Thursday, August 13, 2009

Moody’s – Nukes are bad for balance sheets

Wall Street rating service takes a slap shot at utilities that want to build new reactors

Some parts of this blog post were also published in Fuel Cycle Week V8:N339 August 12, 2009, by International Nuclear Associates, Washington, DC

slap shot Publically traded firms love rating services when they get high marks from them, and hate the same creatures with a passion when the self-appointed Wall Street gurus are passing out bad grades.

What's getting nuclear utilities in a huff this summer is a June 2009 "Special Comment" from Moody's. The rating firm says it is "considering taking a more negative view" of the financial condition of firms planning to build nuclear power plants.

They're not kidding. Of the 17 proposed reactor projects, two have “junk” ratings and both are in Texas. They are NRG's South Texas Project 3 & 4 with Ba3 (questionable credit quality) and Luminant's Comanche Peak with B3 (generally poor credit quality). Of the remaining projects, 13 of them have ratings just one step above "junk" and eight of them are in the southeast.

Stark findings

The implications could not be more dramatic as the financial ratings handed out by Moody's determine risk and the cost of capital. If your firm is planning to go to the market to borrow $4.5 billion for a new 1,200 MW reactor, even half a percentage point in the wrong direction could add over $200 million.

moodys logoThat assumes you can get the money. Moody's warns that there is intense competition for capital. This means a utility shopping for $5 billion to build a new nuclear power plant is up against other utilities chasing much less money for natural gas powered plants with much faster time to market and quicker returns for investors.

These differences in schedules are not lost on the solar and wind companies who also tout their speed of execution relative to nuclear plants. What it comes down to is that the drive for nuclear energy takes so much money that it impacts the acquisition of capital for all other energy technologies or so critics say.

The “special comment” has some more stark findings. Moody’s analysts state the obvious. Construction of nuclear-power plants represents a huge financial gamble, which they call a “bet the farm” proposition.

Worse, Moody's says the regulatory and political climates are too variable to trust that these projects once started will be able to proceed to completion.

What Moody's seems to be saying is that even if as a utility you fix your balance sheet problems, the political whims of elected officials and the winds of outrageous fortune could sink a nuclear reactor project despite your best efforts.

Reactors are “bet the farm” projects for utilities

The reasons, Moody's says, are these.

poker chips We view new nuclear generation plans as a “bet the farm” endeavor for most companies, due to the size of the investment and length of time needed to build a nuclear power facility.

While we continue to view operating nuclear units positively, we increasingly sense that none of the issuers actively pursuing these endeavors have taken any material actions to strengthen their balance sheets.

As a result, it has become increasingly likely that the pursuit of new nuclear power projects will lead to some near-term rating actions or outlook changes.

NEI pushes back

The industry is not taking that assessment lying down. Mitch Singer, a spokesman for the Nuclear Energy Institute(NEI), told me in an interview Moody's "bet the farm" remarks are based on out-of-date information, some of which was analyzed as long as 25 years ago.

Singer also argues the Moody's has fallen into the trap of living in the past instead of simply learning from it. He says that interest rates are not as high as they were during the late 70s and early 80s.

nei logo He says the industry has recovered from the Three Mile Island accident. "Dwelling on it is not helpful," Singer said.

He points out that the NRC has a new combined process for construction and operating licenses. In the past, the agency imposed enormous costs on utilities with separate license applications for building a plant and then operating it.

"The combined licensing reduces regulatory risk and should cut the time for construction of plants," he said.

Singer acknowledges that Wall Street needs "confidence building measures" to loan money to utilities for new reactors. He expects investors will gravitate to states that allow recovery of construction costs while the plant is being built. All of these states are in the southeast.

Jim Hempstead, the lead author of the Moody’s report, was not available to respond to Singer's remarks.

Advantages for ‘brown-field’ sites

green_fieldMoody’s believes there is a significant difference between new nuclear plants located adjacent to existing units from those that are green-field projects. They write

“In our opinion, brown-field projects benefit from the existing infrastructure (including security plans), local political support and historical operating record of the existing units.”

There are only two green-field projects on the drawing boards. One of the green-field plants, Exelon's Victoria, Tex., site, has been put out to pasture for the time being. The Chicago-based utility has stopped work on its license application and is developing a much cheaper Early Site Permit, which preserves its options for a number of years without requiring its stockholders to commit to a course of action.

The other is a site in Levy County on Florida's west coast. There Progress Energy has pushed back the clock by 20 months on site work and postponed rate increases to pay for early costs in response to declining demand for electricity.

Only two projects get a "thumbs up" from Moody's. They are Southern's plans for two new AP1000s at its Vogtle plant and TVA's plans for two new AP1000s at its Bellefonte site. However, as the Moody's report went to press, TVA announced it would only build one of two of the reactors. It cited declining demand for electricity and a limited amount of headspace relative to its debt ceiling.

