Editor’s note: This story is part of Virginia Business’ look at the upcoming General Assembly session in its January issue.
The package also includes an interview with Gov. Bob McDonnell and a discussion of Virginia politics by a panel of journalists, academics and former cabinet members.
After a 30-year career in the U.S. Foreign Service that included posts in Egypt, Thailand, Jamaica and Russia, Walter Coles Sr. returned to his native Pittsylvania County in 2000 to retire. The Vietnam War veteran planned to raise cattle on the farm his family has owned since 1785 and live in the 1817 Georgian-style brick home that has housed his family for five generations.
But just a few years later, the calls started coming. Uranium prices had begun to rise around the same time a Virginia Tech doctoral student wrote a well-read thesis on two previously discovered uranium deposits underneath the pastures of the Coles farm.
“[Uranium companies] began to arrive in Chatham and would say, ‘We’ve got a deal for you,’ ” says Coles, who received offers to buy or lease his farm for uranium mining operations from mining companies in the U.S., Australia, France and Canada. Eventually, Coles determined a local resident would be a better steward of what are known as the Coles Hill deposits. “I decided rather than lease or sell out, I’d rather form our own company, because we were local and understood the local community,” says Coles. “We thought it could be a local project that could benefit the community.”
Coles persuaded 31 Virginia farmers and business owners to invest in what became Virginia Uranium Inc. To get the project off the ground, however, Coles and his son, Walter Coles Jr., executive vice president of Virginia Uranium, knew they would need outside investors, which they eventually found in Canada. (For more information, “Who Owns Virginia Uranium Inc” notation at the end of this story.)
Not everyone agrees uranium mining would be such a good deal for Southern Virginia. Phillip and Deborah Lovelace also decided to raise cattle during their retirement at their family farm, located about five miles from the uranium deposits. They worry about what a uranium mine would mean for their well water, air quality and health. “We came back to the family farm to retire here, and we hopefully can pass it on to our children,” says Deborah Lovelace. “My youngest daughter’s about to go to college, but I wouldn’t want to raise children here [if the mine were built].”
Neighbors aren’t the only voice of opposition. Environmentalists and advocacy organizations from around the state are fighting to prevent uranium mining from being allowed in Virginia, arguing it would threaten drinking water, pose public health risks and degrade quality of life.
After receiving two in-depth science and socioeconomic studies on uranium mining in December, the General Assembly may consider this year whether to lift a 30-year moratorium on uranium mining.
So, instead of the retirement he envisioned, Coles runs a company that wants to mine and process uranium deposits worth an estimated $7 billion at today’s prices, leading what is likely to be one of the most contentious battles in this year’s General Assembly.
Earlier mining plans
The deposits at Coles Hill were discovered in 1978 by Marline Uranium Corp. of Canada, which searched for uranium deposits on the U.S. East Coast in locations with geology similar to that found in Canada. The most promising find was two deposits of uranium at Coles Hill, which now are estimated to contain 119 million pounds — the largest known undeveloped uranium deposit in the U.S. and enough to fuel Virginia’s nuclear reactors for 75 years.
Having no regulations in place and facing concerns from environmental groups and citizens, Virginia placed a temporary moratorium on uranium mining in 1982 while it awaited results of a feasibility study it had commissioned.
Eventually four state governmental bodies (including the Virginia Coal and Energy Commission) determined in 1984 the moratorium should be lifted if recommendations from the state’s Uranium Task Force for permitting and regulations were put in place. The issue was dropped, however, when in the wake of the 1979 accident at the Three Mile Island reactor in Pennsylvania, the U.S. nuclear energy industry stalled. Marline gave up its plans as the price of uranium sank.
A study by the National Academy of Sciences (NAS) is expected to be a key guide for legislators as they consider whether to lift the moratorium. The 302-page report did not recommend whether or not to allow mining, but it concluded that Virginia faces “steep hurdles” if it wants to allow uranium mining and establish regulations that protect mine workers, public health and the environment. Harmful effects can be mitigated if mines are operated and monitored under “modern best practices,” the report says.
It recommends that Virginia establish a regulatory program using the ALARA standard (“as low as reasonably achievable”) for these risks. The study determined that one of the key issues is that the U.S. has little experience with modern underground and open-pit mining, while Virginia has none. (See notationg below for an outline of the report’s findings. The full report is available at http://www.nationalacademies.org.)
