Security takes center stage: bomb scare in U.K.; explosives arrest in Ohio; boat jumpers in NOLA

Security concerns took center stage last week with news that the United Kingdom had arrested 21 people for plotting to use liquid explosives (hydrogen peroxide mixed with other products) to blow up airplanes headed from the U.K. to the United States. The Fertilizer Institute participated in a conference call Thursday morning, Aug. 10, conducted for the chemical sector by Assistant Secretary for Infrastructure Protection Robert Stephan regarding the incident.

The Department of Homeland Security raised the threat level to red for all flights coming to the U.S. from the U.K. The threat level for all domestic flights remains at orange. They reported that there is no evidence of plotting in the U.S. The Transportation Security Administration has taken action to immediately ban liquids of any kind in carry-on baggage on domestic flights – all liquids must be contained in checked baggage. TSA has initiated increased screening procedures for all baggage, whether carry-on or checked.

In the meantime, last week in the U.S. a Youngstown, Ohio, resident was arrested with 81 fifty-pound bags of ammonium nitrate, along with other potentially explosive chemicals in his possession, and faces both local and federal bomb-making charges, according to authorities. The man, identified as Randall Telshaw, 53, has already been charged with intent to produce an explosive device and could face federal action by the Bureau of Alcohol, Tobacco, Firearms and Explosives. Besides the nitrate, there was aluminum powder, smokeless black powder, and potassium perchlorate, along with several assault rifles and a bazooka, several hundred rounds of ammunition, and 73 bazooka shells.

Lt. Kevin Johnson, arson investigator with the Youngstown fire department, told Green Markets that authorities don’t know where the suspect got the large quantity of fertilizer. Johnson said possession of the nitrate alone is not a violation in Ohio. Anyone can buy any quantity, Johnson said, but a new law in the state comes into play when there is a combination of materials such as the suspect possessed. “He didn’t have the fertilizer for agriculture purposes,” he added.

The state agriculture department’s fertilizer section confirmed that Ohio presently has no restrictions or registration requirements for purchasing ammonium nitrate, although concerns have been expressed by the state’s homeland security officials. Two bills are still pending in Congress that would give the federal Homeland Security agency authority to regulate AN sales or would establish a tracking system for sales of the fertilizer.

On top of that, the U.S. was looking for 11 Egyptian students who did not show up for classes at Montana State University.

Add to that an incident on a urea vessel in New Orleans. One Turkish national drowned Aug. 5 when fleeing federal authorities. Three Turkish nationals came into the port on the AS-1, a Turkish vessel, which was in the process of discharging urea in the New Orleans area for ConAgra Trading Co. The company owned only the urea, not the vessel. One individual was reportedly arrested onboard the vessel, while two jumped. One jumper drowned and his body was recovered ten miles downriver; the other remains at large. The one arrested was to be deported. Sources said red flags went up for federal officials when they saw that at least two of the three had previously been deported.

ARA, TFI voice concerns with transportation security requirements

The Agricultural Retailers Association in late July voiced support for a House bill that seeks to address problems with the U.S. Department of Homeland Security’s (DHS) and the Transportation Security Administration’s (TSA) fingerprint and background check program for applicants seeking a commercial driver’s license with a hazardous materials endorsement (HME).

In a July 25 letter to Rep. Russ Carnahan (D-Mo.), the sponsor of the Professional Driver Background Check Efficiency Act (H.R.5560), ARA President Jack Eberspacher and Chairman Dave Coppess said the current TSA background check program “is causing undue hardship” for rural commercial drivers seeking an HME for the first time or trying to obtain approval for their existing one. “There is already a current shortage of CDL drivers in rural areas and this TSA program is only helping exacerbate the problem,” the letter said.

ARA lauded H.R.5560 for establishing a fee cap of $50 per individual to conduct a threat assessment/background check, which it said was “a more reasonable amount” than the current $100 fee. In addition, ARA said H.R.5560 would ensure that a driver who has already undergone and passed a hazmat background check should not be subject to a redundant check or have to pay an additional fee. ARA said it supports the “harmonization of background checks in order to eliminate duplicative programs that are unnecessarily costing industry and taxpayer dollars to administer.”