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Western Lands Uranium Gopher for August 14, 2009

New Mexico asks Appeals Court for review of "Indian Country" decision

gopherSome parts of this blog post were also published in Fuel Cycle Week V8:N339 August 12, 2009, by International Nuclear Associates, Washington, DC

The State of New Mexico has weighed in on the "Indian Country" issue and on the side of the uranium industry. NM Special Assistant Attorney General Christopher D. Coppin and governor's chief counsel Justin Miller filed the friend of the court brief Aug 10 with the 10th U.S. Circuit Court of Appeals in Denver.

The significance of the brief is that Miller, as the Governor's chief counsel, is, in effect, speaking for New Mexico Governor Bill Richardson. He in turn is a former Secretary of Energy who knows the uranium business.

The brief supports a petition by Uranium Resources Inc. (NASDAQ:URRE) for a rehearing before the full court. It asks for a review of a decision last April that said a proposed uranium mine site in the western part of the state is on American Indian land.

Coppin and Miller contend the panel's ruling is not consistent with a U.S. Supreme Court decision defining Indian country. They said that the definition requires the federal government to set aside the land for Indian use as "Indian land." In a statement to the Associated Press they wrote:

"It is critical that any legal standard for determining 'Indian country' status does not increase the potential for future legal debates and controversy due to confusing or unclear criteria," Coppin and Miller wrote. "The state believes the panel's decision increases the potential for conflict between the state and Indian tribes."

The state is concerned the "community of reference test" in the panel's ruling will lead to jurisdictional confusion, tension between the state and tribes and further litigation because of its ambiguity, the brief said.

Hrdro Resources, a subsidiary of Uranium Resources, challenged an EPA ruling that the mine site, surrounded by the Navajo Nation, constitutes "Indian country." Hydro Resources claims the site is private land and not legally part of the Navajo reservation.

The company had sought a permit from New Mexico in 2005 for the mine. However, the state asked the EPA to make a decision on the status of the land as to whether it was 'Indian Country."

The state said it is interested solely because of the jurisdictional question the case presents. If the land is not "Indian Country,"the State of New Mexico Division of Environmental Management would have sole authority to issue permits for the mine.

Powertech gets additional investment

Powertech Uranium Corp (TSE:PWE) and Synatom, a Belgium-based firm, have agreed to a bridge loan for Powertech of $3.45 million CDN to help fund Powertech's ISL uranium projects in Colorado and South Dakota.

The new bridge loan is the first of four commitments of funding by Synatom for a total of $13.8 million CDN. The funding comes on top of a $9 million CDN loan from the same firm in June 2008 and a more recent loan of $2.5 million in December 2008.

Powertech is developing the Centennial mine in Colorado and the Dewey-Burdock mine in South Dakota. Powertech President Richard Clement said in a statement that the firm plans to file for a permit for the Centennial project by the end of 2009.

Synatom is a subsidiary of Electrabel, a European energy company . It manages the fuel cycle for Belgium nuclear power stations.

Powertech unhappy in Nunn

Local political support for Powertech, which has never been strong, took another dip Aug 7 at a meeting of the town board in Nunn, Colo. Residents turned out to applaud a decision by the Mayor and board members to turn down a resolution to support Powertech's uranium mine.

The action came as a disappointment to the company which had invested heavily in the meeting in an effort to win over some of the people opposing the mine. Powertech COO Wallace Mays and CEO Richard Clement made a presentation that emphasized safety procedures to protect area residents.

The meeting took place in an emotionally charged atmosphere. A recall petition is being circulated to recall Nunn Mayor Jeff Pigue who had initially supported the mine. However, the town clerk rejected it because of errors so the Mayor and two board members remain in office.

Energy Fuels gets new DOE leases, prepares for permit hearing

Energy Fuels (TSE:EFR) has been awarded two additional DOE lease tracts resulting from a May 2008 DOE lease sale. These tracts are in western Montrose County, Colorado, (within the Uravan Mineral Belt) about 30 highway miles from the company's planned Pinon Ridge Mill site

The company said in a statement these two tracts combined contain about 2.3 million pounds of historical resource (not NI 43-101 compliant) in a region of historical mining activity by Union Carbide Corporation. The DOE data was from an estimate originally prepared by the Atomic Energy Commission (AEC) based on US Geological Survey and AEC drilling conducted during 1951 - 1953.

Energy Fuels faces a special use permit hearing before the Montrose County Commissioners in August 13 for its Pinion Ridge Mill. Gary Steele, VP, told me in an interview the company expects the county "to be rigorous in soliciting and listening to public comment" before making a decision.

Steele said there is a good chance there will be more than one hearing given the level of public interest in the mill. The Montrose County Planning Commission and a western slope advisory committee both voted unanimously 5-0 in favor of the permit.

George Glasier, CEO, expressed confidence in the outcome of the county review. He told the Durango Herald Aug 9, "We will build this mill, which will make the uranium industry go again in western Colorado. "

If it gets all the local, and state permits, the mill will be built 13 miles west of Naturita, Colo, and would be the only facility of its kind on the western slope. The old Cotter Mill is located near Canon City along the Front Range some 270 miles to the east.