Mining proponents and opponents were quick to offer their interpretations of the study’s conclusions. “The study shows that major technological and regulatory advances over the past 30 years have dramatically improved the environmental and public health performance of the uranium mining and milling industry,” says Patrick Wales, Virginia Uranium’s project manager. “Virginia Uranium is committed to continuing that process by adopting the best practices and regulatory requirements identified by the NAS as essential to protecting the environment and public health.”
The Roanoke River Basin Association came to a different conclusion. “The NAS study does not demonstrate beyond a reasonable doubt that uranium mining in Virginia’s wet climate will pose absolutely no threat to public health and safety,” says Andrew Lester, executive director of the association. “In fact, the study lists potentially insurmountable challenges in addressing the technological and regulatory problems with uranium mining in Virginia.”
If the moratorium is lifted, the state would create a regulatory framework for uranium mining, and Virginia Uranium could begin the years-long process of seeking the required local zoning approvals and state and federal permits.
Opponents believe legislators don’t have enough time to adequately examine the NAS study before this year’s General Assembly session. “One of our many concerns is that the industry is trying to push
this forward without regard to the fact that the Virginia Coal and Energy Commission hasn’t been able to have a public outreach process,” says Calle Jaffe, a senior attorney with the Southern Environmental Law Center.
Another option would be to delay a vote on ending the moratorium but have the state Department of Mines, Minerals and Energy develop regulations for uranium mining. This move, some legislators say,
would allow them to more easily decide whether mining should be allowed.
It is unclear how the new political makeup of the General Assembly will affect the moratorium issue. Gov. Bob McDonnell, who wants to make Virginia the “Energy Capital of the East Coast,” has indicated he would support lifting the moratorium, but only if it can be done safely. “Our experts at the relevant health, environmental and regulatory agencies and my staff will begin a detailed and thorough review of the NAS report,” McDonnell said after the study was released in late December. He planned to have an analysis completed by the beginning of the year.
Republicans now have a working majority in both houses because of Lt. Gov. Bill Bolling’s ability to cast a tie-breaking vote, but that doesn’t mean a vote to lift the moratorium is a sure bet. In 2008 a Democratic-controlled state Senate overwhelmingly passed a bill that would have created a group to study uranium mining and develop recommendations for state regulations. The bill died, however, when a Republican-controlled House Rules Committee tabled it.
Virginia Uranium has flexed its lobbying muscles at the General Assembly. The company has given more than $150,000 in contributions to legislators and political action committees since 2008. Currently, 16 lobbyists are registered to advocate for uranium mining in Virginia this year.
In addition, last year the company paid for more than a dozen legislators to fly to France to visit a former uranium mine and for 12 community leaders and legislators to visit an operating mine and mill in Saskatchewan, Canada. State Sen. John C. Watkins, R-Midlothian, who participated in both trips and was on the Virginia Coal and Energy Commission when the moratorium was put in place in 1982, was impressed with the reclaimed site in France and the ongoing Canadian mine operations. “They had a regulatory structure that provided for the safety of the environment and the safety of the workers,” he says of the Canadian mines.
More jobs for Southern Virginia?
Virginia Uranium Inc. believes uranium mining could be a major economic boost in Southern Virginia, which has lost thousands of textile, tobacco and furniture industry jobs in recent decades. Unemployment in the Danville metro area, which includes Pittsylvania, was 8.9 percent in October, compared with a 6 percent rate for the state.
The company predicts that construction of the uranium mine would create 250 to 350 jobs and that the mine would employ 325 people year-round with annual salaries of $50,000 to $70,000. “We think we could get over 90 percent of our employees locally,” says Coles.
A study completed by Richmond-based Chmura Economics & Analytics reported even greater economic potential. The report concluded that under a “most likely” scenario with environmental impacts that fell within federal requirements, mining and milling operations would directly and indirectly create 1,000 jobs annually and have a net positive impact of $135 million per year.
But environmentalists are quick to point to another possibility in Chmura’s findings. If mining operations severely affected air, water, noise and soil quality, the adverse impact of the project would be twice the net positive effect of the study’s best-case scenario, which assumed absolutely no impact on the environment. “I think that there’s real potential for loss of agriculture and tourism,” says Christopher Miller of the Piedmont Environmental Council. “Those are the two biggest industries in the state, and those might be put at risk, and the Chmura report confirms that.”
Another consideration is the study’s assumption the mine will operate continuously for 35 years. Historically, mines in the U.S. have operated on and off as the price of uranium fluctuated. “There are no mills in the U.S. that have operated for 35 years in a row,” says Paul Robinson, research director with the nonprofit Southwest Research and Information Center.
