Friday, March 20, 2009

Western lands uranium gopher for 03/21/09

Mining uranium press releases for useful news

gopherParts of this blog post were previously published in Fuel Cycle Week, V8N319 for March 18, 2008 by International Nuclear Associates, Washington, DC

The closing stock prices for the informal collection of uranium firms tracked here continue to fall. In the past month only one of the firms, Uranium Energy (AMEX:UEC) saw an increase in its stock price due to a joint venture announcement in the Grants Mining district in New Mexico.

Penny for your thoughts or your company?

However, at these prices no CEO is going to come to the market to sell shares to raise investment funds since they'd essentially be giving the company away. The stock chart is being discontinued due to the fact that it has gotten too hard to scrape the bottom of the barrel every two weeks to find the price data. This is a metaphor about price data and not a value judgement about the companies noted in this blog post. Most uranium companies are grossly undervalued given their assets in the ground and the brightening future for nuclear energy. Get it? Got it? Good.

U3O8 price plunge continues

The every present threat of hostile takeovers has been mitigated by the falling spot price of uranium. Ux Consulting reported a spot price of $43.50/lb down more than $10/lb from a six month high of $55/lb last December. As long as uranium prices continue to fall, investors will likely seek other industries for a more attractive return on their capital.

The plunging price of uranium triggered several responses to previously inked mining deals. South Korea's state-run electricity company cancelled a deal signed in May 2008 with Yellowcake mining (OTC:YCKM) to jointly explore the Beck uranium mine in western Colorado. The Beck property has 12 known deposits which have been subject to varying amounts of drilling in the past. Beck is in the Uravan historic uranium district with a history of profitable mines.

Bluerock folds U.S. operations

Another compelling picture of what these numbers are doing to the industry is painted by the recent actions of Bluerock Resources (CVE:BRD). Once one of the most promising of the uranium juniors doing business in western Colorado, the firm has ended its toll milling agreement with Denison's White Mesa Mill.

The settlement includes a payment of stock in lieu of cash worth approximately $500,000 which is more than half of its total market capitalization as of March 13. In the past few months the firm shutdown the Whirlwind and J-Bird mines laying off all employees at these operations. Clearly, it makes no sense for firms to deplete their resources in the ground when uranium prices fall below the break even point.

Denison to suspend operations at White Mesa Mill

Reuters reports that shares of Denison Mines (AMEX:DNN) plunged 20% after the firm suspended some of its operations and said it may have to sell assets to keep from violating a debt covenant.

The firm will temporarily suspend production at its Sunday and Rim mines. and will likely temporarily shut its White Mesa mill in May, once it produces the 500,000 pounds of uranium the company is under contract to produce in 2009. The mill is be expected to restart in 2010.

It is the only operating uranium mill of its kind in the Uranvan mining district spanning Colorado and Utah. Two other projects to build new mills in the region, Mancos in Green River, UT, and Energy Fuels in Montrose, CO, are expected to be impacted due to falls prices of uranium.

Reuters reported Denison’s announcement focused on a steep loss of $56.8 million, or $0.30/share, due to non-cash write-downs of $59 million brought on by falling commodity prices.

Speaking on a conference call, Denison Chief Executive Peter Farmer said the company was in danger of violating a debt covenant tied to its profitability, and that the company was reviewing "strategic opportunities" to keep that from happening.

Options could include: "entering into contracts with utility companies... asset sales, purchases and joint ventures, investments by private equity investors and potential corporate transactions with other uranium producers," Farmer said.

In a press statement, Denison said, significant events in the fourth quarter include:

- Denison sold 400,000 pounds U3O8 during the quarter from U.S. production at an average price of $61.50/lb and 177,000 pounds U3O8 from its Canadian production under the existing long-term contract at an average price of $52.28 per pound.

- Denison and its joint venture partners, AREVA Resources Canada Inc. ("ARC") and OURD Canada Co. Ltd. announced the postponement of the development of the Midwest deposit.

- Denison announced the suspension of mining at the Tony M mine located in Ticaboo, Utah.

- Denison opened the Beaver mine on the Colorado Plateau. The Beaver mine is capable of producing ore containing over 200,000 U3O8 and 600,000 lbs. of V2O5 in 2009 and will be one of Denison's lower cost mines in the region. This may be the only new ore that reaches the White Mesa Mill.

