Modeled Impacts of Economics and Policy on Historic Uranium Mining Operations in New Mexico

New Mexico was at the forefront of the nuclear age, producing more uranium (U) than any other state in the U.S. for more than three decades until the early 1980s. The state is also unique because these historic activities have been studied and quantified over during this time, providing a unique opportunity to identify how historic uranium mining operations were influenced by economics and policy. In order to quantify these relationships, this study used a system dynamics approach to determine how these factors affected mining industry decisions and how those impacts varied based on mine size. The results of this work found that as the industry evolved over time, the influence of these factors changed and that they did not impact all mining operations equally. Results indicate that price guarantees for U concentrate and subsidies for mining and milling in the early years (1948–1964) of U mining encouraged mines of all size, although smaller mines opened and closed more quickly in response to changes in price. The economic environment created by these policies encouraged exploration and production. However, the latter led to an excess in supplies and declining prices when these incentives lapsed in the mid-1960s, which negatively impacted smalland medium-sized mines, neither of which opened after 1964. The presence of larger mines had more impact on the closing of small mines than closing of medium mines, possibly as a result of economies of scale for the medium mines or their ability to access milling resources after 1964. Lastly, medium and large mines that produced both uranium and vanadium may have had a slight historic advantage over mines that produced only uranium, as evidenced by longer delays in closing response to a unit change in average price. Quantification of these relationships assists in an improved understanding of the factors that influenced historic mining operational decisions and illustrates the complexity of the roles played by economics and policies in the boom and bust cycle manifested in the uranium industry. than 99% of state-wide production between 1948 and 1982 (McLemore, 1983). While the growth of the industry was rapid, it was also marked by a degree of randomness as a result of varying demand for U (used primarily for weapons by the Federal government and nuclear power generation by both the Federal government and commercial utility companies), discovery of new reserves and concerns of U scarcity, and evolving regulatory frameworks, all of which impacted both negotiated prices for long term contracts and U spot prices (Roskill, 1991). Spot price refers to an estimated value regarding transactions involving “significant quantities of natural uranium concentrates” (Roskill, 1991) that could be completed at a specific date; it is often considered to be the average price of negotiated large, long-term contracts and does not typically include smaller sales that would be included in an average price estimate (Roskill, 1991). Roskill (1991) and Walker and Wellock (2010) describe the historic complexity of the U market. Of particular interest is how successive discoveries of new uranium reserves and uranium’s practical uses increased public perception of the utilitarian value of this commodity. They also note how the rapid development of the nuclear power industry was encouraged by government subsidies and information-sharing (Walker and Wellock, 2010). “Probably the single most important difference is that the uranium industry [as compared to other mineral industries], born under a nuclear cloud, was the brainchild of the government” (Roskill, 1991). Although the regional and national U industry thrived for nearly 30 years, it rapidly diminished in the early 1980s due to declines in prices, delays and cancellations of orders for new nuclear power plants (Roskill, 1991), and disasters, such as Three Mile Island, that altered the trajectory and credibility of the nuclear industry (Walker and Wellock, 2010). Uranium production in New Mexico ended in 2002 with the closure of the Quivira Mining Co. (formerly Kerr-McGee Corp.) mill, which at the end of its operation solely recovered U from mine water (McLemore and Chenoweth, 2003) Nuclear energy currently supplies 19% of U.S. electric power, but nearly all of the U fuel supply is imported (US EIA, 2016). Increasing U prices and improvements in mining technologies, recognition that nuclear power is carbon free, as well as the desire for energy security and energy supply stability have resulted in renewed interest in U production in NM and elsewhere. While many factors influence mining operations, historic U.S. mining of U was driven by government-related markets, regulations, and subsidies enacted to encourage the development of the nuclear industry by ensuring a stable and reliable supply of uranium. The objective of this study was to improve understanding of the roles that economics and policy