Will prices support the mine?
After remaining around $10 per pound since the 1980s, a rejuvenation of uranium prices in the early 2000s once again made Coles Hill a feasible project.
Flooding of the Cigar Lake uranium mine in Canada in 2007 caused spot prices to spike to nearly $140 per pound on fears of short supply. But when prices dropped, they didn’t fall to pre-2003 levels, instead ranging from $40 to $70 over the last few years.
Virginia Uranium wasn’t the sole company to show interest in new mining once prices rose. Mines in the U.S. and around the world began seeking opportunities to expand or start new operations. In addition, an Australian mine, Olympic Dam, is planning to increase production by more than 15,000 tons each year, and the Cigar Lake mine is set to start production in the next few years. “Virginia Uranium would have to be competing for both capital and markets,” says Robinson.
Since prices fell from their peak near $140 in 2007, many mining companies have deferred their applications with the Nuclear Regulatory Commission, says Robinson. French-owned Areva has suspended investment at uranium mines in the Central African Republic, Namibia and South Africa after uranium prices in the wake of the Fukushima reactor problems in Japan.
Uranium mining remains a rather small industry in the U.S., producing 4.23 million pounds in 2010, up 2 percent from 2009, according to the Energy Information Administration, but not all capacity is being used. Four underground mines produced uranium ore in 2010, 10 fewer than in 2009, and four in-situ-leach mining operations, where liquid is pumped into the ore and water containing uranium is brought to the surface, were in production. Only one conventional mill was processing uranium.
Preliminary estimates put operating costs at Coles Hill at $30.01 per pound for the first 10 years, $37.52 per pound for the next 10 years, and $51.30 per pound for the final 15 years. The company has said it plans to operate for a straight 35 years, and Wales of Virginia Uranium, argues that there will be enough demand. He points to increased demand for nuclear power and a dwindling supply of secondary uranium sources, such as former nuclear weapons. The World Nuclear Association says more than 60 reactors are under construction, while 152 reactors are in the planning stages.
The association, however, has said that although more uranium is being used right now than is being produced each year, existing production is sufficient to power all nuclear generators for 80 years.
But Mark Lackey, an investment strategist with Pope & Co. in Canada, has predicted that uranium prices would reach nearly $100 per pound by next year because of delays in new supplies coming online and Russia’s plans to stop exporting enriched uranium next year from its secondary supplies.
Uranium mining proponents argue that the Virginia mine could help the U.S. become more energy independent. Currently, the U.S. imports 92 percent of its uranium, with 23 percent coming from secondary supplies. Patrick Moore, one of the founders of Greenpeace who left after disagreements over whether its policies were based in science, points out that on a global perspective, uranium mining and nuclear energy production can be done more safely in the U.S. and other well-regulated countries. “Nuclear energy’s performance in the U.S. is superior,” he says.
A host of environmental and government groups (such as the Virginia Municipal League and the Virginia Farm Bureau) and localities either are strongly opposed to uranium mining or at least want the General Assembly to delay consideration of the issue.
Historically, the uranium industry has a poor track record of protecting the environment and public health. Geologists argue that technology and science have improved enough to allow uranium to be mined with low risk. “I know from past experience we can extract resources from the earth with minimal exposure to the environment and public health,” says Robert Bodnar, a geology professor at Virginia Tech who has been involved in mining for more than 30 years.
Another scientist, however, believes the Coles Hill deposits would likely contaminate the local groundwater.
The Roanoke River Basin Association asked Robert Moran, a Colorado hydrologist, to conduct an analysis of Coles Hill. Using current technical reports from Virginia Uranium and a Marline report from the 1980s, Moran said that conditions such as naturally permeable rock, seismic activity and degradation of liners of tailing containments could create seepage into local water supplies.
The containment of tailings, the remnants from the uranium mining process, is among the biggest concerns about the industry.
The potential threat to water supplies has caught the attention of Virginia’s largest city, Virginia Beach. The city spent $600,000 on two studies to determine the effect of the breaching of tailings containment facilities on its water supply, which is downstream from the proposed uranium sites. The study concluded it would take two years for contaminants to be cleaned from the water under this scenario. “The [city council’s] current position is that there are just too many studies coming out this month or early next year, and there’s simply no time for the public or the city to properly consider these studies for any action,” says Tom Leahy, public utilities director for Virginia Beach.
