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Simplot mine expansion gains support of local governments, union, and farmers

News

Chief U.S. Magistrate Mikel Williams has allowed nine parties to intervene on behalf of the J.R. Simplot Co. in a lawsuit challenging the company’s plans to expand its Smoky Canyon Mine on public land in Southeast Idaho near Wyoming (GM Nov. 10, p. 13). The cities of Pocatello and Chubbuck in Idaho, and Afton in Wyoming; the counties of Bannock, Caribou, and Power in Idaho, and Lincoln in Wyoming; United Steel Workers Local 632; and the Idaho Farm Bureau say valuable jobs and tax revenue stand to be lost if the phosphate mining operation is blocked.

In his Nov. 13 ruling, Williams also denied a motion by Ashley Creek Properties LLC, an opponent of the mine, seeking to file a memorandum as a friend of the court. Williams ruled the information presented by Ashley had been covered by previous briefings. Ashley Creek has long sought to have both Simplot and Agrium Inc. use Ashley Creek’s own phosphate deposits near Vernal, Utah, rather than developing their own new mines (GM Archives).

The case against the mine expansion was filed earlier this year by the Greater Yellowstone Coalition, Natural Resources Defense Council, Sierra Club, and Defenders of Wildlife after the U.S. Forest Service and Bureau of Land Management approved plans for the mine to extract new phosphate deposits in the Caribou-Targhee National Forest. Earthjustice Legal Defense Fund attorneys argued in court against the expansion.

The lawsuit named as defendants federal agencies and top administrators, including Interior Secretary Dirk Kempthorne, Bureau of Land Management Director Jim Caswell, and Caribou-Targhee National Forest Supervisor Lawrence Timchak.

The environmentalists said the mine would increase pollution. They also disagreed with a recent U.S. Forest Service decision to clear the way for Simplot to expand mining operations across more than 1,100 acres of roadless forest.

They said toxic selenium caused by previous mining has yet to be properly addressed and helped the region earn Superfund status more than a decade ago. Smoky Canyon and 17 former mines scattered along the edge of the Greater Yellowstone Ecosystem continue to pose an environmental threat to clean water, fish, and wildlife, the coalition said.

Simplot countered that without the ability to expand into new areas, it will be forced to shut down the Smoky Canyon Mine and Don fertilizer plant near Pocatello. Of the 375 employees at the Pocatello plant, 250 belong to the steelworkers union. About 200 workers are employed at the mine. Annual wages and salaries paid at the mine and plant exceed $52 million. Another estimated 1,450 people are indirectly employed by the operations, whose annual property taxes exceed $3 million.

Simplot has mined at Smoky Canyon, along the Webster Range, since 1984. Each year, about 1.5 million tons of phosphate ore are extracted from the mine and converted into slurry pumped through nearly 90 miles of pipeline to the Don plant, where it is converted into liquid and dry fertilizers used for crops across North America.

In court papers, company officials say ore deposits at Smoky Canyon are expected to play out by 2010, but expansion will allow the company to keep the mine and fertilizer plant operating through 2025.

ICL Fertilizers income soars

Israel, News Briefs

Tel Aviv-ICL Fertilizers, a segment of Israel Chemicals Ltd., reported operating income of $759.3 million for the third quarter ending Sept. 30, 2008, on sales of $1.44 billion, up from the year-ago $158.3 million and $539 million, respectively. Nine-month operating income was $1.9 billion on sales of $3.74 billion, up from the year-ago $343.8 million and $1.47 billion. In the third quarter, the fertilizer section recorded a non-cash inventory write-down of approximately $40 million to reflect the reduced market value of sulfur inventories. Without the write-down, third-quarter and nine-month operating profits would have been $799.3 million and $1.94 billion, respectively. ICL said it believes the global financial crisis will cause a short-term impact on fertilizer demand and reduce grain inventories. However, it believes depleted grain inventories will lead to a return in demand for fertilizer and higher prices. ICL noted that while several of its potash and phosphate competitors have announced production cuts, ICL has virtually unlimited storage, making it possible to continue production at full rates. ICL-wide net income for the third quarter was $846 million on sales of $2.2 billion, up from the year-ago $160 million and $1.04 billion, respectively. Nine-month net income was $1.9 billion on sales of $5.8 billion, up from the year-ago $380 million and $2.9 billion. ICL declared a $380 million dividend to be paid to shareholders on Dec. 22, 2008. Earlier dividends this year have totaled $588 million. In other news, on Sept. 3, 2008, the board of directors approved the buyback of up to 5 percent of shareholder equity through June 30, 2009. As of Nov. 25, 2008, ICL had bought back 1.25 percent of shares.

