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Week Ending July 29, 2005
HR 485 Potash Royalty Reduction Act of 2005
Soda ash (Sodium Carbonate) is an element in glassmaking, fertilizers, chemical manufacturing, detergents and other industrial products, according to the US Geological Survey. The US has been the World’s leading exporter until 2003 when a synthetic product made in China exceeded US exports and several countries that purchased the stuff closed their doors to the US export. According to floor discussion of the bill the industry has lost 700 employees since 2003 and is having trouble competing with other export countries. Last year, the explanation for a proposed reduction in royalty payments was due to a Dept of Interior royalty increase to 8 percent for new operations.
Wyoming employs 2,500 in the soda ash industry and 90 percent of the soda ash production comes from three states and six companies. The bill, then, aims to help out the US soda ash industry based in Wyoming, California and Colorado. According to bill supporters the industry generates $800 million yearly and pays royalties that range from 4% to 6% to the Federal government to extract soda ash from public land . The bill would reduce those percentages to 1% for five years and would also return half of that percentage to the companies that paid it for the purpose of reclaiming the land where the soda ash was extracted. The Secretary must approve a reclamation plan before repaying the royalty percentage.
The question remains if the industry really needs the help. According to USGS data exports continue to increase but an inordinately large US surplus has fickled the supply / demand formula. The US also imports the material from Canada. The product is used in so many US manufactured products that it is considered as part of “economic sectors of the domestic economy,” the USGS said, “monthly soda ash production data are incorporated into monthly economic indicators for industrial production by the Federal Reserve Board, which monitors the condition of the U.S. economy.” On the other hand, consolidation of facilities to process the product indicates cost cutting for some reason.
To determine how the bill has impacted the industry and international competition a study is required to be produced in four years after enactment that would determine the amount of sodium compounds and related products at the point of shipment to market from Federal land during that 4-year period; the number of jobs that have been created or maintained during the royalty reduction period; the total amount of royalty paid to the United States on the quantity or gross value of the output of sodium compounds and related products at the point of shipment to market produced during that 4-year period, and the portion of such royalty paid to States; and a recommendation of whether the reduced royalty rate should apply after the end of the 5-year period beginning on the date of the enactment of this Act.” the bill text said.
Sponsor: Representative Stevan Pearce (R-NM-7th)
Vote: Passed House by voice vote (May 16, 2005)
Cost to the taxpayers: Spending for this bill was not offered nor was there a CBO report requested to our knowledge. However, a similar bill passed the House in July 2004 and that bill did have a CBO report. Here is that information:
'The CBO estimates that “H.R. 4625 would reduce the federal royalty rate for sodium compounds and related materials produced on federal land over the 2005-2009 period” and would reduce federal receipts by $6 million in 2005 and $30 million over the next five years. “Those forgone receipts would be partially offset by a corresponding decrease in direct spending for payments to the states in which they are generated. Hence, CBO estimates that the next increase in direct spending under H.R. 4625 would total $3 million in 2005 and $15 million over the 2005-2009 period.” '
“The royalty reduction required by the bill would temporarily reduce federal payments to three states--Wyoming, Colorado, and California--by about $3 million a year over the 2005-2009 period.
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MORE INFORMATION
The Congress finds the following:
(1) The combination of global competitive pressures, flat domestic demand, and spiraling costs of production threaten the future of the United States soda ash industry.
(2) Despite booming world demand, growth in United States exports of soda ash since 1997 has been flat, with most of the world's largest markets for such growth, including Brazil, the People's Republic of China, India, the countries of eastern Europe, and the Republic of South Africa, have been closed by protectionist policies.
(3) The People's Republic of China is the prime competitor of the United States in soda ash production, and recently supplanted the United States as the largest producer of soda ash in the world.
(4) Over 700 jobs have been lost in the United States soda ash industry since the Department of the Interior increased the royalty rate on soda ash produced on Federal land, in 1996.
(5) Reduction of the royalty rate on soda ash produced on Federal land will provide needed relief to the United States soda ash industry and allow it to increase export growth and competitiveness in emerging world markets, and create new jobs in the United States.
FROM THE USGS
SODA ASH
(Data in thousand metric tons unless otherwise noted)
Domestic Production and Use: The total value of domestic soda ash (sodium carbonate) produced in 2004 was estimated to be about $820 million1. The U.S. soda ash industry comprised four companies in Wyoming operating four plants (a fifth plant is mothballed), one company in California with one plant, and one company with one mothballed plant in Colorado that owns one of the Wyoming plants. The five producers have a combined annual nameplate capacity of 14.5 million tons. Sodium bicarbonate, sodium sulfate, potassium chloride, potassium sulfate, borax, and other minerals were produced as coproducts of sodium carbonate production in California. Sodium bicarbonate, sodium sulfite, and chemical caustic soda were manufactured as coproducts at several of the Wyoming soda ash plants. Sodium bicarbonate was produced at the Colorado operation.
Based on final 2003 reported data, the estimated 2004 distribution of soda ash by end use was glass, 49%; chemicals, 28%; soap and detergents, 11%; distributors, 4%; miscellaneous uses, 3%; flue gas desulfurization, 2%; pulp and paper, 2%; and water treatment, 1%.
