Economic Risks

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Economic Uncertainty of Uranium Mining in Virginia. The economic risks of mining for uranium, milling for yellowcake, and the permanent disposal of radioactive waste in-state, far outweigh the few benefits proposed by the industry. Ultimately, a volatile market price of uranium will be a primary factor in determining how much uranium will be mined, how many jobs will be created and how much money will ultimately come into the community. While the uranium industry continues to highlight best-case scenarios, the economic impacts remain very uncertain.

Market price is volatile. The price of uranium has fluctuated greatly over the past six decades. In 2007 the price spiked at one point briefly to $138 per pound. Since that bubble burst, the price has been ranging in the $40 to $60 per pound range[1]. This market price will heavily dictate the final Net Present Value (NPV) of the deposit. At the current market price of about $55 the NPV is $213 million (dramatically lower than the $10 billion NPV recently reported by the press).

The deposit size is dynamic. Due to fluctuating uranium prices, the amount of the first proposed deposit that will be economic to mine is dynamic. While the industry continues to publicly claim a best-case scenario, even Virginia Uranium Inc.’s own engineering study in December 2010 concluded at the time that it was only economical to produce 46 million lbs of uranium oxide at the first proposed site (less than half the size of the 119 million lbs VUI claims they will mine). What is economical to mine will continue to change based on the volatile uranium market.

If the price of uranium falls the amount of the deposit the company mines and NPV of the project will fall. If the price of uranium spikes, and the company mines a much larger percentage of the deposit, then the physical footprint of the project rises which increases the risk of safeguards to drinking water and community health.

Risk of Short-Term, Unstable Job Market. As with any operation when it becomes more costly to produce a material than you make from its sale, it becomes unprofitable to stay in operation. As a result, the company may suspend operations for an extended period of time or even go out of business altogether, putting people  out of work and a community left to clean up the mess. During a price drop in 2010, three out of four conventional uranium mills in the United States were placed on standby[2].

Furthermore, according to a presentation to Wall Street investors, most of the deposit will be mined and milled during the first 20 years of the operation. Walter Coles, Jr. said that the 35-year operational life was included in the engineering study “to show a commitment to the community that we’re going to have a long mine life on this project,” but “the profits that you would earn in years ’21 through ’35, it’s insignificant.”[3]

A Risk to Virginia’s Urban Areas. A February 2011 Virginia Beach study warns that hurricanes “have generated extreme flooding east of the Blue Ridge Mountains along a corridor that cuts a path through the uranium ore deposits.” The study finds that in the event of a catastrophic failure of a uranium tailings containment structure, radioactivity concentrations in the Roanoke River and Kerr Lake systems will exceed the Safe Water Drinking Act levels for an extended period of time. The Virginia Beach and Chesapeake City Council both have voted in support of keeping the ban.

In the 1980s, uranium mining leases were acquired in Fauquier, Culpeper, and Orange counties. While these leases have expired, if the ban is lifted it will likely be lifted statewide and these areas could be reconsidered  for mining. These leases sit along the Occoquan and Rappahannock Rivers, which supply drinking water for over one million people in Fairfax and Loudon Counties, as well as the City of Fredericksburg.

A Risk To Virginia’s Rural Economies. The legacy of radioactive uranium waste in the Dan River and Roanoke River basins, affecting Virginia and North Carolina, would taint our agricultural heritage for generations.

Agriculture. The Roanoke River system fully supports Southside Virginia’s agriculture sector, valued at $303 million in 2007 alone. Within the seven counties in North Carolina that are considered part of the Roanoke River Basin, nearly $594 million came in through the crop and livestock sales in 2007.[4]

Tourism and fishing.The Roanoke River Basin is comprised of four major reservoirs: Kerr, Smith Mountain, Leesville, and Philpott. Tourism and outdoor recreation depends on the well being of the waters for boating, paddling, and fishing. If the boat ramps are forced to close due to contamination in the Roanoke River Basin, nearly 90% of the tourism and fishing could be lost.[5] The Virginia Bass Federation and over 30 other groups and localities along the basin have stated support of the ban on uranium mining.

State Agencies Lack The Funding To Properly Regulate The Uranium Industry. Currently, the Department of Mines, Minerals, and Energy employs only 13 inspectors to oversee 450 mineral mines in the Commonwealth[6] and Virginia spends less than one-tenth of one percent of its total annual budget to fund the Department. Add in the entire budget for the Department of Environmental Quality, and the commitment still comes to roughly one-half of one percent.[7] Relying solely on permit fees from one company to fund its own regulators would create a severe conflict of interest, and does not resolve the question of who funds monitoring and remediation efforts if that company closes its doors.

In Florida, which has a poor history of environmental degradation from uranium mined as a by-product from phosphate mines, the state was forced to assume ownership of radioactive waste when the company, Mulberry Corporation, unexpectedly went bankrupt in 2001. In order to pay for the $144 million Mulberry cleanup, the state had to completely exhaust uncommitted money in its Non-Mandatory Reclamation Trust Fund, established to address older sites. The FDEP sought beyond this to take $12 million each year otherwise destined for the state’s general revenue fund.[8]

[1] Johnson, Toni. Global Uranium Supply and Demand. Council on Foreign Relations, 2919. http://www.cfr.org/energy/globaluranium-supply-demand/p14705.
[2] http://www.eia.gov/uranium/production/annual/
[3] Transcript of March 1, 2011 Webcast of Virginia Energy Resource, Inc. Presentation, available for fee from Wall Street Energy Forum, http://www.analyst-conference.com/
[4] “Census of Agriculture – 2007 Census Publications – State and County Profiles – North Carolina.” USDA – NASS – Census of Agriculture. Web. 06 June 2011. www.agcensus.usda.gov
[5] “Roanoke River Basin.” http://www.deq.state.va.us/vrrbac/pdf/rrbpaper.pdf
[6] Conrad Spangler, Director, Department of Mines, Minerals and Energy. “Virginia Mining Regulatory Program – An Overview,” NAS Uranium Mining Study Committee, Feb. 7, 2011, Richmond, VA
[7] http://dpb.virginia.gov/budget/buddoc11/index.cfm
[8] Victor Hull, Cleanup Funds Running Short, Sarasota Herald-Tribune, Mar. 17, 2004, BS1

 

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