[Senate Hearing 114-368]
[From the U.S. Government Publishing Office]
S. Hrg. 114-368
S. 2031, THE AMERICAN SODA ASH COMPETITIVENESS ACT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON PUBLIC LANDS, FORESTS, AND MINING
OF THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 1, 2015
__________
Printed for the use of the
Committee on Energy and Natural Resources
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.fdsys.gov
_____________
U.S. GOVERNMENT PUBLISHING OFFICE
98-910 WASHINGTON: 2016
_________________________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].
COMMITTEE ON ENERGY AND NATURAL RESOURCES
LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho RON WYDEN, Oregon
MIKE LEE, Utah BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona DEBBIE STABENOW, Michigan
STEVE DAINES, Montana AL FRANKEN, Minnesota
BILL CASSIDY, Louisiana JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado MARTIN HEINRICH, New Mexico
ROB PORTMAN, Ohio MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota ANGUS S. KING, JR., Maine
LAMAR ALEXANDER, Tennessee ELIZABETH WARREN, Massachusetts
SHELLY MOORE CAPITO, West Virginia
Subcommittee on Public Lands, Forests, and Mining
JOHN BARRASSO, Chairman
SHELLEY MOORE CAPITO RON WYDEN
JAMES E. RISCH DEBBIE STABENOW
MIKE LEE AL FRANKEN
STEVE DAINES JOE MANCHIN III
BILL CASSIDY MARTIN HEINRICH
CORY GARDNER MAZIE K. HIRONO
JOHN HOEVEN ELIZABETH WARREN
JEFF FLAKE
LAMAR ALEXANDER
Karen K. Billups, Staff Director
Patrick J. McCormick III, Chief Counsel
Heidi Hansen, Counsel
Angela Becker-Dippmann, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Spencer Gray, Democratic Professional Staff Member
C O N T E N T S
----------
OPENING STATEMENTS
Page
Barrasso, Hon. John, Chairman, and a U.S. Senator from Wyoming... 1
WITNESS
Leiter, Amanda, Deputy Assistant Secretary, Land & Minerals
Management, U.S. Department of the Interior.................... 7
Douville, Christopher, President, American Natural Soda Ash
Corporation (ANSAC)............................................ 11
Finn, Rick, Federal Affairs Manager, Port of Portland (Oregon)... 22
von Ahrens, Fred, Vice President, Manufacturing, Tronox Alkali... 26
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
American Natural Soda Ash Corporation (ANSAC):
China: Importance of VAT Rebate Elimination for U.S. Soda Ash
Exports dated April 7, 2009................................ 104
About ANSAC and the U.S. Soda Ash Industry................... 108
Letter to Hon. Ron Kirk, U.S. Trade Representative, dated
April 15, 2009............................................. 109
Letter to Hon. Hillary Clinton, Secretary of State, and Hon.
Timothy Geitner, Secretary of the Treasury, dated July 17,
2009....................................................... 111
Letter to Hon. Timothy Geithner, Secretary of the Treasury,
dated October 1, 2010...................................... 112
Letter to Hon. Ron Kirk, U.S. Trade Representative, date
April 2, 2012.............................................. 115
Letter to Ms. Claire Reade, Assistant U.S. Trade
Representative for China Affairs, Office of the U.S. Trade
Representative, and Mr. Craig Allen, Deputy Assistant
Secretary for Asia, U.S. Department of Commerce dated
August 21, 2013............................................ 117
Barrasso, Hon. John:
Opening Statement............................................ 1
CNBC article dated September 16, 2105 entitled ``Why China's
yuan may be set for 15% devaluation'' by Dhara Ranasinghe.. 3
Wall Street Journal article dated September 30, 2015 entitled
``Export Weakness Hampers Growth''......................... 6
Beer Institute:
Letter for the Record........................................ 139
Congress of the United States Letters to:
Hon. Ron Kirk, U.S. Trade Representative, dated May 5, 2009.. 119
Hon. Hillary Clinton, Secretary of State, dated July 16, 2009 121
Hon. Ron Kirk, U.S. Trade Representative, dated January 28,
2010....................................................... 123
Letter to Hon. Gary Locke, Secretary of Commerce, and Hon.