Uranium One buys Wyoming assets

Uranium One (TSE:UUU) will acquire the Irigaray plant and Chistensen Ranch sites in the Powder River basin from Areva and EDF for $35 million. The acquisition will give Uranium One a plant to process feed from ISL mines to turn it into yellowcake.

“By acquiring existing, licensed production facilities, we will reduce the permitting and construction risk associated with developing our own central production plant,” Uranium One’s CEO Jean Nortier said in the statement.

Uranium Power bought out by Titan

Titan Uranium Corp (CVE:TUE) announced that it has acquired Uranium Power Corp (CVE:UPC) and taken control of the firm's assets which include a 50% interest in the Sheep Mountain mine in Wyoming. At market close July 28, Uranium Power has a market capitalization of $18.2 million. Titan said it would file amendments to the current permit at Sheep Mountain to reopen the mine for operations.

Reuters reported in 2005 that U.S. Energy Corp. and Bell Coast Capital Corp. had plans to revive the then idle Sheep Mountain mines in Fremont County within 18 months. The companies estimated at the time the total deposit at 14 million pounds U3O8, forecasting yearly output at 1.5 million lb U3O8. However, none of the work ever took place due to low prices for uranium.

At a price of $50/lb, that 1.5 million pounds would be worth $75 million or more than five times the value of Uranium Power Corp.'s market capitalization in July 2009.

Denison reports NI 43-101 for two Arizona properties

Denison Mines Corp (AMEX:DNN) said it has received an NI 43-101 compliant resource estimate for two uranium deposits in Arizona, giving an inferred value of 110,550 tons at 0.51% U3O8 for the former, and a 113,700 tons at 0.43% U308 for the latter.

These deposits are on the Arizona Strip where the company also has three mines in various stages of development: Arizona 1, Pinenut and Canyon.

The two deposits are located on US Bureau of Land Management (BLM) claims and are not subject to the recent actions of the US Department of Interior Secretary Ken Salazar which removed nearly one million acres of federal lands in the Arizona Strip district for two years while the Department of Interior evaluates whether to withdraw these lands from new mining claims for an additional 20 years.

Denison added it is currently working with the BLM on the preparation of an Environmental Impact Statement for the development of these two deposits as one mining complex.

Nuclear Fuel Services gets NRC OK for commercial UF6 operations

The NRC has approved a license application by Nuclear Fuel Services (NFS) (privately held) in Erwin, TN, to add uranium hexafluoride to its commercial operations. The NRC inspection that led to the approval focused on design and safety issues.

Currently, NFS is converting surplus weapons grade uranium into material suitable for use as commercial nuclear fuel. The process blends down uranium enriched above 85% U235 to just 3-5% U235. The primary customer for the commercial fuel is TVA. The firm has been a major supplier of nuclear fuel for U.S. Navy reactors since the 1960s.

* * *

Update: A reader has point out that NFS was purchased by B&W in December 2008. The information in Yahoo Finance is out of date.


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Wednesday, August 12, 2009

Obama’s climate policy needs nuclear energy

American Nuclear Society public affairs specialist says the White House understands it is necessary

While some advocates for nuclear energy in the U.S. have tied its future to the development of climate change legislation, an astute participant in the process and observer of all things nuclear thinks this is not the most productive path.

cpiercyThe American public does not understand "baseload demand" says Craig Piercy, (right) the Washington, DC, representative for the American Nuclear Society (ANS).

Speaking to a group of business and civic leaders in Idaho Falls, ID, on August 12, Piercy, a veteran of capitol hill and and a senior VP at Bose Public Affairs, told the group there are parallels between the current debate on health care and the long standng one over the future of nuclear energy. He said both debates are one step removed from reality.

"There is a huge gap between opinions and real understanding."

Piercy’s message is there is a future for nuclear energy. It is within our grasp if we will reach for it. There are challenges along the way. Here’s what he said about them.

No climate bill until after mid-term elections

climate_change_carbon_taxPiercy says he does not expect climate change legislation to emerge from Congress until after the 2010 mid-term elections. The reason is that the Republicans have backed away from bi-partisan support for it. At one time it was thought that call for 100 new reactors by Sen. Lamar Alexander (R-TN) could open the door to legislative deals.

"The Obama people were hopeful," Piercy said, But Alexander later "slammed the door" on compromise in a speech at the National Press Club condemning the House bill so completely there is no chance for dialog."

Even with the Republicans "organizing a circular firing squad" on climate legislation, Piercy says the Obama administration wants to put more R&D money into nuclear energy.

"The White House realizes climate policy is not doable without nuclear energy," Piercy said. That said, the White House is also unlikely to be an overt supporter or cheerleader for nuclear energy.

"They are supporting the renewable folks because of the president's political base," Piercy said. "They are hopeful the nuclear industry can build some plants to show success."

Best case to make for nuclear energy is economics

The best argument for nuclear energy isn't likely to be climate change, but rather energy independence and jobs. Pushing for natural gas plants will sink energy independence Piercy said.

20TH CENTURY"The global train is leaving the station with the other major powers ramping up exports of nuclear technologies. We will be on the outside looking in if we don't get onboard."

