Last week, USEC Inc. (NYSE:USU) announced a $200 million investment from Toshiba Corp. and Babcock & Wilcox that would be spread out over three phases. Each of the investors will pitch in  $100 million, subject to closing conditions including regulatory approvals. In exchange, the two companies receive convertible preferred stock and warrants to buy additional common stock in the future.

The first installment of the investment will help USEC to continue its deployment of its American Centrifuge Plant which produces enriched uranium for use in nuclear power generation. The cash will also help support USEC’s $2 billion loan guarantee application with the US Department of Energy.

The not-so-good news for uranium companies was delivered to Uranium Energy Corp. (AMEX:UEC) and Denison Mines Corp. (AMEX:DNN). UEC faced a hearing in south Texas last week where it is fighting a request from county commissioners to overturn the company’s mining permits. According to the county, UEC failed to plug test holes with the required time and, as a result, the drinking water supply has been contaminated by stormwater runoff. The commissioners are also charging that the aquifer cannot be returned to its baseline condition.

The company says that the allegations are unsupported by data and that “you can’t restore the groundwater ion-for-ion.”

Denison has received a violation notice from the US Environmental Protection Agency, alleging that the company did not notify the agency that it had restarted operations at its facility near Fredonia, Arizona. The EPA also charged that the company failed to receive approval before testing emissions from the mine’s vents. The company says that it was “surprised” by the EPA’s action and that Denison had received an air quality permit from the state before proceeding with work. The EPA claims the state is not authorized to approve such work.

One almost certain outcome of the environmental disaster currently blackening the Gulf of Mexico is that federal regulators will take a harder line on enforcement of environmental regulations. Uranium miners are likely to be particularly hard hit because there isn’t a person in the US who doesn’t fear the consequences of radiation exposure. The statistical probabilities of environmental damage from radiation don’t matter.

UEC’s response to the county commission is dismissive, and Denison’s is disingenuous. Playing fast and loose with the environment is no longer a winning strategy.

Paul Ausick

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