The Fourth Wave
Can the West’s uranium towns rise once more?
Note: this story is part of a package of articles in this issue about the West's resurgent uranium economy.
JEFFREY CITY, Wyoming — On a hot and windy day in July, the white steeple of the First Baptist Church rises like a bleached bone above the sagebrush, crumbled pavement and abandoned homes of Jeffrey City, Wyo. Thirty years ago, this town housed some 4,500 people, mostly uranium miners and their families. There was a bank, a bowling alley, two grocery stores and a library. Now it’s quiet, except for the wind and the trucks rushing by on Highway 287. The post office is locked and empty, the postmaster’s chair turned to the wall at mid-morning on a Monday. "Closed ’er down a few months back," says a man outside. "Got to get your mail in Rawlins or Riverton," both 60 miles away.
Public disdain for nuclear power, quirky government policy, and a global economy have not been kind to places like Jeffrey City, or Uravan, in Colorado, or Grants, N.M., uranium boomtowns that saw their final heyday in the ’70s. Nail by nail, events had all but sealed the coffin of the U.S. uranium industry.
But uranium prices are hitting $47 per pound now, six times the 2000 price and higher than the record set in 1978, when Jeffrey City was a bustling boomtown. Mines in Colorado and Utah that have been dormant for two decades or more are being revived (HCN, 6/13/05: Uranium miners go back underground). And in July, a Canadian/South African company, SXR Uranium One, bought up Wyoming mineral rights along with two of the four remaining licensed uranium mills in the U.S.: one located south of Jeffrey City, the other about 60 miles from Hanksville, Utah. It’s enough to give the folks who congregate at Jeffrey City’s Split Rock Bar and Café a reason to think that they might start seeing a few new faces. But history tends to keep hope at bay.
The economics of place
Uranium deposits are plentiful in Colorado, Utah, New Mexico and Wyoming, but the ore is relatively low-grade, containing only 0.04 to 0.23 percent uranium oxide; some Canadian deposits, like the McArthur River Mine in northern Saskatchewan, average over 20 percent. Furthermore, U.S. producers must compete with cheap labor in African mines, and with more efficient and stable multi-ore operations in Australia, such as the massive Olympic Dam Mine, which yields not only uranium, but also copper, silver, and gold.
Only when other forces have overcome these disadvantages has the domestic industry prospered. In 1948, the government, uneasy about depending on foreign sources like the Belgian Congo for its atomic bomb materials, stepped in and put a floor on yellowcake prices. By guaranteeing a price and purchasing all uranium ore mined domestically, the Atomic Energy Commission spawned the Geiger counter frenzy that swept the West’s sandstone deserts and prompted the birth, in 1957, of Jeffrey City.
In 1971, flush with uranium reserves, the government pulled the rug out from under domestic producers, yanking the subsidies and the protection from imports. The price of yellowcake went into a freefall, but not for long. Jeffrey City emerged from that bust healthier than ever, thanks to a complicated mix of economic forces — the skyrocketing price of oil, the delay of mine openings in Australia, and changes in Canadian export policy — that pushed up the price of uranium oxide from $8 per pound in 1974 to $40 in 1977. The combination of military and commercial needs kept demand for uranium high. In 1979, Wyoming officials predicted that yellowcake could exceed $100 per pound.
Jeffrey City nearly burst its seams. School enrollment jumped from 150 students in 1970 to 500 by 1979. Don Bryngelson, former superintendent of the Jeffrey City schools, says, "Pathfinder (one of the mines) built a new trailer court and told me they’d fill it up gradually. I went away one weekend, and when I came back on Sunday, it was filled up with 300 trailers."
Yet as uranium became more valuable, more people went looking for it, and the increased supply ultimately deflated the price. The Uranium Mill Tailings Radiation Control Act of 1978 bit into producers’ bottom lines by upping regulatory requirements. And the near-meltdown at Three Mile spurred growing safety concerns. The optimism surrounding nuclear power waned: More than two-thirds of all orders placed after 1970 for new nuclear plants worldwide were eventually cancelled.
The uranium boomtowns of the West either busted or faded into oblivion. In 1980, Western Nuclear in Jeffrey City laid off 118 of its 554 employees; another 221 lost their jobs the next year. People abandoned houses they could not sell. And over the next 25 years, the population dwindled to the current 40 to 50 people.