Meanwhile, The Fertilizer Institute in July voiced concerns to the Department of Transportation regarding another key transportation issue facing the fertilizer industry – a notice of proposed rulemaking (NPRM) from DHS, TSA, and the U.S. Coast Guard to promulgate the transportation worker identification credential (TWIC) requirements mandated by the Maritime Transportation Security Act (MTSA).

The TWIC program would require all individuals with unescorted access to secure areas of American ports and Coast Guard regulated facilities to undergo a security threat assessment to determine whether or not they pose a security risk. Following the threat assessment, the TWIC, which would contain biometric information such as a fingerprint, would be issued to individuals desiring unescorted access.

“Because of TFI’s diverse membership and the regular shipment of bulk fertilizers by barge and vessel, many TFI members have facilities regulated by MTSA,” wrote TFI President Ford West in a July 6 letter to the DOT. “In addition, two fertilizer products are classified as Certain Dangerous Cargo (CDC), bringing under jurisdiction of this NPRM many retail and wholesale warehouses on our nation’s inland water system. TFI estimates there will be approximately 300-400 fertilizer facilities that are required to comply with these regulations. As a result, these regulations are of substantial interest.”

TFI said it was concerned that the NPRM’s definition of “secure areas” and “escort,” as well as its enrollment processes, would put a financial burden on TWIC applicants and owners/operators, as well as on small fertilizer businesses. “TFI believes, by changing the definition of secure area to restricted area and allowing facilities to utilize technology to escort and monitor the movements of non-TWIC holders, TSA will help facilities and applicants mitigate much of the financial burden of this NPRM,” the letter said.

TFI argued that the number of people needing access to a facility ?Çô including FedEx, UPS, and USPS delivery personnel, contractors, plumbers, etc. ?Çô is well beyond the “nexus of transportation” that TSA accounts for in the NPRM. TFI also referred to the maintenance turnarounds that take place regularly at fertilizer production facilities, arguing that TSA “does not fully understand the nature of fertilizer manufacturing.”

During these turnarounds, TFI said, an MTSA regulated manufacturing facility “will hire hundreds of additional personnel on a limited short-term contract” for the purpose of updating and performing inspections and repairs. “TFI believes that requiring these ‘turnaround’ vendors, workers, and contractors to obtain a TWIC would expand the scope of TWIC implementation beyond that of ‘transportation workers,’” the letter said.

TFI also said TSA’s list of potential TWIC enrollment sites is “grossly inadequate” for the number and location of regulated facilities, recommending instead that TSA utilize “mobile or self-service enrollment sites conveniently located on or in the vicinity of regulated facilities.”

TFI also addressed the issue of redundancy, noting various state programs that already exist for the purpose of supplying port identification credentials. “The original intent of TWIC was to require a single criminal background investigation and transportation identification credential to transportation workers,” TFI said. “Allowing states to maintain credentialing systems, outside of TWIC, defeats the purpose of implementing a national transportation worker credential.” TFI proposed instead that TSA allow individuals to maintain a single port identity card, phasing out state programs when current credentials reach expiration.

The NPRM also requires owner/operators to maintain records for two years of all individuals granted access to secure areas of a facility, a requirement that TFI says should be reduced to a maximum of sixty days of recordkeeping.

TSA’s deadline for comments on the 66-page NPRM was July 6, but TFI asked for a 60-day extension to continue reviewing the document.

ConAgra adjusts earnings, again

Omaha-ConAgra Foods Inc. is still dealing with the results reported by its former subsidiary, United Agri Products, and on July 28 again adjusted earnings for the years 1999-2001. This time ConAgra cited matters related to UAP, as well as the level and application of company reserves. The Securities Exchange Commission alleges that a gross amount of $170 million related to the reversal of reserves was improperly recorded in income during fiscal years 1999-2001. ConAgra said it is currently conducting discussions with the SEC regarding a possible settlement of these matters. It said any settlement may include the company consenting to the issuance of a final judgment without admitting or denying the allegations, with respect to a complaint to be filed by the SEC in federal court. ConAgra has previously filed restatements in June 2001 for the years 1997-2000 related to UAP, and in April 2005 for years 2002-2004 relating to income tax matters. New restatements for fiscal years ending in May are as follows.