Uranium Energy advances in Texas

Uranium Energy (AMEX:UEC) continues to make progress with permitting a new ISL mine in Texas. The company’s Nichols Project has an NI 43-101-qualified inferred uranium resource of 1.3 million pounds U3O8.

However, environmental groups are contesting the air quality and mining permits as are local ranchers who have convinced the Texas Commission on Environmental Quality (TCEQ) that they have standing. Other parties granted standing to contest the permits include Goliad County, a volunteer fire department, and 43 other parties. The Alliance of Texans for Uranium Research & Action helped the parties with their filings at TCEQ. The hearing is expected to take place in mid-April.

Josh Leftwich, UEC's environmental manager, told the Victoria Advocate the firm expected the permits to be contested, but that TCEQ's executive director has already issued a recommendation to the commission that the permit should be issued and approved.

"We are confident that we can address these concerns and defend the application," he said.

Powertech files with NRC for Dewey-Burdock

There was some good news on a couple of fronts. Powertech (TSE:PWE) announced it had met several important milestones in the permitting of the Dewey-Burdock project in South Dakota. The most important is that the firm has submitted its license application for an ISL mine to the NRC. The firm received an underground injection control permit from EPA in January 2009.

Also in Colorado Black Range Minerals (ASX:BLR) reported it was continuing its exploratory drilling in the Tallahassee Creek mining district west of Canon City. Mike Hayes, managing director, told the Denver Post in February that the project could have 100 million pounds U3O8 making its potentially one of the largest uranium mines in the state. However, Hayes also noted that the effort by Black Range is the fifth attempt since 1954 to make money from uranium mining in the area. Volatile price swings have caused prior efforts to shut down before operations could turn a profit.

Strathmore publishes NI 43-101 for Nose Rock, Dalton Pass

Strathmore Minerals (CVE:STM) completed NI 43-101 Technical Reports for Portions of Nose Rock and Dalton Pass Uranium Properties.

Nose Rock measured & indicated resource at Section 1 Totals 2.6 million pounds U3O8; Dalton Pass measured & indicated resource at Section 32 Totals 3.07 million pounds

The Nose Rock NI 43-101 report covers Section 1, which comprises approximately 540 acres of the company's property. The historical resource for the remaining 4,520 acre property as reported by Phillips Uranium (1979) is 4,383,582 tons at an average grade of 0.163% U3O8 for a total of 14,303,085 pounds (not NI 43-101 compliant).

The Dalton Pass NI 43-101 report covers Section 32, which comprises approximately 640 acres of the 1,120 acre project. The previously reported historical resource prepared by Pathfinder (1980) examined Section 32 only. Updated mineral resource estimates for the remainder of both properties will be prepared, subject to the availability of historical databases.

Strathmore Minerals (CVE:STM) has signed a letter of intent with Great Bear Uranium (CNQ:GBR) granting Great Bear an option to acquire a 100% interest in the Chord Uranium Property located in South Dakota. Great Bear has until the end of September of this year to close on the transaction.

The Chord Property comprises 22 totaling 440 acres and is located approximately 15 miles north of the town of Edgemont, South Dakota.

Uranium was first discovered at Chord in the 1970s and extensive drilling by previous operators Tennessee Valley Authority and Union Carbide outlined a historical uranium resource estimate totaling 3.8 million lbs U3O8 at an average grade of 0.11%. These numbers are not compliant with NI 43-101 standards as they exist today.

PacMag digs for uranium, gets germanium in North Dakota

Formation Resources, the U.S. operation of Australia's PacMag Metals (ASX:PMH) is discovering that its exploratory drilling for uranium in North Dakota is turning up more valuable deposits of molybdenum and germanium. PacMag consultant Jim Guilinger told the Associated Press in Bismark on Feb 25 that last year the firm drilled 450 holes and the results are showing that it will be worthwhile to develop the uranium if there is enough germanium at least at current prices. While uranium has a spot price this week of $43/lb, the germanium is worth eleven times that amount because of rising demand for use the mineral in the manufacturing of solar panels.

The two minerals have been found in a coal seam that PacMag has targeted in a lease of 25,000 acres of private land. Ed Murphy, the North Dakota State Geologist, said it is currently the only permitted uranium exploration project in the state. There were numerous uranium mining claims being worked in the 1980s in North Dakota. PacMag has designated the area the Sentinel Project and plans to resume drilling in the Spring.

