell discussed Iran's activities in a telephone call Friday with Russian Foreign Minister Igor Ivanov.

Some 600 Russian specialists are working on an $800 million project to build a nuclear reactor in southern Iran that is supposed to go on line in the next few months.

The United States has expressed concern that the planned 1,000 megawatt reactor will help advance Iran's weapons program. But Russia has insisted that the nuclear plant would serve purely civilian purposes and remain under international supervision.