Earnings $M Net Income Diluted Earnings Per Share
2001 Reported 641.8 1.25
2001 Restated 627.0 1.22
2000 Reported 382.7 .80
2000 Restated 360.5 .75
1999 Reported 330.2 .69
1999 Restated 278.8 .58

Martin Midstream 2Q earnings up 44.3 percent

Kilgore, Texas-Martin Midstream Partners LP (MMLP) reported a 44.3 percent increase in net earnings, to $5.2 million ($.40 per unit) on sales of $133 million for the second quarter ending June 30, compared to the year-ago $2.9 million ($.34 per unit) and $84.9 million, respectively. Six-month net earnings were up, at $9.5 million ($.72 per unit) on sales of $279.9 million, versus the year-ago $6.5 million ($.75 per unit) and $181 million, respectively. Fertilizer operating revenues were off slightly, though revenues were up significantly. New acquisitions across the board, including sulfur, gas, transportation, and terminals, have helped boost company revenues. The company noted that on July 17 it acquired a marine terminal and associated assets near Corpus Christi, Texas, from Koch Pipeline Co. LP, for $6.2 million. The terminal is located on approximately 25.5 acres of land and includes two short pipelines and three 80,000 barrel tanks. The terminal is a specialty petroleum terminal which charges fixed monthly fees to third parties under term contracts for use of storage tanks. Earlier this year, MMLP acquired the Texan, an offshore tug, and the Ponciana, an offshore LPG barge, for $5.85 million. The vessels are in service under a long-term charter with a third party. MMLP also bought the M450, an offshore barge, for $1.55 million. This went into service under a one-year charter.

Earnings 2Q-06 2Q-05 YTD-06 YTD-05
Sulfur – Sales 17,624 940 33,013 940
Operating Income 2,092 197 3,551 197
Volumes 230.2 10.7 427.9 10.7
Fertilizer – Sales 12,071 8,862 24,096 18,415
Operating Income 875 884 1,097 1,363
Volumes 63.7 39.5 128.4 84.2

* Figures in thousands

SQM 2Q earnings up 37.7 percent

Santiago-Sociedad Quimica y Minera de Chile SA (SQM) reported a 37.7 percent increase in net earnings for the second quarter, to US$41 million ($1.56 per ADR) on sales of $285.6 million, versus the year-ago $29.7 million ($1.13 per ADR) on sales of $232.8 million. “With these results we have achieved 21 straight quarters of improving results and we expect that the positive market conditions observed during this first quarter half will continue into the future,” said SQM CEO Patricio Contesse. This comes despite higher energy costs, including a disruption in natural gas supplies from Argentina. The disruptions, which began in April, are expected to continue into the second half. SQM said that its iodine expansion is complete and it is now working hard on potassium nitrate and lithium expansions. Specialty fertilizer revenues rose to $143.1 million for the first quarter, up from the year-ago $126.1 million. Iodine had the biggest surge in sales during the quarter, to $61.4 million from the year-ago $37 million. While specialty fertilizer revenues are up for the first half ($250.2 million versus $243.2 million), potassium nitrate sales volumes were down, at 335,000 mt from the year-ago 378,000 mt. SQM cited a drop in tons to Latin America and Brazil, due to a reduction in planted hectares as well as the strong Real versus the US dollar. First half volumes to China, Chile, North America, and Europe were all off; however, SQM expects much of that to be recouped in the second half. Second-half net income was $75.3 million ($2.86 per ADR) on sales of $504.7 million, up from the year-ago $54.5 million ($2.07 per ADR) and $442.1 million, respectively.