Now come the Canadians and the South Africans with their eyes on the nearby uranium reserves and the mothballed mill at the edge of town.
Renaissance in the sagebrush?
The potential rebirth of places like Jeffrey City depends on the fickle forces of economics, says Michael A. Amundson, a history professor at Northern Arizona University and author of Yellowcake Towns: Uranium Mining Communities in the American West. "And the economics are so much more complicated than they were 50 years ago."
Investors and companies are excited about the predicted gap between supply and demand. Already severe, it’s forecast by some to become acute. The world currently uses about 180 million pounds of uranium concentrate per year, but its mines and mills only produce 100 million pounds. For the last decade or so, reprocessed nuclear warheads and stockpiled yellowcake have made up for the shortfall. When, in 2002, investors noted that these inventories were drying up, the price of uranium doubled in a year, and the West’s latest uranium rush was on.
"The demand-supply fundamentals are very attractive. It will take years for supply to catch up to demand," says Chris Sattler of SXR. The most optimistic forecast predicts that all combined mining resources won’t produce more than 128 million pounds of uranium oxide per year by 2015. According to the nuclear energy arm of the Organization for Economic Co-operation and Development (OECD), world demand may reach 220 million pounds per year by 2025.
Jay Shogren, a professor of natural resource economics at the University of Wyoming, thinks the newest resurgence in uranium is here to stay for a while. The current high prices are "driven by the jump in oil prices as much as anything else. As long as you have speculators who think that nuclear power is an option, then it makes perfect sense for something to diversify their portfolio."
But today’s uranium surge is so far mostly speculation. Few experts agree on how many nuclear power plants will actually be built. The Energy Information Agency estimates that nuclear generating capacity worldwide will jump by about 21 percent by 2030. The International Atomic Energy Agency, however, is more optimistic, anticipating growth of between 22 and 44 percent during that time.
Even if the demand materializes, the West’s mining industry will face an uphill battle as global forces weed out high-cost producers. Domestic mines will have to compete with the rest of the West’s booming energy industry for employees. And they must battle for market share with high-grade producers in Canada, which supplies nearly 20 percent of the world’s mined uranium ore. State-owned firms in Russia, Kazakhstan, Uzbekistan and Ukraine make up another 23 percent of production; U.S. mines currently provide only 2.5 percent.
A method of mining that wasn’t around during the last big booms may help the domestic industry stay afloat. In eastern Wyoming and parts of Nebraska and Texas, isolated aquifers make "in situ" mining feasible. The in situ process leaves the surface undisturbed while leaching out underground uranium deposits with a combination of water and chemicals. While conventional open-pit mining requires 500 workers to mine 1 million pounds of uranium, in situ mining requires only 75 workers. In situ mining contributed about 21 percent of the world’s uranium in 2004.
In this changed world, can conventional mines like those around Jeffrey City compete? "Oh, sure," says Sattler of SXR. "Our mine in South Africa has an ore body of .09 percent (uranium oxide) and it’s profitable. We’re very bullish on Wyoming as a place to mine." Sattler says that as long as the price stays above $30 per pound, conventional mining remains a good investment. He hopes to have SXR’s two mills and mining properties up and running by 2010.
Others are more cautious. "Nuclear power trends can be difficult to anticipate for a variety of political and social reasons," warns the Energy Information Administration in this year’s International Energy Outlook. This uncertainty makes charting future uranium prices a bit of a crapshoot. No one knows how many plants China and India will ultimately build, or for how long the Russians will continue to market their uranium from converted warheads. And another Three Mile Island or Chernobyl could swiftly undermine the public’s begrudging acceptance of nuclear power.
Jeffrey City and its Western kin may rise again, phoenix-like, from the sage. But in all likelihood, the Rocky Mountain West’s high-cost producers, with their low-grade ore, will be the last to go on line and the first to shut down.
Back at the Split Rock Bar, most of Jeffrey City’s residents remain skeptical, despite the buzz over a new boom. "The possibility (of a revival) is always there, probability is not," says Elizabeth Erickson, co-owner of the bar, which also sells burgers and gasoline. "I’m 29 and I’ve been around Jeffrey City since I was 2," she says. "Too much stuff has happened to get everything back together again."
Samuel Western writes about the West from Sheridan, Wyoming.
The following sidebar article accompanies this story:
The Hot West - Graphics show the location of the West’s nuclear sites and uranium sources, and the nuclear fuel cycle is described