(Grand Junction Daily Sentinel, December 10) – Companies involved in baking soda production outside Meeker and Parachute have joined in a push by the sodium products industry for a five-year reduction in federal royalty rates so they can be more competitive in the global market.
Final congressional action on the bipartisan American Soda Ash Competitiveness Act could come in a matter of days if it’s included in an omnibus budget bill. Supporters include Natural Soda, which runs an underground solution-mining baking soda operation southwest of Meeker, and Belgium-based Solvay, which produces baking soda near Parachute from soda ash it ships from Green River, Wyoming.
The measure’s supporters include both U.S. Sens. Michael Bennet, D-Colo., and Cory Gardner, R-Colo., along with U.S. Rep. Scott Tipton, R-Cortez. Other backers include the Meeker and Grand Junction Area chambers of commerce, Associated Governments of Northwest Colorado, and the Port of Portland in Oregon, from where a lot of soda ash exports are shipped.
But the proposal to reinstate a 2 percent royalty rate has met with opposition from the Department of Interior and Bureau of Land Management.
“The Department believes it is important to ensure a fair return to the U.S. taxpayer,” Amanda Leiter, Interior deputy assistant secretary for land and minerals management, said in a prepared statement to the Senate Energy and Natural Resources Subcommittee on Public Lands, Forests and Mining in October.
In written testimony to the subcommittee, Natural Soda LLC President and Chief Executive Officer Sara Schaeffner called the measure “critical to Natural Soda’s ability to realistically compete with overseas producers and to open new markets for our Colorado product. Reducing the royalty rate has significant economic benefits for the northwestern Colorado region, as well as our state and nation.”
Tipton was one of a bipartisan group of 13 House members who in November signed a letter to the House Appropriations Committee’s Interior Subcommittee leadership urging the royalty reduction’s inclusion in the omnibus appropriations bill. The House members said the U.S. soda ash industry had $1.3 billion in exports last year. But according to their letter, companies face competition in Asian markets from Chinese synthetic soda ash producers who benefit from Chinese subsidies and the recent 4.4 percent devaluation of China’s currency.
“Faced with these challenges, a five-year federal royalty rate of 2 percent is critical to retain the global competitiveness of U.S. soda ash,” the House members said.
U.S. Rep. Paul Cook, R-Calif., is the prime sponsor of the House version of the bill.
“Rep. Cook has been pushing hard to get the soda ash royalty reduction included in the omnibus (bill),” his spokesman, Michael Fresquez, said Thursday. “Negotiations are still ongoing, but Rep. Cook is encouraged by the bipartisan support the royalty reduction has received in both chambers.”
Soda ash is used in producing glass, detergents, pulp paper, baking soda and other commonly used products. Its chemical name is sodium carbonate, and Leiter said in her testimony that it can be extracted from the mineral trona, which consists of soda ash, sodium bicarbonate and water. Leiter said in her testimony that the modern soda ash industry began in the 1950s in the Green River Basin of Wyoming, home of the largest known deposit of trona, where it is mined from deposits 800 to 1,600 feet underground.
Natural Soda produces its baking soda directly from sodium bicarbonate deposits rather than trona, but its royalties also would be affected by the proposed legislation, which covers a range of sodium resources. Natural Soda in recent years has moved beyond the North American market to become a worldwide supplier.
It undertook a plant expansion that doubled its production capacity about two years ago, and plans to start work on another expansion next year that will double its capacity again, to 500,000 tons per year, with an eye toward continued expansion of its export sales.
According to the government, as of the end of the 2014 fiscal year, there were 78 federal sodium leases covering nearly 100,000 acres in Wyoming, California, Colorado, Arizona and New Mexico. Leiter said in her testimony that the proposed legislation “would apply an across-the-board reduction in the royalty rate on soda ash leases from the 2006 fair market value average of 5.6 percent to 2 percent for five years.”
Congress reduced the rate to 2 percent before, in 2006 legislation that expired in 2011. Pre-existing rates then went back into effect until Congress in 2013 implemented a 4 percent rate. That expired Oct. 31, and the higher rates took effect again.
Fred von Ahrens, a vice president for Tronox Alkali in Green River, Wyoming, who also was speaking on behalf of other companies including Solvay, said in written testimony to the Senate subcommittee that five U.S. natural soda ash producers employ more than 3,000 high-paid workers between them.
He said the 2006 and 2013 royalty rate reductions came out of a recognition that the emergence of stiff Chinese competition “was eroding America’s natural soda advantage.” He said the domestic industry lost 1,000 jobs in the decade before the 2006 reduction. He also said the synthetic process being used abroad to make soda ash has more environmental impacts, including a greater carbon footprint.
Von Ahrens said that while the Congressional Budget Office has suggested the government would lose $80 million over five years if the new rate reduction passes, royalty revenues to the government actually increased from 2006-11 because of the increased production the 2 percent rate at that time helped generate.
“And, that was in the middle of a global recession,” he said.
He said that during those five years, with the predictability of a stable 2 percent royalty, the U.S. soda ash industry nearly doubled its rate of investment, spending more than $158 million to expand capacity and make needed improvements.
But Leiter testified that the BLM reported to Congress in 2011 that the five-year reduction resulted in a substantial loss of royalties to the federal government and the states that share in those revenues. The loss exceeded what was projected when the reduction was implemented, she said.
She said the report found that the reduced rate didn’t appear to have significantly contributed to new jobs, increased investment in production or increased exports, but appeared to have shifted about 2 million tons of annual production onto federal leases, from state and private leases with higher royalty rates.
Both Bennet and Gardner are co-sponsors of the Senate version of the bill. Erin McCann, a spokeswoman for Bennet, said he co-sponsored the bill “to help Natural Soda continue to create jobs and strengthen the local economy. Natural Soda is the second-largest mine of this kind in the country, and this bill will help an already thriving industry on the Western Slope continue to prosper.”