Piercy points out the case can be made for thousands of high paying jobs manufacturing nuclear components, like the new plant that broke ground in Newport News, VA, a combined effort of Areva and Northrup Grumman.

Unfortunately, the jobs angle isn't fully recognized in Congress. The $50 billion in additional loan guarantees added to the Senate version of the economic stimulus bill was stripped out of the House version by Speaker Nancy Pelosi (D-CA) and Rep. Henry Waxman (D-CA).

"The environmentalists have the Democratic leadership on speed dial," Piercy said, and the loan guarantees were a big enough target that “they became a rallying point for green groups who declared victory when they were stripped from the House version of the bill.”

Outlook good for nuclear R&D

Despite turmoil in Congress, Piercy says there is good support for nuclear energy at the Department of Energy (DOE) and that means support for the Idaho National Laboratory (INL). DOE is getting excellent leadership was well.

Energy Sec. Steven Chu chose Pete Miller, a veteran of DOE science labs, to be the Assistant Secretary of Nuclear Energy. He in turn immediately hired Peter Lyons, a former NRC Commissioner, to be his deputy. Miller was confirmed for his post last week by the U.S. Senate.

ArtworkThere is also renewed interest in small reactors, such as the LWR being developed by NuScale (left) and a nuclear battery being developed by Hyperion, because not all nukes come on one size, e.g., large, which is how former VP Al Gore has characterized them in congressional testimony.

Piercy said developing nations will need smaller, "right size" reactors that fit their grids. Also, U.S. utilities will not have to bet the company to add the technology to their baseload capabilities.

"Utilities can buy small reactors in $500 million chunks and add them as electricity demand develops."

The field of small reactors needs government help. He noted that Henry Ford once said, "If I asked people what they wanted, they would have asked for faster horses."

Piercy said what he means by mentioning this quote is that the need for innovation in the nuclear energy field never goes away.

The Idaho National Laboratory could be a proving ground for multiple small reactors, Piercy said. He thinks that as many as four-to-five reactor types could be developed and tested on the Arco desert, which has been the home to 55 reactors over the past 60 years. Peircy's comments actually follow a day long tour of the lab's desert facilities on a big yellow bus.

Advocating for nuclear energy

ANS logoWhen you get down to it, nuclear energy is not a policy issues, it is a political issue. The American Nuclear Society, which is a 501C3 organization does not lobby, but it will be working with its local chapters to do outreach to citizens groups who do lobby and who come to Washington, DC, to talk to their elected representatives. The organization is a partner in a new website for grass roots support for nuclear energy.

The Nuclear Advocacy Network is a joint project of the Nuclear Energy Institute (NEI), the American Nuclear Society (ANS), the North American Young Generation in Nuclear (NA-YGN), and Women in Nuclear (WIN).

NAN is also reaching out to a number of other organizations and individuals for membership. The members of NAN have joined together to facilitate communication with policymakers and the media on issues related to nuclear energy, science and technology.

The best way to reach members of congress, Piercy said, is to visit them in their district offices. "The noise level in Washington is simply too intense sometimes for grass roots groups to be heard."

However, Piercy also noted that there are fewer "hard core anti-nuclear members of Congress." Of course there are exceptions including some from California and New England states. But anti-nuclear "dogma" is declining. There are provisions for loan guarantees that can be used for nuclear energy in the House climate bill. Some mainstream environmental groups like Environmental Defense are coming to the table.

"You are never going to convince Greenpeace," Piercy said, but "these people are like folks who dance with snakes. They are really out there on the margins."

NRC will be held accountable

nrc logo On other items during the Q&A session, Piercy said this about recent developments at the NRC.

*** New NRC Chairman Gregory Jazcko is learning the ropes and is bound by the regulations of the agency. He can't run things based on his own views.

*** Also, the NRC will have its feet held to the fire by Congress to get combined licenses out the door by 2011 or 2012. "Congress will push for these milestones," he said.

*** There are two vacancies on the NRC. The leading candidates for the jobs have strong nuclear energy backgrounds.

*** The Yucca Mountain mess will eventually lead the U.S. to recycling nuclear fuel. "It is inevitable," he said. The DOE should not be in charge of it. " What's needed is an industry consortium, perhaps with public money to get it going as a partnership.”

*** Harry Reid makes a lot of demands on the Obama administration as the Senate Majority Leader, e.g., zero out Yucca Mountain, but his numbers in Nevada for the 2010 election don't look promising.

Credits

Piercy’s talk in Idaho Falls was co-sponsored by the Partnership for Science & Technology (PST) and the Idaho Section of the American Nuclear Society.

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Vermont Yankee center of battle of expectations

Safety issues, rates, and even profit sharing are in the mix

tough job The toughest jobs in the nuclear industry right now have to be those of the managers of the Vermont Yankee nuclear plant. Green groups want to shut the plant down, state agencies want to have their say about everything from safety to rates, and politicians see bashing the plant for some of its operational missteps as a path to gaining votes on election day. It’s been like this for the past few years.