Gold miner acquires uranium property

Fisher-Watt Gold Company (OTC:FWGO) announced it has completed the acquisition of Tournigan USA (OTC:TVCFF), a subsidiary of Tournigan Energy (CVE:TVC). The focus of the deal is 55,000 acres of uranium claims in Wyoming, South Dakota, and Arizona. The transaction includes retention of a 30% interest in each of the existing properties and debt in the amount of $325,327.

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Sunday, March 15, 2009

Tweaking Areva on loan guarantee prospects

Idaho Falls Post Register pays attention to the French nuclear giant’s financing plans for the Eagle Rock uranium enrichment plant

Areva logoThe arcane world of federal loan guarantees got a little bit easier to understand this week as a result of a front page, above-the-fold, article published in the Idaho Falls Post Register on Sunday, March 15. The dual bylined article by reporters Corey Taule and Sven Berg is headlined, “Not so fast … Politics and finance could collide to make Areva’s trip to Idaho Falls a bit bumpier.” The newspaper takes a look at the rosy press release Areva issued recently about the fact that the Eagle Rock facility is ahead of schedule.

Readers of this blog will be familiar with the gist of the article, which is that Areva has applied for a $2 billion loan guarantee from the U.S. Department of Energy and is in competition for it with USEC (NYSE:USU). That firm is building a $3.5 billion uranium enrichment plant in Piketon, Ohio called the American Centrifuge Plant.

On March 1 this blog described Areva’s options to finance the Eagle Rock uranium enrichment plant here in Idaho. I’m interviewed in the Post Register’s article and quoted correctly covering the same ground as the blog post. The Post Register takes the story a step further describing the politics surrounding the loan guarantee decision which will be made by the Department of Energy.

Politics pits Ohio against Idaho

simpsonThe newspaper interviews Idaho Rep. Mike Simpson (right) who covers the political considerations DOE faces in a winner-take-all decision about who gets the loan guarantee.

The State of Ohio is home to Areva’s arch competitor USEC. It is a state fairly seething with Democrats whereas in Idaho they are about as common as snowballs in July. The Post Register remarks in a droll fashion, “That fact isn't lost upon Idaho Republican Congressman Mike Simpson.” His pull quote, splashed across the front page, goes like this.

"I will tell you that Obama needs Ohio's voters in the next election far more than he needs Idaho's voters," Simpson said. "To think that politics won't play a part is naive."

Simpson also points out that when then candidate and now President Barak Obama was campaigning for votes during the Fall 2008 election, he wrote a letter to Ohio Governor Ted Strickland. The newspaper tracks down the letter recently published in an Ohio newspaper and reveals that, no surprise, Obama promised to put USEC chickens in Ohio pots.

AmericanChicken"Under my administration, energy programs that promote safe and environmentally-sound technologies and are domestically produced, such as the enrichment facility in Ohio, will have my full support. I will work with the Department of Energy to help make loan guarantees available for this and other advanced energy programs that reduce carbon emissions and break the tie to high cost, foreign energy sources."

That letter is not good news for Areva. Company spokesman Jarret Adams bravely tells the Post Register in response he's "hopeful" the DOE will make its decision, “based on the merits of the applications and not on politics,” though he acknowledged, "Because we're dealing with the government, politics is a factor. We can't deny that."

Areva certainly isn’t naive about U.S. politics. People in Idaho shouldn’t be nervous if USEC gets the loan guarantee. Areva has the ability to choose other financing options if it comes to that.

Competitive pressures drive Areva to build Eagle Rock

Competitive reasonsWhether it gets the loan guarantee from the federal government, or not, for competitive reasons Areva must build the Eagle Rock facility. One of these reasons is that the company will sell the capacity of the plant to utilities well ahead of the time it will go into production of enriched uranium. One of the firm’s options to raise money is to sell shares in the Eagle Rock plant to utilities, which are also its customers. The tactic is something this blog pointed out March 1 Areva is doing already for a similar plant now under construction in France.

Areva is sensitive about this issue because it could give DOE an excuse to decide in favor of USEC which has had a history of rocky finances. DOE could figure it can make Democrats in Ohio and the President happy while not materially affecting the future of the Idaho plant. DOE declined to comment in response to an inquiry from the Post Register.

