uranium
18 Sep 2008
Uranium Won't Pay the Bills
Colin Barnett hopes to raise billions by lifting WA's ban on uranium mining. But this dangerous policy doesn't even make economic sense, writes Senator Scott Ludlam
Uranium mining is frequently presented as the only solution to a range of economic power security and climate change challenges. In reality, however, the uranium industry creates far more problems than it claims to solve.In a highly questionable move, the Western Australian Premier-elect has tied the increase in funding for regions, through the Nationals' "royalties for regions" program, to uranium mining. In planning to lift WA's ban on uranium mining — a ban that had been supported by the outgoing Carpenter government — Colin Barnett has named the issue as one of his two key priorities, along with the large-scale release of genetically modified organisms into the environment.
Decades of deep community opposition is only one of the reasons there has never been a commercial uranium mine in Western Australia. Another is the inherent volatility in the uranium market.
Barnett's hopes for uranium as the newest phase of WA's quarry economy should be treated with deep suspicion by West Australians, not only for the serious environmental and social concerns this type of mining raises, but also because the economic reasons for uranium mining are far more shaky than the industry would have us believe.
While the risks associated with uranium mining and nuclear power are of such a nature that they extend beyond the scope of normal economic modelling, even a more restricted study reveals a whole range of reasons why uranium is an economically flawed proposition.
The fortunes of the uranium miners — and their political supporters — now depend entirely on three factors: the long-term profitability of the global nuclear power industry; the geopolitics of multiple nuclear arms races and the potential for acts of nuclear terrorism; and the determined opposition from those in the community who stopped believing the lies of this industry a long time ago. All three of these factors are entirely out of the hands of the new Premier.
The global nuclear power industry is strongly convinced that a global "nuclear renaissance" is underway — an idea which they are basing on evidence which actually points in the other direction completely. According to one investor's guide, "...right off the bat we know that demand for the radioactive metal is set to increase just because of the growth in nuclear power generation [...] Simply put, investing in uranium is a 'no-brainer'. Uranium prices are almost guaranteed to continue increasing in value."
Since this was written, the reverse has occurred. The uranium spot price fell from nearly US$140/lb a year ago to $64.50/lb by September 2008. The same thing happened with the uranium "boom" of the late 1990s — a whole field of junior explorers was wiped out the last time the nuclear industry declared there was a "renaissance" going on.
It is an article of faith within the industry that nuclear power capacity is growing strongly after 30 years of virtual standstill, and that this is the key driver of higher uranium prices. This is demonstrably not the case. The number of operating nuclear power stations peaked in 2002 then fell by five units the end of 2007, to 439 reactors. The International Atomic Energy Agency lists 32 units as under construction in 2007, which is 20 less than were under construction in the late 1990s.
There has been a virtual moratorium on new reactor construction in Western Europe and North America since the 1980s: today the average age of the world's operating nuclear power stations is 23 years. Compare that to the average age of their 117 decommissioned reactors, which was 22 years at the time of closure. Where is the renaissance that will sustain our uranium industry?
A recent status report of the global nuclear industry concluded that on the basis of faltering construction rates, rising costs, legal and political challenges, the ageing of the world's current reactor fleet and the uncompromising nature of the technology, "...the number of nuclear power plants operating in the world will most likely decline over the next two decades with a rather sharper decline to be expected after 2020."
Worldwide, the industry tends to emphasise construction efforts in the heavily state-subsidised markets of China and India, with Russia leading the export market. Around half the Russian reactors are slated for shutdown over the next decade, and nuclear power in China and India makes up only a tiny fraction of their overall electricity generation (1.9 per cent and 2.6 per cent respectively), with no sign that the slow and expensive reactor construction process will meet the ambitious targets in either country. The single reactor under construction in Western Europe — the Olkiluoto 3 reactor in Finland — is already $2.7 billion over budget and more than two years behind schedule, after two years of work.
A map of uranium deposits in Western Australia
Despite the extremely generous hand-outs some governments make to the industry, they are still apparently not enough to kick-start nuclear power generation as a reliable market for our uranium.
In the US, since 2000, the Bush Administration has offered substantial tax credits, loan guarantees, a highly favourable regulatory environment and an extension of limited liability under the Price Anderson Act until 2025 to entice new reactor builds. The industry response has been lukewarm at best, with no firm commitments to new construction.
