Tuesday, May 5, 2009

Science Panel May Study Virginia Uranium Plan

From the Federal Reserve Bank of Richmond
Regional Focus, Winter 2009


Renewed attention to nuclear power has stoked a
worldwide rush for the chief constituent of reactor
fuel, uranium. Its rising price makes the ore economically
feasible to extract, and people are staking claims even
on public lands, including the Grand Canyon.

Uranium is a metal that’s slightly radioactive, found in
rocks, soils, rivers, and seawater as well as in granite, fertilizers,
and coal deposits. It’s fairly common. But uranium in
Virginia? A large deposit of uranium ore — possibly 119 million
pounds, if geologists’ assessments bear out — lies
beneath Pittsylvania County’s bucolic pastures.

But in Virginia, there’s the small matter of a 1983 state
moratorium on uranium mining. State legislators had rejected
a uranium mine study, but a Virginia Coal and Energy
Commission subcommittee has authorized negotiations
with the National Academy of Sciences to study the idea.
The stakes are high. The study could clarify long-term
effects on air, water, and health. A separate analysis would
compare costs to benefits of a domestic uranium supply,
jobs, and possibly resource-tax money for the region.

Virginia’s Southside

Walter Coles Sr. still remembers the early 1950s when a
Geiger counter ticked up in response to what may be the
biggest untapped source of uranium in the United States.
The signal was so strong that the geologist who brought the
device, a friend of his father’s, thought it was broken.

Nuclear was hot then. President Dwight Eisenhower had
pitched “atoms for peace” in a 1953 speech to the United
Nations. Nuclear fuel occupied a prominent place in a future
of military might and peacetime energy.

Back then, as now, the two families who own the uranium
deposits could have sold the land and/or the mineral rights
for cash. But they want to mine it “for and by Virginians,”
Coles says, to shore up the economically depressed region.

The deposit lies six miles north of Chatham, Va., a town of
stately homes built in more prosperous times, in a region
known as Southside. Some of the yards display signs against
the uranium mine. Frankly, Southside could use the jobs.

The company, Virginia Uranium, estimates those could
number 300 to 500, and would include nuclear engineers, as
well as heavy equipment operators, among others. The jobs
and the possible taxes on the resource could spawn economic
development and pay for education and conservation,
among other efforts, Coles hopes. About 40 miles away,
Babcock & Wilcox and Areva fabricate nuclear fuel, the
former for military and the latter for commercial purposes.

Area farmers, according to Coles, often supplement farm
income with other employment. Textile and furniture making
have eroded, tobacco farming too. “We had raised
tobacco until three years ago, since 1785,” he remarks on a
drive from the Chatham office to the property. He plants
hay for his hobby, 150 head of cattle. Even he left home as a
young man because there would not have been enough
income to support two families on the farm. He served in
Vietnam, and later worked on peacekeeping there, followed
by a foreign service career with the State Department, from
which he retired in 2004.

Under the property lies a geographical fault, and to the
west of it, “two approximately 350 meter long by 250 meter
wide ellipsoidal mineral deposits.” Those deposits of uranium
lie in igneous rocks, hard rocks, but to be used as fuel
must be processed to a gas and then further “enriched” into
uranium oxide pellets. The ore would likely be excavated in
an open pit, using water to damp down the dust. The mill
would crush and chemically extract the uranium. The resulting
uranium oxide, “yellowcake,” would go to a conversion
plant such as the one in Metropolis, Ill., and then to the
nation’s only enrichment plant in Paducah, Ky., before it’s in
any kind of geophysical shape to fuel reactors.

Contaminated leftover materials and chemicals used in
this kind of extraction process typically are collected in
retention ponds. The prospect of overflow or failure of
impoundments worries the state’s biggest environmental
group because of Virginia’s comparatively rainy climate.

Most mines are out West, in arid climates, or in remote
regions of Canada. At least one city that gets its drinking
water from reservoirs downstream, Virginia Beach, has
opposed it.

When the mine closes, the property will be placed in a
conservation easement, Coles says. Back on the farm, where
the original land grant that bears Thomas Jefferson’s signature
hangs on the wall of the circa 1817 home, nothing
happened after the initial screech of the Geiger counter.

In 1979, however, Marline and Union Carbide drilled core samples
until 1984 under mineral rights leased from the two
families that own the land. The firms back then also leased
mineral rights to 16,000 acres in Fauquier, Orange,
Culpeper, and Madison counties.

Uranium Supply and Demand

There was even an economic impact study on the possible
Coles Hill uranium mine. But demand collapsed and the
leases eventually expired in the wake of core meltdowns in
1979 at Three Mile Island, and 1986 at Chernobyl. Cost overruns,
nuclear disarmament, and overestimates of electricity
demand also killed the 124 nuclear reactors then on the
drawing board.

But nuclear’s looking, if not hot, then lukewarm. Nuclear
reactors don’t directly emit carbon. If carbon is priced anytime
soon, then nuclear’s high capital costs might seem
more competitive. Per kilowatt hour, excluding any long-
term waste or capital costs, nuclear generated electricity is
cheaper than coal or gas. Nuclear does leave a footprint,
though. Worldwide, uranium mines release carbon, processors
discharge chlorofluorocarbons, also a greenhouse gas,
and then there’s that unsolved mystery — waste storage.
More nuclear waste repositories such as Nevada’s Yucca
Mountain would be required if reactors really had to take up
the electricity slack.

