Uranium mining operations have cooled: Texas' only active mine has scaled back production despite less opposition to nuclear power

By Asher Price

AMERICAN-STATESMAN STAFF

Friday, October 09, 2009

ENCINO — Even as the nuclear energy industry aims to expand, its momentum appears to have slowed for the moment.

About two years ago, when the price of uranium was at $136 a pound, the scrubby, sandy pastures where Mesteña Uranium LLC operates would have been filled with trucks, drills and hard hats. But now, with uranium selling in the low-$40s, only a few crews are operating here, with enough time on their hands to elbow one another into action when the boss' SUV — known as the Black Angus — shows up. (emphasis mine...SB)

With the price of uranium down, privately held Mesteña has cut its payroll, from 225 employees, including contractors, at the beginning of the year, to about 135 today.

Uranium is the fuel for the nuclear plants, and Mesteña's Alta Mesa operation, about a dozen miles west of Encino in South Texas, is the only active mine in the state.

In an effort to cut back capital costs, production has been throttled back from about 850,000 pounds a year to 650,000 pounds, said Paul Goranson, vice president of Mesteña and overseer of day-to-day operations, and the driver of the Black Angus, a Ford Expedition.

The company had hoped to mine uranium in another part of the ranch — owned by the shareholders of Mesteña — but that expansion was cut after the price of uranium dropped.

"The global nuclear renaissance has been put on hold," Goranson said. "We ramped up (on employees), but we've had to cut them back fast."

Although more than 90 percent of the nation's uranium is imported, with about half the imports in the form of stockpiled Soviet nuclear weapons, domestic uranium production had revived several years ago as utilities said they wanted to expand nuclear power plants. The notion was backed by some environmentalists who said the energy would be much cleaner than coal, and by policymakers, for whom the fading memories of Three Mile Island are making the technology more politically palatable.

The price shot up from less than $10 a pound in 2002 to a high of $136 in summer of 2007.

The revival of nuclear power also renewed the kind of opposition to nuclear power that had lain dormant since the late 1970s, when the last new plant began construction. Some environmentalists and landowners say uranium mining threatens groundwater and uses large amounts of water.

"We want to put a stop to uranium mining until we have better protections in place," Cyrus Reed, conservation director of the Lone Star Chapter of the Sierra Club, said last year.

But the economic crisis and changes in supply appear to have had a lot more to do with the drop in uranium prices than protests by environmental groups.

Goranson said that hedge funds that had bought the uranium with plans to hold on to the commodity found themselves needing to raise money, fast, and willing to sell "at whatever price they could get."

Meanwhile, the market upheaval made it hard for utilities to secure the loans they needed to build nuclear plants that cost hundreds of millions, if not billions, of dollars.

Across the globe, other sources of supply, such as one in Kazakhstan, were found to be more robust than expected years ago, said Jeff Combs, president of Ux Consulting Co., which publishes nuclear fuel prices and tracks the uranium market.

There are no miners' lamps or carts headed underground at the Mesteña operation, called the Alta Mesa facility. Known as in-situ recovery, the process involves pumping oxidized water into the ground, which loosens and dissolves the uranium. Then the uranium-bearing water is pumped to the surface and into a recovery plant, where the uranium is separated from the water. The water, now free of the uranium, is pumped back underground to capture more uranium.

The recovered uranium, meanwhile, is filtered, dried and packaged as a yellowcake powder for shipping. Each drum of yellowcake has the energy equivalent of 10,000 tons of coal, or enough to fill a 100-car train. The drums are sent by 18-wheeler to Illinois, where they are converted to a uranium gas, then to Kentucky or Ohio for enrichment as fuel in nuclear reactors.

Operations here are likely to rebound. The imported Soviet nuclear weapons program is scheduled to wind down in 2013, and 20 more reactors have been proposed nationally. (The U.S. has 104 reactors, producing about 20 percent of the nation's electricity.)

"Going forward you're going to need lots of uranium supply," Combs said.

Internationally, concerns about climate change and the huge demand for electric power in China and India, among other places, have put dozens of new nuclear plants on drawing boards.

Among the plants hoping to expand is the South Texas Project in Matagorda County. Austin, which gets more than a quarter of its electricity from the South Texas Project, declined to invest in the expansion, but San Antonio is still considering it.

The Lower Colorado River Authority, which provides power to more than a million Central Texans, has not ruled out buying into the expansion and could buy power from the nuclear plant. At its August meeting, the LCRA board invited Dale Klein, a member of the Nuclear Regulatory Commission, and the husband of LCRA board chairwoman Becky Klein, to give a briefing.

"The future of nuclear power is a glass 'half full,' " Dale Klein, echoing the position of many politicians and the nuclear industry, told the LCRA board. "Public confidence in a safe and secure future for nuclear power is well-grounded."

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