In Britain, despite the announcement by the Government of a new fleet of reactors — underwritten by public funding for plant decommissioning, waste storage and protection from open-ended liabilities — those projects will inevitably face the same legal, safety, technical, economic, social and environmental realities which have held their industry in limbo for decades.
As an industry, uranium's economic viability is also acutely vulnerable to the unique hazards and imponderable risks of accidents at nuclear power stations. The industry often claims that there is less risk from the power plants that are newer. But here again, the facts point the other way. Of the seven major accidents resulting in known radiation releases from reactor core melting, the average operating age of the reactor was less than three and a half years. The frequency of accidents can be expected to rise as reactors age and equipment fatigue takes its toll — particularly as plant owners seek to extend the life of their plants decades beyond the original design life.
The industry won't survive another accident on the scale of Chernobyl or Three Mile Island. All over the world, people are working to have these plants closed before another serious accident ends the argument in the worst possible way.
In its quest for economic viability, the uranium industry has found justifications to push its product to some very risky customers. Nuclear power reactors were first designed as weapons factories, producing plutonium destined to be refined for weapons production. The same enrichment plants which produce nuclear fuel can also be used to produce bomb-grade material. This is a fundamental concern that has never been satisfactorily addressed by the uranium mining industry, which in promoting the spread of "civilian" nuclear power around the world makes it so much easier for nations and sub-national entities to obtain the means to produce nuclear weapons.
Nuclear power remains the only energy source which provides the feedstock for weapons of mass destruction. Australia currently sells uranium to several nuclear weapons states and is considering sales to Russia. The Federal Goverment also supports a US-proposed deal to transfer nuclear technology and fuel to India despite that country's refusal to sign the Nuclear Non-Proliferation Treaty.
Beyond the obvious security concerns, it is uncertain how markets — and more importantly, the public — would react to the very real possibility of an attack on a nuclear facility resulting in the widespread release of radiation.
These concerns would be enough to prevent our involvement in any other industry imaginable — so why is uranium mining still being supported by some of our leaders?
In the absence of State or Federal Government commitment to protect the population from the risks that this industry brings, it is once again up to the community to step up and take a stand on its own behalf.
With the recent demise of the Carpenter Government and the capitulation of federal Environment Minister Peter Garrett in approving the Beverley mine expansion in SA, the uranium miners seem confident that they'll be given a very easy ride through the environmental and heritage protection laws which were intended to safeguard us from exactly this kind of development.
In 12 years of the Howard government, during which dozens of uranium mines were promised, only one, small, polluting mine at Beverley actually opened. Concerted opposition at all levels of society has stopped uranium mines, nuclear power stations and radioactive waste dumps, not just in Australia but all over the world.
Opposition to this industry is not based on emotion, irrationality or a fear of progress. Rather, the global and local anti-nuclear movement has based its campaign on simple acknowledgement that this industry is profoundly damaging to the environment and to human beings.
The inability — after six decades — of any nation to provide a satisfactory disposal method for the lethal wastes arising from the industry has long been a key limiting factor. But there are also many other problems with this industry, less well known, that constantly degrade our environment, our security and our economy. These include the high rates of water consumption at uranium mines and nuclear power stations, the reliance on abundant and inexpensive fossil fuels, the magnitude of "routine" (ie non-catastrophic) radiation releases from nuclear facilities, the hazards of radioactive and chemical contamination at uranium mine sites, and the degree to which the public costs of the industry are buried in the fine print of tax offsets, guaranteed power purchase agreements, waivers of liability and other covert hand-outs.
The stepped decline of nuclear power began in the 1970s, and growth in the industry has now been overtaken by the rise and rise of wind power and solar installation over the same period. While uranium's fortunes will forever be limited by its 60 years of accidents, astronomic costs and unanswered questions, the future lies in the same fast-moving green energy technologies which have shown rapid growth rates at the same time as nuclear power has stalled.
The people of West Australia, like those around the country, need energy and economic solutions that will work now, and well into the future — not a short-term dash for cash that may backfire economically, contaminate their environment and leave a toxic legacy for generations to come.
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Opium poppies grown for heroin production are exceptionally profitable, but that doesn’t make it a good idea for Western Australia to permit the establishment of a heroin industry.
Similarly, the profitability or otherwise of uranium mining is irrelevant to the question of whether it should be permitted. You’re running the risk that if it does turn out to be profitable, you’ll be undermining your credibility on the enviornmental and security issues (most of which I think you’re wrong on, but that’s by the by).