Ron Kirk, U.S. Trade Representative dated May 31, 2011..... 125
Hon. Jacob Lew, Secretary, Department of the Treasury, dated
February 25, 2015.......................................... 127
Douville, Christopher:
Opening Statement............................................ 11
Industrial Minerals article dated September 2015 entitled
``Chinese Soda Ash: Mission Creep''........................ 13
Written Testimony............................................ 17
Responses to Questions for the Record........................ 147
Finn, Rick:
Opening Statement............................................ 22
Written Testimony............................................ 24
Responses to Questions for the Record........................ 162
Freudenthal, Hon. David:
Letter for the Record........................................ 133
Glass Packaging Institute:
Letter for the Record........................................ 137
International Longshore & Warehouse Union:
Letter for the Record........................................ 163
Leiter, Amanda:
Opening Statement............................................ 7
Written Testimony............................................ 9
Responses to Questions for the Record........................ 145
Mead, Hon. Matthew:
Letter for the Record........................................ 132
Natural Soda LLC:
Statement for the Record..................................... 135
S. 2031, the American Soda Ash Competitiveness Act:.............. 143
Union Pacific Railroad:
Letter for the Record........................................ 140
United Steelworkers:
Letter for the Record........................................ 164
von Ahrens, Fred:
Opening Statement............................................ 26
IMA-NA Soda Ash Life Cycle Assessment........................ 27
Written Testimony............................................ 95
Wyden, Hon. Ron:
Statement for the Record..................................... 165
S. 2031, THE AMERICAN SODA ASH COMPETITIVENESS ACT, A BILL TO REDUCE
TEMPORARILY THE ROYALTY REQUIRED TO BE PAID FOR SODIUM PRODUCED ON
FEDERAL LANDS, AND FOR OTHER PURPOSES
----------
Thursday, October 1, 2015
U.S. Senate Subcommittee on Public Lands, Forests,
and Mining
Committee on Energy and Natural Resources
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:40 p.m. in
Room SD-366, Dirksen Senate Office Building, Hon. John
Barrasso, Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. JOHN BARRASSO, U.S. SENATOR FROM
WYOMING
Senator Barrasso. The Committee will come to order. Senator
Wyden is unavoidably detained.
This afternoon the Subcommittee on Public Lands, Forests,
and Mining will hold a hearing on S. 2031, the American Soda
Ash Competitiveness Act.
Last month the Subcommittee's Ranking Member, Senator
Wyden, and I introduced this bipartisan legislation along with
Senators Enzi and Merkley. The purpose of our bill is to help
America's natural soda ash producers compete in the global
market. Natural soda ash is also known as sodium carbonate. It
is the raw material used to manufacture glass, chemicals and
other industrial goods.
Natural soda ash is produced from Trona, a mineral found in
high concentrations primarily in California and Wyoming. The
production of soda ash supports thousands of jobs across the
country in a variety of industries including mining, shipping
and manufacturing. In my home State of Wyoming, soda ash
production directly employs over 2,300 people.
In 2014, the United States exported nearly 58 percent of
all soda ash produced for a total of $1.3 billion. Last year
soda ash was our nation's second largest inorganic chemical
export. Soda ash exports help reduce America's trade deficit
and grow our nation's economy, but we must not assume that soda
ash exports will increase. America's soda ash producers
continue to battle unfair trade practices imposed by other
nations.
For example, China has aggressively moved to help its
synthetic soda ash producers capture market share from
America's soda ash producers. Since 2009, China has given its
synthetic soda ash producers a nine-percent rebate on China's
value-added tax, its V-A-T, it is VAT. More recently China
devalued its currency, the Yuan, by 4.4 percent to boost
exports.
It is estimated that China's value added tax rebate and
currency devaluations give soda ash and China producers roughly
a $27 per metric ton benefit. This unfair benefit is only
expected to grow over the next year.
CNBC reported recently that China may devalue its currency
by a total of 15 to 20 percent by the end of 2016.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
CNBC cited a source that said, ``Engineering a devaluation
of this magnitude would not be easy.'' However, they talk about
the People's Bank of China, ``has the mechanism to achieve a
creeping devaluation and maintain the appearance of it being
market led.''
This report and China's track record on currency
devaluation make me very skeptical and suspicious of any
communications or any commitments that China's president
allegedly made last week. China's unfair trade practices
threaten America's soda ash producers, and it is important that
Congress respond.
That is why we have introduced the American Soda Ash
Competitiveness Act. Our bipartisan bill will help level the
playing field for America's soda ash producers. Specifically,
our bill maintains a competitive royalty rate for soda ash
produced from Federal land.
Tomorrow the Bureau of Land Management, the BLM, is
expected to increase the royalty rate on soda ash. I strongly
disagree with this decision. The Administration should not
raise costs on America's soda ash producers without first
ensuring that China and other countries scrap their unfair
trade practices.