The Energy Policy Act of 2005 offered investment tax
credits and subsidies for construction, among other nuclear
perks. That and the industry’s longtime federal insurance
caps on accident liability have helped propel nuclear energy,
and, by extension, uranium prices.

Virginia Uranium estimates its gross revenues at about
$280 million annually depending on uranium prices, which
long term are expected to average $70 per pound. An
average mill, says project manager Patrick Wales, is likely to
produce around 3.5 million to 4 million pounds a year, for 30
years, roughly.

Back in the mid-1970s, uranium prices reached roughly
$112 per pound, in 2006 dollars. Uranium sold for $7 a pound
in 2002; the price is now about $42 per pound, down from
$136 a pound in 2007. The $136 was “due to a lot of investors
in this industry looking to buy and hold uranium,” says Nick
Carter of the Ux Consulting Co. “It’s now at a level where, in
order for a lot of these new mines to be developed, there
needs to be a much higher price.”

Production costs help determine viability. “Production
costs at Coles Hill are unknown,” he says. “The costs typically
are higher here than say Kazakhstan and the eastern
countries because the regulatory system is much more stringent
here than in Asia.” Existing mines in Kazakhstan can
produce below $20 per pound, maybe even $10, he says.
Ux Consulting forecasts uranium prices, but not for the

“What I can tell you is that over the next couple of
years, we see prices moving into the $50s and $60s,” Carter
says. “Beyond that, it’s really going to be a function of what
new projects come online. We’re seeing nuclear growth in
Asia, particularly in China and India.”

Exploration expenditures in the United States increased
116 percent from 2006 to 2007. Production in the United
States reached 4.5 million pounds of uranium oxide in 2007,
according to the U.S. Energy Information Administration,
about 4 percent of the world total, at six sites in the West.

Canada currently produces about 23 percent, Australia about
21 percent, according to the World Nuclear Association. In
Africa and Kazakhstan, uranium production is expected to
grow to 40 million pounds annually. About 55 percent of the
world’s nuclear power fuel today comes from uranium, the
rest from former military uses. That includes an annual 18
million to 24 million pounds of Russian high-enriched uranium.
The agreement that allows this expires in 2013.

On the demand side, several utilities in the Fifth District
have plans to build new reactors and many have filed for
extensions on existing plants built decades ago. Activity is
high in the District because every state except Maryland
regulates utilities. This nonmarket structure lets firms earn a
rate of return on investments that can include reactors
which ordinary investors might decline to fund.

South Carolina Electric and Gas Co., for example, recently got new
rates approved for building two reactors. Similarly,
Dominion Power customers are already paying, via rate
increases, for a coal-fired plant under construction in
Wise County, Va.

The Unknown Element

The uranium mine at Coles Hill remains a largely “on paper”
enterprise, with operations and output, employment, and
other possible effects, good and bad, unknown to the larger
community. No current laws address the mining of uranium.

The Virginia General Assembly, if it lifted the moratorium,
would amend mining laws and draft regulations, according
to Mike Abbott of the Virginia Department of Mines,
Minerals, and Energy, which regulates coal mines in the
state, among other duties. “Our agency would be involved in
drafting the language with input from a variety of stakeholders,
including the general public.”

Once the mine is decommissioned, then the U.S. Nuclear
Regulatory Commission specifies how the tailings, or waste,
are to be managed. How water flows through rock may
affect that. From 1911 through the 1950s, a Canonsburg, Pa.,
site was inappropriately mined, but remediated by the government
in the 1980s. While there were no milling-related
traces in the surface waters of the nearby creek, the groundwater
remains contaminated. Both surface and ground
waters will be monitored in perpetuity, according to the
Energy Information Administration. Mines in remote
Canadian locations, however, could prove similar in geology
and hydrology to Virginia, according to Virginia Uranium.

Because this hard rock mine is breaking new ground, the
Piedmont Environmental Council has requested that
Virginia sponsor original research. “The first thing to do is
study those areas comparable to Virginia — rainfall, geology,
hydrology — to see if it’s ever been done properly,” says Todd
Benson, a council attorney. “Show us five places where it’s
been done comparably.”

Virginia Uranium has offered to help pay for any study.
Meanwhile, the firm’s parent has sold an 8 percent stake to a
Canadian resource firm, Santoy, to raise cash, and plans to go
public in Canada first. The United States has been out of the
uranium mining business since the price collapsed, and
Coles notes that there’s little mining expertise left on Wall

Benson, for now, wants to make sure the study is sound.
“It appears the best possible study will require you do in-thefield
research,” he says, because of Virginia’s rainfall
compared to the arid West. Waste lagoons could overflow in
a heavy rain event, and inaccurate predictions would mean
trouble. “Let’s look at where it’s been done -- has it been
done anywhere comparable to Virginia? If it’s never been
mined anywhere similar to Virginia, then at least we know
we’re in uncharted territory.”


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