Also, by 2014, assuming all three plants, Areva, USEC, and LES, are in full operation, they will account for only 75% of the U.S. domestic demand for enriched uranium for commercial nuclear reactor fuel. The remainder of the market will be open to imports including blended down HEU from Russia which now supplies more than half of the U.S. demand for nuclear fuel under the Megaton-to-Megawatts program administered by USEC.

Finally, the Post Register spends a little time on the NRC license for the plant. Given the Areva’s deep expertise in these matters, and the NRC’s experience issuing licenses to Louisiana Energy Services and USEC, getting the license for Eagle Rock should be straightforward. The NRC has accepted Areva’s application and the clock is ticking on getting it approved.

Note the full text of the Post Register article is not online as the newspaper limits access to paid subscribers. If you want to read the rest of the story, you’re going to have to buy a paper.

Areva seeks new financing sources

sovereign wealth fundsWhile the Idaho Falls Post Register is plowing through the politics of loan guarantees, the Financial Times of London revealed this week that Areva is seeking investors among Middle Eastern sovereign wealth funds. While it is unlikely that any fund raising in Saudi Arabia or the UAE will directly impact the Eagle Rock facility, it could take some financial pressure off the French government. The FT wrote . . .

Investment from strategic partners or funds in important markets, such as United Arab Emirates and Saudi Arabia, could bring new resources while reinforcing Areva’s competitive position in a region in need of new production capacity.

As pointed out on this blog last week, according to various financial analysts, Areva needs $11 billion euros over the next three years to finance its global business. Some of that money will likely come from investors as well as the French government.

Areva is a sprawling multi-national firm that spans the complete range of the nuclear fuel cycle from uranium mining to reprocessing of spent nuclear fuel. It builds nuclear reactors worldwide and its plans include four sites in the U.S. all of which will need enriched uranium from the Eagle Rock plant.

A few months ago the euro was worth a lot more in terms of dollars which now makes the Eagle Rock plant, and Areva’s other U.S. investments, more expensive. However, the majority of the costs of the plant are still in the future, and the current financial crisis could be on its way to the history books by the time Areva breaks ground in 2011.

* * *

Readers interested in keeping up with all things related to Areva’s plans for the Eagle Rock plant should include in their online travels the firm’s new blog which began operation this month.

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Excessive exuberance in rhetoric at the NRC

Dale Klein’s recent speech could use some help from Yogi Berra rather than Alan Greenspan

NRC INTERVIEWIn a speech March 10, 2009, to NRC employees Chairman Dale Klein (left) diverged from a largely operational perspective to wax rhetorically about “excessive exuberance” in the nuclear industry. This is a remarkably candid comment from a nuclear regulator. Only Yogi Berra has been more forthcoming when it comes to making oneself understood. It is worth chewing on Klein’s comment to see where it came from and what it might mean.

Just so we’re clear, here is exactly what Klein said. [PDF file]

On the subject of new builds, you may remember that in 2007 and 2008 many of my speeches were about toning down expectations. Our concern was about how many license applications we would be receiving, and having adequate staff to review them. The concerns I repeatedly mentioned then were that the enthusiasm for new builds could eclipse the need to ensure high quality parts and components, and make adequate plans for workforce development. Today, of course, the picture looks a little different. Quality assurance and workforce development are still long-term concerns, but it seems like the global economy has resolved the issue of what I referred to as an “excessive exuberance” to be in line for the first new reactor builds.

Is the NRC in over its head with the nuclear renaissance?

The paradox is Klein is right to be worried whether his agency has the resources to do the job. Since 2007, the NRC has received applications for 17 new nuclear reactor operating licenses covering 28 new reactors. It expects to get a total of 22 applications for 33 new reactors by end-2010. There is plenty of work for NRC’s engineers. Nobody wants Klein to be a cheerleader for the industry, but telling nuclear energy utilities to tone it down seems to be just as much off the mark as going in the other direction.

CSO060316: CSO Brass Portrait.  © Todd Rosenberg Photography 2006
Klein seems to be taking on more of a burden than may be needed. Some of the responsibility for making sure the NRC does its job rests with Congress. The NRC gets its funding by charging the nuclear industry cost recovery fees, currently about $250/hr, for engineering reviews of reactor designs and license applications.