So I want to thank Senator Wyden for his support of this
bipartisan legislation. Senator Wyden knows the importance of
the soda ash industry to Oregon, Wyoming and communities
throughout the country. He also knows that America's natural
soda ash has a significantly lower environmental impact when
compared to China's synthetic soda ash.
I also want to thank Senators Enzi and Merkley for their
support of this bill.
On July 29th, the House Natural Resources Committee
approved identical legislation on a bipartisan vote. I will
encourage members of this Committee to advance our legislation
as quickly as possible.
I would also like to point out a front page story in
yesterday's Wall Street Journal entitled, ``Export Weakness
Hampers Growth.'' According to the study, hopes for an American
export boom are wilting. U.S. exports are on track to decline
this year for the first time since the financial crisis,
undermining a national push to boost shipments abroad. The
article goes on to say that the weak trade performance is
restraining overall economic growth. The article also discusses
the challenges that Portland, Oregon has faced in trying to
increase its exports.
I will enter this article in today's hearing record.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Barrasso. As we await other members of the
Committee, we will hear at this time from our witnesses.
Joining us this afternoon is Ms. Amanda Leiter, Deputy
Assistant Secretary for Land and Minerals Management at the
Department of Interior. Thank you for being with us. Mr. Chris
Douville, who is the President of ANSAC, the American Natural
Soda Ash Corporation. Mr. Rick Finn, Federal Affairs Manager
for the Port of Portland. And Fred von Ahrens, who is Vice
President of Manufacturing for Tronox, who came here from Green
River, Wyoming today.
Welcome to all of you. I look forward to your testimony.
Ms. Leiter, let's start with you.
STATEMENT OF AMANDA LEITER, DEPUTY ASSISTANT SECRETARY, LAND &
MINERALS MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR
Ms. Leiter. Chairman Barrasso, absent members of the
Committee, thank you for the opportunity to testify on S. 2031,
the American Soda Ash Competitiveness Act.
As you just stated this bill would reinstate for five years
the soda ash royalty rate reduction enacted in 2006 that
expired in October 2011.
The Department of the Interior cannot support S. 2031
because the act would not provide a fair return to the American
public, and the economic evidence from 2006 to 2011 does not
indicate that this sort of royalty reductions substantially
increases soda ash production, jobs or exports.
As you noted, soda ash is a key ingredient in many products
including glass, detergents and baking soda. It is refined from
the mineral Trona or it can be manufactured synthetically. The
United States is a leading producer of soda ash with the
world's largest natural deposit of Trona in Southwestern
Wyoming.
As of Fiscal Year 2014, there were 78 Federal sodium leases
spanning nearly 99,000 acres across five states, Wyoming,
California, Colorado, Arizona and New Mexico. Fifty-five of the
leases were in Wyoming.
The soda ash industry contributes substantially to U.S.
gross domestic product. In 2014, the total value of the
domestic soda ash produced was about $1.7 billion and the
industry directly supplied 2,500 jobs.
S. 2031 would reinstate the two-percent royalty rate
established by the Soda Ash Royalty Reduction Act of 2006,
which expired in October 2011. From October 2011 to October
2013, royalty rates returned to the rates set in each
individual lease. In 2013, the Helium Stewardship Act included
a provision that, again, waived lease terms and set a four-
percent royalty rate for two years, and that provision expires
today.
As mandated by the 2006 act, the BLM reported to Congress
on the impact of the royalty reduction between 2006 and 2011.
That 2011 report found that the 2006 act resulted in a
substantial loss of royalty revenues to the Federal Government,
$150 million, far exceeding congressional estimates from 2006.
The BLM also found that the rate reduction did not appear
to have significantly contributed to the creation of new jobs
in the industry nor to have created, excuse me, nor to have
increased exports nor to have notably increased the industry's
capital expenditures to enhance production.
The report did find that a significant amount of production
had shifted from state and private leases on to Federal leases.
As a steward of America's public lands, the Department of
the Interior takes seriously our responsibility to receive a
fair return for the mineral resources we manage on behalf of
the American people. S. 2031 would waive the requirements of
the Federal Land Policy and Management Act of 1976 which states
that it is United States' policy to receive fair market value
for the use of public lands and resources.
In a 1996 study, the BLM found that in Wyoming's Green
River Basin the soda ash royalty rate was eight percent on most
private lands and five percent on state lands. As a result of
the study the BLM determined that the fair market value royalty
rate for all then existing Federal leases in Wyoming would be
increased from five to six percent, and the royalty rate on all
new leases in Wyoming would be eight percent. We have no reason
to believe that state and private royalty rates have changed
from five and eight percent, respectively.
