Current-Argus
February 12th, 2004

Potash company seeks to reduce royalties
Officials: Decrease in payments would aid firm
 - By Jason P. Montoya: Current-Argus Staff Writer

CARLSBAD – A request by Mississippi Potash Inc. for a reduction in federal royalties levied on the company’s potash production has gained the support of Sen. Pete Domenici, R-N.M.

Domenici wrote a letter to the Bureau of Land Management to request that the agency quickly act on a royalty reduction application that was submitted by the BLM’s New Mexico office.

The application requests a lowering of the federal royalties collected on potash to 1 percent for every ton of potash sold.  The current royalty rate is 2 percent, with a joint company and BLM reclamation account and the federal treasury sharing the proceeds.  The change would mean an estimated decrease of $700,000 in payments to the BLM annually.

“Potash mining remains an important aspect of the economy in southeast New Mexico.  I want the BLM to carefully consider this royalty reduction.  I think it has merit.  We may be in a market situation where the federal government can take a step back on this fee in order to ensure the longevity of these mining jobs,” Domenici states in a press release.

Leslie Theiss, BLM field manager for Carlsbad, said the application for a rate reduction was prompted by a request by Mississippi Potash and would only apply to Mississippi.

She said the local BLM office supports the reduction.

“We feel conditions and information show that it is needed,” she said.  “We are conscious of the importance of the potash industry to this area.  We want to ensure that it remains a viable operation.”

Theiss said the reduction in royalties, if approved, would not be the first time the potash industry has received a reduction during times of financial hardship for the industry.

In a letter to Ray Brady, acting manager of the BLM Solid Minerals Group, Domenici wrote, “Potash, in Eddy and Lea counties, has long been a significant part of the local economy, but it has been struggling.  Area leaders have made it known to me that this royalty reduction, if granted, can bring significant economic help to the area.  I would be grateful for your thorough and complete evaluation of this request.  IF upon completion of the review, you believe the application merits approval, I hope the final discussions will be made expeditiously.”

Mayor Bob Forrest said Carlsbad officials contacted Domenici to get his support for the application because they were trying to help the local potash industry.

“They have been paying (the royalty) for 60 years.  They have needed some help the last few years.  It makes a lot of difference.  Anything we can do to help, we will,” he said.

“There are still close to 1,100 (potash mining) jobs in the area.  The potash mines have been a backbone of this community and helped build Carlsbad.  It’s our turn to help them,” Forrest said.

Han Stuart, spokesman for BLM’s New Mexico office, said the application is awaiting approval from BLM officials in Washington.  He said any reduction in royalties would also have to be approved by the governor’s office because the state receives half of the revenue generated from the royalties.

In trepid Mining LLC is scheduled to finalize a purchase of Mississippi Potash Inc. and Eddy Potash Inc. later this month pending approval by the US Bankruptcy court.  Owner Robert Jornayvaz said a reduction in royalty payments would help make Mississippi more economically efficient.

He said the reduction would show that the BLM recognizes the need to work with the potash industry.