Salient Statistics—United States: 2000 2001 2002 2003 2004e
Production2 10,200 10,300 10,500 10,600 10,800
Imports for consumption 75 33 9 5 5
Exports 3,900 4,090 4,250 4,450 4,700
Consumption:
Reported 6,390 6,380 6,430 6,270 6,200
Apparent 6,430 6,310 6,250 6,090 6,300
Price:
Quoted, yearend, soda ash, dense, bulk,
f.o.b. Green River, WY,
ollars per short ton 105.00 105.00 105.00 105.00 105.00
f.o.b. Searles Valley, CA, same basis 130.00 130.00 130.00 130.00 130.00
Average sales value (natural source),
f.o.b. mine or plant, same basis 66.23 67.79 68.00 65.31 69
Stocks, producer, yearend 245 226 222 330 200
Employment, mine and plant, number 2,600 2,700 2,600 2,600 2,500
Net import reliance3 as a percentage
of apparent consumption E E E E E
Recycling: There is no recycling of soda ash by producers; however, glass container producers are using cullet glass, thereby reducing soda ash consumption.
Import Sources (2000-03): Canada, 99%; and other, 1%.
Tariff: Item Number Normal Trade Relations
12-31-04
Disodium carbonate 2836.20.0000 1.2% ad val.
Depletion Allowance: Natural, 14% (Domestic and foreign).
Government Stockpile: None.
Events, Trends, and Issues: The soda ash plant in Colorado that came onstream in late 2000 was mothballed in September 2004; however, the sodium bicarbonate part of the operation will continue but will use soda ash feedstock shipped from the company’s Wyoming facility. The Colorado facility continued to produce soda ash from
underground nahcolite ore through August. The same company also merged its chemical businesses with its mineral operations and renamed the company. In addition, the company formed a joint venture with a major Chinese soda ash manufacturer that has a plant in Lianyungang.
The United States had been the world’s leader in soda ash production for nearly 100
years until China, a major world producer of synthetic soda ash, surpassed the United States in 2003 by producing 11.1 million tons. By midyear 2004, China was on pace to produce 12 million tons of soda ash.
Prepared by Dennis S. Kostick [(703) 648-7715, dkostick@usgs.gov, fax: (703) 648-7757]
153
SODA ASH
Although the domestic and export markets improved in 2004, approximately 2.8 million tons of nameplate capacity remained mothballed in the United States. This surplus capacity adversely affected the U.S. soda ash industry’s efforts to increase prices in the past couple of years. The industry announced price increases of $22 per short ton in
the third quarter 2004 to offset higher energy and transportation costs. It was uncertain by yearend how much of the increase will be realized for the following year, but industry sources were optimistic that most of the proposed price increase would be accepted by consumers.
A new soda ash project was proposed in Kazakhstan in the Zhambul region by a large detergent company in conjunction with a Turkish investor. The synthetic soda ash plant would have an annual capacity of 200,000 tons.
There are more than 35 different companies in Kazakhstan that presently use soda ash in varying quantities.
Notwithstanding economic and energy problems in certain areas of the world, overall global demand for soda ash is expected to grow from 1.5% to 2% annually. Domestic demand may be slightly higher in 2005.
World Production, Reserves, and Reserve Base:
Production Reserves4, 5 Reserve base5 2003 2004e
United States 10,600 10,800 623,000,000 639,000,000
Botswana 285 280 400,000 NA
Kenya 350 350 7,000 NA
Mexico — — 200,000 450,000
Turkey — — 200,000 240,000
Uganda NA NA 20,000 NA
Other countries — — 260,000 220,000
World total,
natural (rounded) 11,200 11,400 24,000,000 40,000,000
World total,
synthetic (rounded) 26,800 27,600 XX XX
World total (rounded) 38,000 39,000 XX XX
World Resources: Soda ash is obtained from trona and sodium carbonate-rich brines. The world’s largest deposit of trona is in the Green River Basin of Wyoming. About 47 billion tons of identified soda ash resources could be recovered from the 56 billion tons of bedded trona and the 47 billion tons of interbedded or intermixed trona and halite
that are in beds more than 1.2 meters thick. About 34 billion tons of reserve base soda ash could be obtained from the 36 billion tons of halite-free trona and the 25 billion tons of interbedded or intermixed trona and halite that are in beds more than 1.8 meters thick. Underground room-and-pillar mining, using a combination of conventional,
continuous, and shortwall mining equipment is the primary method of mining Wyoming trona ore. The method has an average 45% mining recovery, which is higher than the 30% average mining recovery from solution mining. Improved solution-mining techniques, such as horizontal drilling to establish communication between well pairs, could increase this extraction rate and entice companies to develop some of the deeper trona. Wyoming trona resources are being depleted at the rate of about 15 million tons per year (8.3 million tons of soda ash). Searles Lake and Owens Lake in California contain an estimated 815 million tons of soda ash reserves. There are at least 62 identified natural sodium carbonate deposits in the world, some of which have been quantified. Although soda ash can be manufactured from salt and limestone, both of which are practically inexhaustible, synthetic soda ash is more costly to produce and
generates environmentally deleterious wastes.
Substitutes: Caustic soda can be substituted for soda ash in certain uses, particularly in the pulp and paper, water treatment, and certain chemical sectors. Soda ash, soda liquors, or trona can be used as feedstock to manufacture chemical caustic soda, which is an alternative to electrolytic caustic soda.
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