The issue that comes to the front this week is the financial health of the "decommissioning fund." It represents money which will be accumulated from electricity sales, invested conservatively, and used to safely close the plant down once it ceases operations. That isn't likely to happen soon.

Entergy (NYSE:ETR), which owns the plant, has applied to the NRC for a 20 year extension of its current license. The fund, like your 401K, has taken a beating thanks to the wizards on Wall Street. While the losses in the fund aren't Entergy's fault, the NRC has taken notice of its condition. Unlike the NRC, the legisaltive leadership in State of Vermont has demanded Entergy pony up $400 milllion immediately to restore the fund to its condition prior to the onset of the recession.

Entergy expects Vermont Yankee to be relicensed, and reminded regulatory agencies and the public this week that their management of the “decommissioning fund” is directed by the regulations of the NRC and not the Vermont Public Interest Group nor the state legislature.

Entergy VP Jay Thayer told the Rutland Herald just that on Aug 11.

“The NRC has jurisdiction to determine whether the decommissioning trust fund is adequately funded and if not, what the remedy should be. Entergy will comply with the NRC’s requirements . . . and will provide additional financial assurances consistent with the NRC’s regulations.”

one way signIn response Paul Burns, Director of the Vermont Public Interest Group said he was “startled” by Entergy’s claim that the company is taking this position. Burns is incensed that Entergy won't simply shut down, fund or not, because his group says so.

Burns and State Senate President Peter Shumlin have tried for the past year to create a sense of inevitability of the shutdown of Vermont Yankee in 2012 when its current license expires. Their political rhetoric flies in the face of actions by federal regulators who are now considering the license renewal application for another 20 years. That hasn't stopped them from "crying wolf" over the decommissioning fund as though it would be needed tomorrow.

Rates trump green issues

Despite the objections of green groups to license renewal, the real issue for Vermonters is that the 600 MW reactor provides 30% of the power for the state at just $0.04/Kw. Take it away and Vermont utilities that get their electricity from the reactor will be buying it on the spot market from fossil plants at three-or-four times that rate. This fact is not lost on one of the plant’s toughest critics.

Sen.Peter Shumlin wrote a letter to Entergy this week telling the firm the legislature wants an agreement on rates by November. He should be worried because the average retail price of electricity in New England states is well north of $0.12/Kw.

The real bottom line is that he wants to have things both ways. He wants to bash the reactor with anti-nuclear rhetoric to bolster his political base of green voters and he wants cheap rates from it to appeal to voters' pocketbooks.

lights on

Vermont has it good and state leaders, whatever their “green” stripes may be, want to lock in the benefits of the current prices they get from nuclear energy. See the discussion by Rod Adams at Atomic Insights last March for more details.

This brings us to Rich Smith, Deputy Commissioner of the Vermont Department of Public Service. He told a local TV station the agency, which represents rate payers, wants a “below market contract price for future electricity.”

He also mentioned his priorities, which otherwise seem pretty reasonable, include “better management practices” and ensuring the decommissioning fund is in the black by 2032. The latter is a no brainer since it the last year of a renewed 20-year license. During this time revenues from electricity sales will restore the fund. This is why the howls of outrage from Shumlin and the green groups ring hollow.

So it seems that what’s going on in Vermont is really a battle over rates with the side show of green groups that are being used, whether they realize it or not, to bring pressure to bear on the reactor’s owners over rates. Green groups are no doubt sincere in their opposition to nuclear energy. Politicians who want to deliver continued cheap rates to voters might see them as something else, and that is as useful harbingers of uncertainty and doubt about public support for nuclear energy

Telling a good story

Nuclear flowers in Vermont The nuclear industry has been criticized for not telling its story. In Vermont there is an example of how a utility that is under the gun from multiple critics is able to get its message out to the public.

In statements to the news media Vermont Yankee spokesman Rob Williams laid out the firm's positions on the economic benefit of the plant and who really has the regulatory authority for nuclear safety.

  • Economic impact

Entergy said it is responsible for more than $1 billion in direct economic impact because of its 660-person payroll. The state also benefits from tax revenues and a profit-sharing agreement with utilities. Williams said an arrangement like this one "leaves no doubt" a license extension serves the public good.

Entergy adds the nuclear reactor, which produces just under one-third of Vermont's electricity, does not add to global climate change.

  • Regulatory Authority
If wishes were fishes there are some state legislators who would be knee deep in flounder, but federal law doesn't work that way.

Williams told the Rutland Herald unequivocally the federal government, not the state, is responsible for evaluating the safety of the plant, the spent fuel pool, and the operation of the plant.

"Those types of issues are within the purview of the Nuclear Regulatory Commission, and that purview is recognized by the state regulators."

As for which issues are regulated by the state and which by the federal government, Williams added that the plant safety falls "clearly on the federal side of the line."

"The (Public Service Board) does not regulate nuclear safety, because the NRC was established by Congress to oversee commercial nuclear plants as a regulator of nuclear safety," he said.

Well done Rob Williams.