The Andersons revises guidance downward again

Eastern Cornbelt, News Briefs

Maumee, Ohio-The Andersons Inc. on Nov. 26 said it expects its full-year earnings per share to be less than previous guidance. The full year is now expected to be within the range of $2.00-$2.80 per diluted share, down from the previous estimate of $3.50-$4.00 per diluted share announced in October. The company’s earnings per diluted share for 2007 were $3.75, which set a company record. The current adjustment is the result of continued volatility in the plant nutrient sector, which has driven previous guidance adjustments both upward and downward during the course of the year. The Andersons said that while volatility is inherent to the commodities markets, the current unpredictability in plant nutrient product valuation is at unprecedented levels. For that reason, the company widened the range beyond normal levels, and it says there remains the potential for additional guidance adjustments in the weeks ahead.

Agriliance 3Q earnings more than double

News Briefs, Northern Plains

Arden Hills, Minn.-Agriliance LLC reported net earnings of $14.8 million for the third quarter ending Sept. 30, 2008, on sales of $189.4 million, according to co-owner Land O’Lakes Inc. Third-quarter 2007 saw earnings of $6.3 million on sales of $586.5 million. Sales in 2008 are down because in September 2007 its crop nutrient and crop protection businesses were transferred to CHS Inc. and LOL, respectively. Agriliance now exists as a group of retailers owned by LOL and CHS. Nine-month net earnings were $22.5 million on sales of $845.7 million, compared to the year-ago $41.7 million and $3.2 billion, respectively.

LOL corrects earnings downward

News Briefs, Northern Plains

Arden Hills, Minn.-Land O’Lakes Inc. has corrected its recent net earnings for the third quarter ending Sept. 30, 2008, from $59.9 million to $47.9 million, and nine-month earnings from $224 million to $212 million (GM Nov. 17, p. 12). LOL said the decrease resulted primarily from inventory costing procedures at its agronomy segment that were not properly completed at the time of the earnings release. Specifically, cost of goods sold in the agronomy segment was understated by $10.1 million as a result of errors in inventory costing. Based on this news, management and LOL’s audit committee have identified “material weakness” in internal controls. Similar weakness was found relating to financial records of MoArk, a wholly-owned LOL egg company.

BHP pulls offer to buy Rio Tinto

Australia, News Briefs

Melbourne-Mining giant BHP Billiton said Nov.25 it has decided that a proposed acquisition of another mining giant, Rio Tinto, would not be in the shareholders’ best interest. “While we have not changed our view of the basic industrial logic of the combination, or of the longer term prospects for natural resource demand growth driven by emerging economies, we have concerns about the continued deterioration of near term global economic conditions, the lack of any certainty as to the time it will take for conditions to improve and the risks that these issues imply for shareholder value,” said Don Argus, BHP chairman. He also cited the sharp drop in commodity prices. Earlier this year, BHP spent C$284 million to gain control of a potash development venture in Canada (GM July 14, p. 12). The Rio Tinto news spurs speculation as to whether BHP will have the wherewithal to continue with this project any time soon.