However, the money NRC receives for cost recovery goes into the treasury and is appropriated back to the agency by a reluctant Congress that treats the agency the way an orchestra conductor treats the brass. The operative philosophy is never give too much encouragement to either trumpet and trombone players nor to federal government regulators. It is up to Congress to insure reviews of license applications and reactor designs are not delayed by funding issues especially since the industry is paying for them.

Is the ESBWR an NRC poster child for “excessive exuberance?”

Overlaoded ChickenTruckIn point of fact one reactor vendor is already lightening NRC’s workload, taking some of the chickens off the truck, but not necessarily by choice. Reuters reports that Danny Roderick, Senior VP at GE-Hitachi, commented in response to an inquiry from the wire service that a lack of financing will slow the development of nuclear energy in the U.S.

Roderick put it in a nutshell when he told Reuters "Recent market developments are influencing the pace of new power plant projects in the U.S. industry-wide.” His comments were widely reported by the mainstream press.

"The global financial climate is causing some U.S. customers, primarily ones that are relying on the capital markets to finance their projects, to reprioritize needs and consider options for the construction of new nuclear power plants. The underlying need for power has not gone away," Roderick said.

What’s interesting about his comments is that it is true the U.S. reactor industry has been reordering its priorities, but not to the advantage of GE-Hitachi. The firm’s latest reactor design, the ESBWR, has been put on the back burner by two of the nation’s largest utilities – Exelon and Entergy. Both said more or less that the reason they dumped the design is because the U.S. Department of Energy said delays in time to market for the ESBWR made it a non-starter in applications for federal loan guarantees.

  • Nov 2008 - Exelon bids goodbye to ESBWR
  • Jan 2009 - Entergy bids goodbye to ESBWR

Both utilities still plan to build as many as six new reactors that would generate up over 7 GWe of electricity in three states, but not with the ESBWR. So Roderick is also right that the “underlying need for power has not gone away,” but that’s not “excessive exuberance.”

Slow pace for design review at the NRC

nrc logoThe reason for delayed time to market for the ESBWR is the relatively slow pace of design certification review at the NRC caused by exactly some of the concerns outlined in Klein’s speech. The reactor design was submitted in 2005 and docketed for review in December of that year. By now the design should be emerging from review and licensed for sale. NRC still has questions about the design, safety issues, etc. While the NRC calendar for the ESBWR review process got a new schedule this month, it does not include a final date for closure. [NRC chart PDF file]

What it boils down to is a question of whether Klein’s speech is push back against an understandably frustrated GE-Hitachi which has lost very considerable ground in gaining market share for a new reactor design? The other question is whether Klein’s target is more broadly aimed at the U.S. industry in general and has nothing to do with the ESBWR? Either way, Klein’s comments and concerns are food for thought.

Postscript Notes on Alan Greenspan – advice for speechwriters

Here’s why it is probably not a good idea for Dale Klein’s speech writers to be inserting quotes from Alan Greenspan in the chairman’s public remarks.

Alan_Greenspan_color_photo_portraitThe phase “irrational exuberance,” not “excessive,” was made famous by former Federal Reserve Chairman Alan Greenspan (right) talking about the stock market. Taken in retrospect, Greenspan later said he he made “mistakes” in assessing the health of the financial industry.

On Oct 24, 2008, he was raked over the coals (WSJ) by an angry House Oversight Committee which cast grave doubt (NYT) on his judgment and historical legacy. In response to intense criticism, Greenspan said, "We were wrong quite a good deal of the time." He also said. Forecasting "never gets to the point where it's 100% accurate."

What Greenspan said about “irrational exuberance” in December 1996 was this.

“How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions?” said Greenspan, then the Federal Reserve’s chairman. “And how do we factor that assessment into monetary policy?”

These were good questions. It’s too bad he didn’t stick with them. The point of highlighting Greenspan’s possible diminished place in history rather than as a sage economist is a cautionary tale about giving and using your own advice.

YogiBerraFor these reasons, you have to wonder who is writing speeches for Dale Klein at the NRC? Mis-quoting a discredited Alan Greenspan in the middle of the current financial panic isn’t likely to lead to clarity in getting one’s message across.