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Tuesday, August 11, 2009

Is AEHI planning to leave Elmore site?

CEO says he’s looking at Idaho State Lands

Update: 10/20/09 AEHI seeks site in Payette County, Idaho

AEHI logoOver at the Idaho Statesman, reporter Rocky Barker has a piece that indicates there is more confusion about plans by Alternative Energy Holdings Inc. (AEHI) (OTC:AEHI) for a new nuclear reactor at a site near Mountain Home, ID, in Elmore County. Barker reports that there is no basis for a claim by AEHI CEO Don Gillispie that the State of Idaho has offered the firm a new site for its reactor. The current site is about 80 miles southeast of Boise.

The State of Idaho has lands that are leased for cattle grazing, forestry, farming, mining, and other uses. The funds from these beneficial economic activities are used to support education. The state manages nearly 2.5 million acres within its borders.

gillispiedonWhat prompted Barker's report is that Gillispie (right) recently said the state has offered his firm sites on state lands for its proposed nuclear plant following delays in local approval at the current site in Elmore County.

But Idaho Department of Lands Director George Bacon told Barker at the Statesman his response to the statement by AEHI about the state offer is, “Not really.”

“He has gone out with some folks to see if the state has some properties that meet his needs,” Bacon said. “We’ve advised him what the process was for leasing land for any process.”

There is a big difference between explaining how the process works and making a decision. Bacon told Barker AEHI would not get the lands just by asking for for them.

Bacon said an extensive process of “due diligence” takes place to make sure the action is in the best interest of the schools. The process includes environmental and business reviews and consultation with county governments affected by the change in use.

What this means is that even if AEHI formally requested a site on state lands, it would still have to do all the same things it is doing now in Elmore County to get approval for a zoning change on a privately held parcel. So why bother?

Is AEHI shaking Elmore’s tree?

shake treeWhat this looks like is that AEHI is trying to shake the tree over at the Elmore County Commission which sent the firm's zoning request for the reactor back to its planning and zoning commission. The county commissioners were not satisfied that the current zoning rules give them a basis for a vote on a nuclear reactor.

Maybe Gillispie is just losing patience with a bunch of local government types and wants to pressure them to make up their mind by pointing out he has other options. AHEI has dangled the prospect of hundreds of jobs for locals in rural Elmore County if the reactor is built. If he presents the case that he is thinking of leaving town, because he is frustrated with the slow pace of decision making, maybe he's thinking it could stir up some pressure on the county to make up its mind.

What’s AEHI’s end game?

However, AEHI's latest public statements may ring hollow since the firm still doesn't have the $50-70 million it would need to submit a license application to the NRC. Even if it got that far, it isn't clear that AEHI would be able to build a reactor. AEHI told the NRC it would submit a license application by the end of 2009. Right now it doesn’t look like it will keep to that schedule.

soldSignSome critics of the project have speculated that what AEHI really wants to do is get an NRC license for the nuclear reactor and then sell it to the highest bidder. There is no recent precedent for this. The transfer of a nuclear reactor license is no small matter. AEHI’s public relations firm did not respond to an email inquiry about this strategy.

Significantly, another nuclear reactor being planned in Utah,the so-called "Blue Castle" project slated for Green River, has exactly that objective. It wants to obtain a license for a 3,000 MW plant to wheel power to the electricity hungry cities of southern California. Once it gets one it, intends to cash out selling the license to anyone who thinks they can actually build the plant as a merchant. Utah's legislature has turned down proposals to guarantee plant construction with state's rate base.

At least the Utah firm has a market in mind that can use that kind of power. It isn’t clear to anyone that the grid in Idaho can support even a nuclear plant half that size. It remains to be seen whether Transition Power in Utah or AEHI in Idaho will prevail and meet the expectations of their investors.

'In God we trust, all other pay cash'

ingodwetrustIn the meantime, this famous book title by the late humorist Jean Shepherd offers a helpful view of the situation. AEHI comes up short with no land, no reactor, no license, and most importantly, despite going through three investment banking firms, still has no money. In a filing with the SEC in March 2009, the firm listed total assets of $105,000. It is unclear whether the firm has updated its financial reports since then.

Mr. Gillispie undoubtedly wants to build his credibility with the nuclear industry and especially in Idaho, To achieve this result he has to stop looking and acting like a speculative penny stock outfit, and start operating like a real nuclear company. Otherwise, people will continue to be justified in scratching their heads about whether he is the real deal or not.

At market close on Aug 19, AEHI stock traded at $0.12/share against a 52-week range of $0.01-$0.35 with market capitalization of $12 million.

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Monday, August 10, 2009

Attacks on Pakistan’s nuclear arsenal

Three assaults recorded in past two years

nuclear weapons juggling actUpdate: New York Times report for 08/11/09 adds details and a map.

The Times of India reports that an open source journal published in July 2009 at the U.S. Military Academy at West Point revealed that Pakistan's nuclear weapons facilities have been attacked three times over the past two years. The incidents, tracked by Shaun Gregory, a professor at Bradford University in UK, include . . .