Western Australia doesn’t have special regulations to require iron ore companies to demonstrate their guaranteed profitability before permitting an investment. What’s different about uranium?
I agree with Rockjaw! What a load of Greenie latte-swilling bleeding-heart crap. Rockjaw and I will fly through a nuclear cloud and turn ourselves into gigantic. warty cane toads in memory of Lang Hancock to prove that nuclear power, like Malcolm Turnbull, is good for you. Pick your insipid vegetables with your hammers and sickles you wusses while the confident folk eat their genetically modified intensively farmed koalas and glow happily in the dark. Yesss!
Hi goonie -
For me the value of Ludlam’s piece is that it helps to debunk this notion that uranium would definitely add a lot of value to the economy.
It’s not the lucrative slam-dunk that the industry says it is - the whole economics of uranuim and nuclear power in general are flawed (at least from the point of view of the countries involved, rather than the companies, who get huge subsidies), and don’t stand up when you look at them closely. For a bit more on this, have a look at Professor Ian Lowe’s piece, here: http://www.acfonline.org.au/news.asp?news_id=582&c=183339
Lowe mounts a comprehensive rejection of the argument that we need uranium or nuclear energy, and his piece is pretty much required reading for anyone thinking about these issues.
But back to Ludlam’s article above: admittedly he’s restricting his points to the profitability of mining alone, rather than discussing the whole mining/exporting/power generating industry and its real dollar value to the countries that are involved in it - if he did expand the discussion he would make the case against uranium even stronger.
Ludlam is making the more specific point that you can’t assess the potential returns from this sort of mining without looking at the unique economics and vulnerabilities of the uranium market. If you do consider these factors, the outlook for countries counting on uranium to pay handsomely is not too good.
I’m with you in thinking that people who reject this old, dangerous and dirty technology need to be careful not overstate their case. But I don’t agree that Ludlam is relying on the economic arguments against uranium mining. Rather, he’s acknowledging that for some people, the unacceptable risks that will always be part of the nuclear industry are - somehow - acceptable, and that for them, the only argument that makes a difference is an economic one. Hence this piece.
I think that Ludlam’s focus here on the economic points just shows that there are so many reasons not to waste time, money and security on nuclear power that they can’t all fit into one article.
Cheers mate!
Are you Aussie peeps totally pure radio rental? I wouldn’t call myself absolutely environmentally-friendly, but why do you need so much uranium when around 90 per cent of Western Australia is uninhabited, and you can whack in huge areas of solar panels? Just a little suggestion, of course.
I would have though that there was more than enough scope there for huge solar-power plants to be built; much less harmful to the environment than uranium. The uranium market is only a little less volatile than the mineral itself, after all..
Scott Ludham presents a doom-and-gloom scenario for the Australian uranium industry based on the propaganda of anti-uranium organisations (NIRS and Greenpeace) rather than the reasoned analyses of independent organisations, such as the OECD. Most uranium sales are based on long-term contracts with utilities rather than spot prices which fluctuate considerably, as they do for other metals. These contracts are based on known requirements for operating nuclear reactors, not speculation about future reactors. Nevertheless, it should be noted that both US presidential candidates envisage new nuclear power plants as making a significant contribution to reducing the impact of global warming.
The uranium industries in South Australia and the Northern Territory are profitable. There is no logical reason why Western Australia should be excluded from the uranium export market. Not all the uranium deposits shown on Senator Ludham’s map can be exploited profitably at current prices. However, there are at least two major deposits in WA that should be developed, subject to environmental approval.
Export of uranium is one of the greatest contributions that Australia can make in the fight against global warming. And, as a major supplier to the nuclear power industry, Australia is in a strong position to exercise leverage to improve the nuclear non-proliferation regime worldwide. It is already doing this in respect of possible uranium sales to India and Russia.
Uranium is the answer to global warming when you don’t want to actually cut down your own use of power or reduce your own carbon footprint. Uranium is a finite resource and good quality uranium will run out in about 40 years and then we are back to square one. Still" at my age not my problem " is the current attidue. As for taking back the uranium radioactive residue, as conscience would dictate, not in my back yard thank you. Hypocrites all. In WA every house could have solar panels for the price of a uranium mine and generate and sell electricity. But hey this is a neo con governemnt even if the wheels have fallen off capitlism.