Virginia Uranium says the study was based on containment cells that would be kept above ground, while the company plans to keep tailings below grade as well as in underground holes created during the mining process. The NAS study said this method was environmentally more sound than above-grade containments.
Cotter Corp.’s uranium mill near Canon City, Colo., provides a cautionary tale on the importance of properly managing tailings. The mill, which operated off and on between 1958 and 2005, received many citations for air and water contamination and was declared a Superfund site in 1984. In 2005, a state regulator determined that even a tailings pond built under current regulations was determined unusable. In 2009, Colorado required Cotter to post a financial bond of $43 million to help pay for cleanup of the site, but the company so far has paid only $20.8 million of that amount.
But Moran says another major issue is that most of the uranium mining data today do not come from independent sources. “The modern operations are clearly done at a higher quality level than historic ones,” he says. “The bigger problem is that the information that’s generated from the projects — even the modern ones — is largely controlled by the corporations.”
Environmentalists have major concerns about Virginia’s ability to regulate uranium mines. “Even the best regulations don’t necessarily prove they will be able to protect us completely,” says Lester of the Roanoke River Basin Association.
Another concern stems from the fact that tailings remain for thousands of years. “Companies will do a reasonably good job while the operations are active, but once they shut down, who’s going take care of the site forever?” asks Moran.
The bigger picture
Despite the opposition he faces, Walter Coles Sr. says he has no regrets about straying from his retirement plans to start Virginia Uranium. He has placed much of the farm’s original land in conservation easement. The company bought an additional 2,300 acres to provide a larger buffer between mining and milling operations and his neighbors. The company’s operations would take only 15 percent of the total land, Coles says.
Although the company has not submitted detailed plans on its operations (and would not be able to develop full plans until Virginia regulations were put in place), the company’s preliminary economic assessment suggests using mostly an underground mining technique, which would require less destruction of land than an open pit mine.
As the General Assembly weighs the pros and cons of uranium mining this year, it will need to look beyond the rich deposits beneath Coles’ pastures. Uranium has been discovered at 55 other spots around the state, although none have been proved to be economically feasible for mining at today’s prices.
“We’re focusing in on this one particular case, and we’re missing the bigger picture,” says Bodnar of Virginia Tech. “Maybe the first thing we need to decide is: Should we try to become more energy independent in this country? And if the answer is yes, then where should we look to become more energy independent. Coles Hill is just one piece of that puzzle.”
Who owns Virginia Uranium Inc.?
Opponents often raise concerns about the uranium mining project because it is “foreign-owned” or “foreign-backed.” The details are a little more complicated.
Even with support from state investors, the Coles family knew the company would need outside investors. Coles and his son, Walter Coles Jr., a former investment analyst in New York who is now executive vice president of Virginia Uranium, received no interest from New York banks. So the father-son team headed to Canada, the second largest producer of uranium in the world, where they received positive response from investors.
Here’s how the company is structured: VA Uranium Holdings Inc., a company incorporated in Yukon, Canada, for tax purposes, owns 100 percent of Virginia Uranium Inc. A little less than 50 percent of VA Uranium Holdings is owned by Canadian firms. Virginia Energy Resources Inc., a uranium development company based in Vancouver, Canada, owns 29.44 percent of the holding company’s shares, while Sprott Resource Corp., a Toronto-based natural resource development firm, owns another 18.06 percent. Local investors own about 52.5 percent of the holding company, according to Virginia Uranium.
Study shows hurdles with uranium mining
The National Academy of Sciences’ report determined Virginia faces “steep hurdles” in establishing a regulatory framework to protect employees, public health and the environment if uranium mining is allowed.
The study did not include a blanket recommendation on uranium mining in Virginia but identified health and environmental risks such as radiation exposure and groundwater contamination. The report said these risks could be reduced by implementing industry best practices and establishing a stringent monitoring system.
One of the key obstacles in regulating uranium mines is lack of experience on the state and federal level. Conventional mining is a small industry in the U.S. and currenlty done only in the West. The report recommended the state consider the entire lifecycle of a mine or mill during the planning phase, including post-mining monitoring.
Containment of uranium tailings, the solids produced in processing, is one of the industry’s most significant environmental health concerns. Although technology has improved, data do not exist yet on the long-term effectiveness of modern procedures for containing tailings, the report said.
The study recommended implementing industry best practices outlined by the World Nuclear Association, International Atomic Energy Agency, and International Radiation Protection Association.