  • an attack on the nuclear missile storage facility at Sargodha on November 1, 2007;
  • an attack on a nuclear airbase at Kamra by a suicide bomber on December 10, 2007;
  • and the August 20, 2008 attack when Taliban suicide bombers blew up at the Wah cantonment, one of Pakistan's main centers for assembly of nuclear weapons

According to the Times of India, the attacks have received little attention. It reported that Peter Bergen, a noted terrorism expert who reportedly reviewed Gregory's paper, first published in West Point's Counter Terrorism Center Sentinel, told the newspaper "he (Gregory) points out something that was news to me (and shouldn't have been) which is that a series of attacks on Pakistan's nuclear weapons facilities have already happened.”

Separately, last May McClatchy newspapers reported that despite the turmoil in the country with insurgents, Pakistan was expanding its nuclear weapons complex. This development raises their profile and makes them more of a target for terrorists who want to set off a nuclear weapon in the West.

Geography rules conflict

shaungregoryIn the paper, Gregory (right) describes the steps Pakistan has taken to secure its nuclear weapons. However, Gregory asks if the geographical location (map) of Pakistan's principal nuclear weapons infrastructure makes it more vulnerable to internal attacks. He also discusses some of these vulnerabilities which could lead to future attacks.

Gregory did not report that any of the reported attacks resulted in the Jihadists gaining access to or control of Pakistan’s nuclear materials or weapons. He wrote that enhanced vigilance and security is necessary.

“It remains imperative that Pakistan is pressured and supported, above all by the United States, to continue to improve the safety and security of its nuclear weapons and to ensure the fidelity of those civilian and military personnel with access to, or knowledge of, nuclear weapons.”

Shaun Gregory is Professor of International Security; Director of the Pakistan Security Research Unit, at the University of Bradford in the U.K.

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Sunday, August 9, 2009

Russia & Turkey in game of 'Deal or No Deal'

Nuclear energy project still too expensive for Ankara

ancient byz artRussia turned up the heat on Turkey this week over the long running and complex negotiations to build four nuclear reactors for a total of 4,800 MW of electricity generation. None other than Russian Prime Minister Vladimir Putin showed up in Ankara on Aug 6 to sign agreements on oil and gas pipelines and to salvage the nuclear deal.

The Financial Times of London reports that the latest round of negotiations involves Turkey taking a 15-25% stake in the nuclear project. In return Russia’s AtomStroyexport will reduce the price of electricity generated by the plant to $0.12/KwHr. The price of the reactors is included in a $21 billion deal that also covers transmission and distribution networks that could make Turkey a regional exporter of electricity.

Reuters reports that the delivered price of electricity from the deal is still too high to be viable in Turkey’s domestic energy market or in the region, but the final agreement has been signed by Sergi Kiriyenko, head of Russia’s atomic energy export agency and Zafer Alper, head of Turkey’s Atomic Energy Agency.

Will Turkey comply with its own tender?

Unfortunately, this new price will likely set off howls of protest domestically as it is still a third more than the price of electricity from natural gas. What makes the price reduction so significant is that the Russians started a year ago with an offer of $0.21/KwHr. The Russians have come a long way, but they’ve also squeezed concessions from Turkey in the process.

taneryildiz“In order to reduce the price to a reasonable level we’ve offered a state partnership,” Taner Yildiz, energy minister, (right) told the Financial Times. He said a state share of between 15-to25% would not imply any state guarantee for the project and that there was no intention of changing the terms of the tender.

The problem for both Turkey and Russia is that the published tender has explicit terms about the price of delivered electricity and a government guarantee to buy it at that price until 2030. Critics have pointed out that the deal is not only expensive, it also increases Turkey’s reliance on Russia for its energy needs.

Wolfgango Piccoli, an analyst with the Eurasia Group, told the Financial Times, “Questions over compliance with the tender and apparent political interference give the project’s opponents ammunition for serious legal challenges.”

Greenpeace activists protested the deal and the visit by Russian Prime Minister Vladimir Putin on Aug 6. About two dozen protestors showed up in downtown Ankara unfurling huge banners that said, “No atoms please.” They also used attention grabbing props representing classical Russian nesting dolls, but with the faces of Putin and Turkish Prime Minister Recep Tayyip Erdogan printed on them implying the nuclear reactors projects hold unpleasant hidden surprises.

Deal or no deal?

deal_or_no_dealTurkey is still trying to get a viable price from the Russians. The latest “sweetener” is to offer to take an equity stake of 15-25% in the $21 billion project.

The tender calls for a “build-to-operate” deal with the vendor financing the construction and operating the plant. This latest offer from Turkey to swap equity for a cut in in the cost of electricity would reduce Russia’s capital requirements for the project by $3.2-to-5.3 billion.

Russia proposes to build four VVER PWR type reactors at 1,200 MW each near Mersin on the Mediterranean Sea. According to World Nuclear News, AtomStroyExport would lead construction along with Park Teknik of the Turkish conglomerate the Ciner Group, while Russia's Inter RAO UES would operate the reactors. The first reactor is expected to enter revenue service in 2016.