In an effort to be constructive, rather than critical, I am offering the NRC this link to 47 excellent quotes by former NY Yankee catcher Yogi Berra (right). Berra is a folk hero for his mangled explanations of baseball and life in general.

Readers are invited to review Berra’s quotes and suggest the application of them to the NRC. Any regulatory activity is fair game. You can send your unsolicited entries to the NRC’s Office of Public Affairs [contact form] where the agency will dutifully log them as public comment.

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Update on nuclear energy in the states for 03/15/09

Building bypasses to blind spots one legislator at a time

Time-MachineAnyone waiting for the federal government to come up with a rational policy that quickly swaps out greenhouse gas producing coal-fired power plants for nuclear energy had better have a time machine handy.

The reasons are two fold. First. as long as Sen. Harry Reid rules in Nevada and, second, as long as Al Gore has a speaking voice, it isn’t going to happen. Reid shut the door on Yucca Mountain and as Majority Leader in the U.S. Senate, is a key to so much of the Obama administration’s legislative agenda that he cannot be stopped on this issue.

The paradox of Al Gore’s position is that while he has a Nobel Prize winning grasp of the problem of global warming, he seems to be unclear on the concept when it comes to solutions. It is frustrating that Gore doesn’t get it. His opposition alone could delay some new nuclear power plants by a generation. Take for instance the fact that a former key Gore aide is now Chief of Staff to Energy Secretary Steven Chu. Want evidence of influence? There it is.

The result is that the Obama administration has a willful blind spot when it comes to nuclear energy. Never mind that globally other countries have got pedal to the metal to build new nuclear plants. Just ask the U.K. China, Japan, France, Italy, and the UAE.

That hasn’t stopped states from developing their own energy policies. This blog has been reporting action in Missouri, Kentucky, West Virginia, Minnesota, Wisconsin, Oklahoma, and Utah. Here are three updates.

Wisconsin

The State of Wisconsin is beginning to realize that putting off a decision on new nuclear power plants until Yucca Mountain opens will require the use of a time machine. Current state law says a new nuclear plant can’t be approved until the federal government has a comprehensive waste solution. Actually, the government does, it is just isn’t implementing it. The solution is called spent fuel reprocessing, and is in demand as a technology elsewhere in the world because of the energy density of spent nuclear fuel compared to coal or natural gas.

This fact is not lost on the people of Wisconsin who are now thinking about changing the state law. On March 12 Frank Jablonski, an attorney in Madison, Wisc., told two legislative committees it is unrealistic to say you want to do something about greenhouse gases and not build nuclear power plants.

“You don’t get there from here realistically without nuclear power being part of the mix,” he said. He added that world demand for electricity demands nuclear energy. He explained there is a general scientific consensus that the problems of spent fuel management and nonproliferation risks are manageable.

Jablonski has a long history working on environmental and energy issues in Wisconsin so the legislature listened carefully. Rep. Jim Soletski (D-Green Bay), who chairs the Energy & Utilities Committee, said a measure to change Wisconsin’s law on nuclear energy will come before the legislature later this session.

Memo to Al Gore, please call Mr. Jablonski. He has something to say to you.

Utah

Despite a contentious start down the road toward nuclear energy two years ago, driven by the outsized ambitions of a former state legislator, the current members of the House and Senate this week endorsed a pro-nuclear resolution. SJR16, sponsored by Rep. Christine Watkins (D-Price), survived several attempts to turn its clear message into mush.

She made her case, with an obvious reference to Yucca, with this point, “For the legislature to wait until everything is perfect is foolish and lacks leadership.” It is obvious she was persuasive. The vote in the House was 56-17.

On the Senate side, Sen. David Hinkins, R-Orangeville, said concerns about water supply could be addressed because a nuclear power plant is not a major consumptive user of the resource. The measure also passed there and is now on its way to the governor for signature.

Oklahoma

The Associated Press reports that legislation to streamline the review process for new nuclear power plants passed in the full House on March 12. The legislation represents a turn around for nuclear energy. More than two decades ago Public Service of Oklahoma abandoned its proposed Black Fox project after nine years of head banging with anti-nuclear activists. The bill passed this week also contains instructions to state agencies to come up with proposals for changes to tax law that would encourage the construction of a nuclear power plant in Oklahoma.

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