12/19/2011 Wall Street Journal: NAS Study Released

12/19/2011 Wall Street Journal By JOHN W. MILLER: The effort to lift the ban on mining uranium in Virginia received a setback Monday with the publication of a report by the National Research Council advising the state to draft tough new regulations to prevent health and environmental risks before it allows uranium mining. The issue is important for Virginia Uranium Inc., which is controlled by Toronto Stock Exchange-listed Virginia Energy Resources Inc., and owns 119 million pounds of uranium deposits underneath an old tobacco farm owned by the Coles family in southern Virginia.

The company has been lobbying the Virginia legislature to lift the ban, imposed in 1982 after the disaster at the Three Mile Island nuclear power plant, so it can cash in on uranium prices that are around $50 a pound, five times their level 10 years ago, valuing its holdings at more than $5 billion. Uranium prices typically track the price of oil, and with 432 nuclear reactors in the world, 63 under construction and 152 on order, the market is still considered solid, despite the disaster earlier this year in Japan.

While the National Research Council, which was asked by the Virginia legislature for an evaluation, did not advise against lifting the ban, and found that uranium mining in the state was “economically viable”, it also found contamination risks in the mining waste dumps known as “tailing ponds”, as well as risks proper to Virginia, such as possible earthquakes and high water levels. Uranium mining elsewhere in the U.S. occurs in dry places such as Texas and Colorado.

The Council concluded that the need for new rules to contain these risks constitutes “steep hurdles to be surmounted before mining and/or processing could be established within a regulatory environment that is appropriately protective of the health and safety of workers, the public, and the environment.”

Patrick Wales, a geologist for Virginia Uranium Inc., said the report was not a surprise and not an obstacle to their business model. “There are best practice solutions to every issue raised in the report,” he said. “And we’ve factored in the necessary time for the regulatory process estimated by the report to implement those practices.”

For example, Mr. Wales added, “We are fortunate that the underlying geology at the Coles Hill site is a very hard granite rock that has largely remained unchanged for the last 400 million years. This kind of setting will help ensure the safety and maintenance of our tailings facilities beyond the 200-1,000 requirement specified by the Nuclear Regulatory Commission.”‘

The report concluded that it would take “five to eight years” after the granting of a mining license before mining uranium would be safe in Virginia. The legislature is due to debate and vote on the issue next year.

Virginia Uranium “is confident that this lengthy time frame will allow the General Assembly, state and federal agencies and community residents to thoroughly examine every aspect of this issue and make sure that the regulations are in place and best practices are fully adopted to protect the health and well-being of our community,” said Mr. Wales.

There was some good news for Mr. Wales’s company. “Only the deposits at Coles Hill in Pittsylvania County,” which is owned by Virginia Uranium Inc., it said, “appear to be potentially economically viable at present.”

But Paul Locke, chair of the committee of 14 experts which has spent the last two years compiling the 302-page report, was less sanguine. “There are unknowns, because this has not been done a lot in the U.S.,” he said. The problem, Mr. Locke said in a phone conference, is the long contamination periods of uranium.

The report says, “The decay products of uranium provide a constant source in uranium tailings for thousands of years, substantially outlasting the current U.S. regulations for oversight of processing facility tailings.” If those leak, that can lead to “a risk of cancer from drinking water,” the report says.

There are of course, uranium mines elsewhere in the world, and they have methods deemed safe for dealing with their waste. The Council found that mining uranium in Virginia would likely be safe if those methods were copied. However, one problem is “there’s no real analogue” for mining uranium in Virginia, said David Feary, who directed the study.

Only a small cluster of companies in western states mine uranium in the U.S., and the industry is dominated by giants like Rio Tinto Plc., Areva, Cameco Corp. and Kazatomprom. The number of people employed in exploration in the U.S. increased to 211 in 2010 from 175 in 2009, according to the U.S. Energy Information Administration.

Kazakhstan, a vast landlocked nation in central Asia that belonged to the Soviet Union, now produces one-third of global supply. Kazakhstan, Canada and Australia now mine three-fifths of the world’s uranium. The U.S., which still has the world’s most nuclear power stations, now has to import over 90% of its uranium.

Prices stayed low in the 1990s, as the Soviet Union flooded the market by converting Cold War nukes into commercial uranium. It was only with the rise of oil prices in the 2000s that uranium prices started to climb back up.

Write to John W. Miller at john.miller@dowjones.com

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