When Turkey first published the tender for the project more than two years ago, there were 13 potential bidders. Except for the Russians, the rest walked away because Turkey refused to accept their appeals for changes in the areas of protection of intellectual property and Turkey’s insistence on not using foreign workers to operate the plant. It may be that one of the reasons Russia offered such a high price to start with, and is still not in a competitive range, is that they are the only game in town.

Nuclear is not the only energy deal

gas flameSince then Turkey has also signed a series of energy deal with Russia for oil and natural gas pipelines.

The New York Times reports that during Putin's Aug 6 visit to Ankara, Russia and Turkey concluded energy agreements to support Turkey’s drive to become a regional hub for fuel shipments.

The deal reportedly will help Russia maintain a monopoly grip on natural gas shipments from Asia to Europe.

Turkey also granted the Russian natural gas giant Gazprom use of its territorial waters in the Black Sea. The company wants this route for its "South Stream" pipeline to gas markets in Europe.

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Daneros uranium mine permit delayed

BLM Utah State Office to review environmental assessment

Some of this content was also published in Fuel Cycle Week V8:N327 on 07/29/09 by International Nuclear Associates, Washington, DC

redrockTwo Utah environmental groups have temporarily gained the upper hand in a dispute over the quality of an environmental assessment [EA] for the Daneros Mine being developed by White Canyon Uranium (ASX:WCU), an Australian-based company. The Utah State Office of the Bureau of Land Management (BLM) has accepted requests from Uranium Watch and the Southern Utah Wilderness Alliance (SUWA) to stay the issuance of the permit for mine operations while it reviews the environmental assessment for the project. (Photo SUWA)

The mine is the first underground uranium works to open in more than 30 years. White Canyon had expected to start operations this month, but the appeal pushes that date back by at least a month or more.

Cumulative impacts of historical uranium mining

Both groups filed multiple objections to the permit in the environmental assessment submitting 68 of the 72 comments received by BLM in the public comment process. Notably, both complained that the BLM only considered the site-specific impacts of the project and did not take into account cumulative impacts from decades of uranium mining in the Monticello District for federal lands in southern Utah.

The BLM District Office rejected that claim saying in its response to comments that new surface disturbances of land would be minor since the Daneros site an underground mine.

Sarah Field, the Director of Uranium Watch, based in Moab, UT, objected and said in an interview, "once uranium mining is over, the impacts last forever."

Liz Thomas, the attorney for SUWA who also filed objections, said in an interview the mine is adjacent to a wilderness study area and opening the mine for operations might jeopardize a future decision to set aside the nearby Upper Red Canyon and Red Rock Plateau (map) for that purpose. She said the EA "was inadequate" in its consideration of these types of impacts.

BLMLOGOMarge Crandal, a spokesperson for the BLM State Office in Salt Lake City, told me the agency receives requests like the ones on the Daneros mine all the time, and that typically, the review process takes about 30 days.

This came as somewhat of a surprise to SUWA's Taylor who said that as she understood it there is no regulatory timetable for the review. She also characterized the appeal of the Daneros EA as a precedent since no new uranium mines have been proposed to be opened in Utah for nearly three decades.

EA unlikely to be overturned

In the past, Field of Uranium Watch says, BLM's reviews by the state office have not overturned the work of the District office if it followed procedure and was complete in documenting its responses to public comments. She acknowledged that her group raised complex issues that are unlikely to be tackled in an EA. The result, she said, is "that with some minor tweaking the permit will probably be issued following the review."

Field's ambition to change the landscape of government oversight of uranium mining is to force BLM to conduct a programmatic environmental impact statement on all of its permitting activities in 11 western states.

That way, she says, the historical legacy of uranium mining might be taken into account in current permit decisions.

So far there has been no indication from BLM that it would give serious consideration to that request.

Daneros to ink toll milling agreement with Denison?

white_canyon_uranuim_logoWhile BLM reviews the EA, underground work at the Daneros mine is set to be complete by the end of September. The company is installing ventilation fans and a generator. It is waiting for the permit to being operations.

Assuming BLM issues a permit later this year, White Canyon is expected to either sell its ore to Denison's mill in Blanding or pay a contract rate for toll milling and then sell the resulting U3O8 to customers. Denison confirmed to an industry trade newsletter that it is in negotiations with White Canyon Uranium for a toll milling agreement.

In June 2009 it was reported via its website that the initial annual production target for the Daneros mine is 0.5 million pounds,. At a spot price of $50/lb, the mine's output for the next 12 months would be worth $25 million.

The Daneros uranium deposit is a “brownfields” exploration discovery in close proximity to major past producing uranium mines of the Red Canyon mining area, including Lark, Bullseye, Spook and Radium King. The area has good infrastructure and is 60 miles by road from Denison's uranium mill in Blanding, UT.

The Daneros Deposit was discovered by Utah Power & Light in exploration that concluded in the 1980s. It was not mined at the time due to low prices for uranium.

White Canyon Uranium did not respond to an email inquiry about the BLM appeal by press time.

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