Audio conference registrants hear valuable insights

Silver Spring, Md.-Registrants to Green Markets’ Aug. 8 audio conference heard interesting insights about the spring 2006 fertilizer season, and what to expect regarding usage and buying habits for the fall season and beyond. Speakers for the event included Bruce Vernon, director of crop nutrient marketing for Agriliance; Shelly Weathers, manager, purchasing, for Agrium Wholesale; and Dick Wilkinson, vice president, sulfur division, for Martin Operating Partnership. An audio recording of the 90-minute conference is available on CD-ROM for $199, and can be ordered by visiting http://www.pf.com/eventDetail.asp?id=62&type=2. Green Markets will be hosting another audio conference on Oct. 11 about new fertilizer technologies/products. Information on how to register will be posted soon at http://www.pf.com.

Agrium concludes Pursell acquisition

Calgary-Agrium Inc. said Aug. 8 that it has concluded the purchase of certain fixed assets and inventory of Pursell Technologies Inc. (PTI) and certain of its affiliates for a purchase price of US$74.5 million (GM June 26, p. 1). Agrium had already achieved regulatory approval. Agrium has also purchased patented technology for emerging non-fertilizer controlled release products, such as specific crop protection products, for the consideration of $12.5 million plus contingent payments based on a percentage of future sales. The PTI assets, the recently acquired Nu-Gro, and Agrium’s pre-existing specialty products will be combined to create a new Specialty Products Business Unit to optimize the stable and growing earnings from this segment. The acquired assets will be operated under the name Agrium U.S. Specialty Products.

Mosaic inks with Faustina Hydrogen

Plymouth, Minn.-The Mosaic Co. has announced that Mosaic Fertilizer LLC, a wholly-owned subsidiary, has signed a 15-year ammonia offtake agreement with Faustina Hydrogen Products LLC, an affiliate of US Syngas LLC (USS). The term of the ammonia offtake commences upon startup of a petroleum coke gasification project to be constructed adjacent to Mosaic’s Faustina phosphate manufacturing plant in St. James Parish, La. USS is acting as lead sponsor of the project. The agreement provides that Mosaic will purchase a majority of the approximately 1.3 million tons of anhydrous ammonia that would be annually produced at the petroleum coke complex. The agreement is subject to various conditions, including, among others, USS’s ability to obtain adequate financing to construct the petroleum coke complex, and the successful completion and startup of the project. Assuming financing is obtained prior to the end of this calendar year, the project is anticipated to begin operations in 2009. In April 2006, Mosaic announced a non-binding letter of intent with USS to pursue the development of the petroleum coke project (GM April 17, p. 1).

SWFC donates to Nutrients for Life

Washington-The Nutrients for Life Foundation has received a $9,500 donation from the Southwestern Fertilizer Conference (SWFC). The donation will fund ongoing Foundation efforts aimed at educating students, the media, and the general public about the benefits of commercial fertilizer. The Foundation was formed in 2004 for the purpose of improving public understanding of the societal and environmental benefits of commercial fertilizer. SWFC is a non-profit trade association established in 1925, with its annual meeting evolving into a major annual fertilizer event.

Innophos files IPO

Cranbury, N.J.-Innophos Holdings Inc., the parent company of Innophos Inc., has announced that it has filed a registration statement with the U.S. Securities and Exchange Commission for a proposed initial public offering of its common stock. The proposed offering will include shares sold by Innophos Holdings and by certain of Innophos’ stockholders. Credit Suisse Securities (USA), LLC; Bear, Stearns & Co. Inc.; and UBS Investment Bank will act as joint book-running managers. The number of shares to be offered and the price range for the offering have not been determined. Innophos Inc. is one of the leading North American manufacturers of specialty phosphates. Headquartered in Cranbury, N.J., it has manufacturing operations in Nashville, Tenn.; Chicago Heights, Ill.; Chicago (Waterway), Ill.; Geismar, La.; Port Maitland, Ont.; and Coatzacoalcos, Veracruz, and Mission Hills, Guanajuato (Mexico).

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