FocusHelium bill gives soda ash producers royalty break

27 September 2013 16:56  [Source: ICIS news]

Helium bill gives soda ash producers royalty breakBy Bill Bowen

HOUSTON (ICIS)--US natural soda ash producers would receive a small boon through the Helium Act which today sits on President Obama's desk awaiting his signature.

The act includes a provision that would lighten the royalty paid to the federal government for trona mined on federal land to 4% from 6%. Trona is the naturally occurring mineral used by US producers to make soda ash, or sodium carbonate.

The helium bill’s provisions provide the subsidy for two years and would give US producers a lift in their competition with subsidized soda ash produced by government-owned operations in China, according to US House Representative Cynthia Lummis (Republican-Wyoming), author of a previous and more generous version that would have reduced the rate to 2% for a five-year period.

The operations of US natural soda ash producers FMC Wyoming, OCI Resources, Tata Chemical North America and Solvay Soda Ash are centred in the trona-rich Green River Basin of southwestern Wyoming, home to the world’s largest known reserves of trona ore. Searles Valley Minerals operates at a trona deposit in central California.

The actual financial benefit for producers is likely to be fairly small. Lummis’ original bill was estimated by the Office of Management and Budget (OMB) to reduce federal revenues by $80m (€59m) over five years. So half of the royalty reduction over less than half the number of years will commensurately reduce the financial benefit to the industry.

“Obviously, though, any royalty rate reduction is a reduction in costs,” said Zsig Schneider, vice president of sales and marketing for Tata Chemicals. “It’s a straightforward tax deduction.”

The benefit will likely be put toward ramped up production and capital improvements, said Ted Fastert, North American soda ash sales manager for Solvay Chemicals.

“I think what this will also do is create an environment to improve capacity at the operations of US producers,” Fastert said.  

US soda ash exports have faced keen price competition from Chinese product sold at below cost over the past 18 months, driving down revenues for US exports.

The royalty provision was tucked inside The Helium Stewardship Act of 2013. It continues funding for operations of the Federal Helium Reserve (FHR). Operated by the US Bureau of Land Management, the reserve coordinates and oversees the storage and transportation of a vast lake of underground helium stretching from the Texas Panhandle to Kansas.

The FHR sells helium to private industry. Private refiners also use parts of the federal infrastructure to get the gas to market.

A 1996 law required the shutdown of the reserve as soon as it paid off the $1.3bn loan that financed its creation, which happens at the end of this fiscal year, on 1 October.

Its operations, centred in Amarillo, Texas, provide 40% of the nation’s helium demand.

The program launched during the Cold War’s clamber for an edge in technology, and its lapse was expected to send the cost of helium soaring.

($1 = €0.74)

By: Bill Bowen
+1 713 525 2653

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