Welds eyed in VA tank collapse

News Briefs, Southeast

Chesapeake, Va.-The Chesapeake fire marshal who is heading up one of at least three investigations into the Nov. 12 collapse of a 2.5 million gallon liquid fertilizer tank has declined to confirm corrosion of tank welds as a possible cause. Fire department spokesman Steve Johnson told Green Markets, “The investigation is still in the preliminary or planning stage. Our focus is on assuring that required inspections and services have been properly completed on the facilities. Our task force will not be doing engineering evaluations, that is not their area of expertise.” Johnson did confirm that the fire marshal’s office is working with the federal Occupational Safety and Health Administration, and that Allied Terminals is doing its own investigation. Johnson termed as “assumptions” press reports that the corrosion from the fertilizer could have caused the failure, along with at least two other scenarios. “We will cooperate with OSHA and other private and public agencies that are stakeholders in this event,” Johnson insisted. “The press article you mention states assumptions. We have no conclusive evidence yet as to what caused the collapse.” Green Markets contacted Gary Boley, who heads his own company, Inter Spec LCC, in Norfolk, only two miles from the terminal. Although Boley has never inspected a tank there, he said there are lots of vertical and floor welds that could be attracted by nitrates combining with carbon to cause the corrosion. Boley, who was one of the first 20 inspectors certified by the American Petroleum Institute in the early 1990s and has inspected 500 fertilizer and several thousand oil and chemical tanks, suggested that the liquid line, which rises and falls with delivery of the product, could contribute to the weld problem. But liquid AN has not been found to have an effect on the walls of the tank, he added, and the age of the tank seems to be of little consequence. Another possibility cited by Boley is filling over certified levels, which puts the tank into “more severe service,” since fertilizer is 32 percent heavier than water and 70 to 75 percent heavier than gasoline. Boley also suspected that when the Allied tank was changed from riveted to welded two years ago, overheated welding rods could have been used, which would weaken the plates and leave them vulnerable to failure. Boley’s Inter Spec provides inspection and engineering services throughout the U.S. and internationally.

Rocky Mountain confirms phosphate in SE Idaho

News Briefs, Phosphate, Vancouver

Vancouver-Rocky Mountain Resources Corp., a Vancouver industrial metals and minerals exploration and development corporation, has confirmed two high grade phosphate beds, thicker zones of intermediate grade phosphate, and a vanadium-rich bed in the Montpelier mining district of Southeast Idaho’s Bear Lake County. Rocky Mountain recently acquired a significant position in Paris Hills, about two miles west of the small towns of Paris and Bloomington and about 45 miles south of the active Soda Springs phosphate mining district in Caribou County (GM Sept. 8, p. 14). “First, the thickness and grade of the high grade beds are within the ranges expected based on reports by Earth Sciences Inc. in their work from the 1970s,” said Tom DeMull, Rocky Mountain president. “Second and more significant, Rocky Mountain has identified long intervals of intermediate grade phosphate that were not included in Earth Science’s historic resource at Paris.”

IFA warns food crisis may be around corner

France, News Briefs

Paris-The International Fertilizer Industry Association (IFA) last week warned world governments that a “food crisis” may be around the corner. IFA warned that farmers are having difficulty getting credit to plant crops and the rapidly changing prices of agricultural commodities and inputs make it risky for them to invest in fertilizer. IFA also notes that low grain inventories and a steadily growing population, combined with a small harvest in 2009, could result in a considerable rise in grain prices. “A new surge in food prices would dramatically raise the number of undernourished people, leading to political unrest in many countries,” said IFA, which said key players at its recent governing council meeting in Ho Chi Minh City expressed these concerns.

Industry will meet diesel demand for urea, says TFI

News Briefs, Northeast, Urea

Washington, D.C.-The fertilizer industry isn’t worried at this point about the switchover in 2010 to urea-based selective catalytic reduction conversion or urea SCR for virtually all new diesel vehicles manufactured in the U.S. Urea SCR is the only technology available that can remove enough NOx from diesel exhaust to comply with strict new limits imposed by EPA. Some believe that the additional urea required for reducing vehicle emissions will create a new demand that could drive up fertilizer prices, but TFI and others disagree. “The diesel rule does not go completely into effect until 2010 and we anticipate the industry will be able to meet both agriculture and industrial demand for nitrogen products,” TFI spokeswoman Kathy Mathers told Green Markets. Mathers noted that nitrogen prices in the past few weeks have been backing off and are no longer at record highs. The newly formed North American SCR Stakeholders Group agrees with TFI’s assessment. Kim Doran, SCR Stakeholders spokesperson, explained, “Demand for this automotive-grade urea is not expected to exceed 5 percent of the world’s production. The new use of urea to control vehicle emissions could lead to increased investment and expand world capacity for urea production.” Urea tanks will be standard equipment for most new diesel trucks, buses, cars, and sport utility vehicles manufactured in the United States after Jan. 1, 2010. An automotive grade of urea will be injected into the vehicles’ exhaust stream to “scrub” nitrogen oxide (NOx) from the diesel exhaust. Doran said the automotive urea, called “diesel exhaust fluid” in the U.S. and trademarked AdBlue in Europe, reduces NOx by as much as 90 percent alone, and can take NOx to near-zero levels when used in combination with diesel particulate filter technology.