In Fiscal Year 2014 under the Helium Stewardship Act four
percent rate, the soda ash industry paid almost $42 million in
royalty for production from Federal lands. If the royalty rate
had been just two percent during Fiscal Year 2014, the royalty
revenue for that year would have been 50 percent lower
representing a loss of $21 million to Federal and State
taxpayers.
Current United States Geological Survey data indicate that
the soda ash industry has increased production, exports and job
numbers over the last four years regardless of the changing
royalty rate. These data provide no economic justification for
a rate reduction.
For these reasons, and especially because S. 2031 would not
provide a fair return for the use of public resources, the
Department of the Interior cannot support this bill.
Mr. Chairman, thank you for the opportunity to testify
today. I'd be happy to answer any questions.
[The prepared statement of Ms. Leiter follows:]
Senator Barrasso. Thank you very much, Ms. Leiter, I
appreciate your testimony.
As I mentioned earlier, Senator Wyden is unavoidably
detained. Breaking news out of Oregon is there has been a
shooting, with ten people killed, and as many as 20 others
injured at a community college. I know that Senator Wyden has
other pressing issues affecting him.
Mr. Douville, if you could please give your testimony.
STATEMENT OF CHRISTOPHER DOUVILLE, PRESIDENT, AMERICAN NATURAL
SODA ASH CORPORATION (ANSAC)
Mr. Douville. Chairman Barrasso, thank you for the
opportunity to testify on S. 2031, the American Soda Ash
Competitiveness Act. I am Chris Douville, President of ANSAC,
which is the world's largest soda ash exporter.
ANSAC was established in 1984 as the export arm of the U.S.
national soda ash industry. We handle the sales, marketing and
logistics operation in global export territories for three
leading producers of soda ash in the United States, Tronox,
Tata Chemicals and OCI.
I join my industry colleagues today in voicing support for
this legislation. With U.S. soda ash exports facing the
combined headwinds of a shaky global economy and increasingly
aggressive foreign competition, a reduction of the royalty rate
is needed now more than ever.
I would like to highlight several issues as you consider
this legislation. First, the U.S. soda ash industry, thanks in
part to previous royalty reductions, has increasingly expanded
exports. Second, U.S. natural soda ash is facing growing
competition in developing countries from China's synthetic soda
ash. Third, the outlook for exports is expected to worsen in
the year ahead as global soda ash demand growth in emerging
markets is in decline.
From the perspective of ANSAC enactment of this legislation
is absolutely critical to maintain U.S. jobs and export
competitiveness. At the quantities of 6.7 million metric tons,
valued at $1.3 billion in 2014, U.S. natural soda ash exports
have directly contributed to thousands of high paying, U.S.
jobs and served to put a dent in the U.S. trade deficit. In
2014, 58 percent of U.S. natural soda ash production was
exported compared to 42 percent in 2005, the year before the
royalty rate was first reduced. Thus, the royalty rate
reduction has greatly helped to support additional export
growth.
The U.S. is not only the leading soda ash export in the
world, it is also the most efficient and environmentally
friendly. U.S. natural soda ash consumes far less energy and
produces fewer global greenhouse gas emissions on a delivered
basis than synthetic soda ash. Despite the efficiency and
environmental advantages of U.S. natural soda ash production,
China has overtaken the United States as the world's largest
soda ash producer, now making 115 percent more soda ash than
the U.S.
The percentage of Chinese soda ash exports is on the rise
as evidenced by the September 2015 Industrial Minerals article
titled, ``Chinese Soda Ash Mission Creep,'' which I would like
to submit for the record.
Senator Barrasso. Without objection.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Douville. China's domestic demand growth has fallen to
its lowest level since 2009. As Chinese producers seek an
outlet for their excessive annual production capacity, we
forecast the Chinese exports could increase 22 percent in 2015.
Since 2009, China has promoted the export of soda ash by
offering its producers a nine-percent rebate of the country's
17 percent VAT on their exports. More recently, the
government's 4.4 percent devaluation of China's currency in
August 2015 has provided Chinese soda ash producers with an
additional price advantage. Together the VAT rebate and
currency devaluation give Chinese soda ash exporters a $27 per
metric ton benefit based on an average export price of $200 per
metric ton. This equates to approximately $60 million in
benefit for Chinese exporters.
Recent media reports, as you've cited, indicate that China
is considering a further 15 to 20 percent devaluation of its
currency by the end of 2016. China has reduced export prices by
$30 to $40 per metric ton in the past six months. Chinese soda
ash exporters are now prime to take market share from the U.S.
throughout Asia and beyond.
China competes directly with U.S. natural soda ash in Asian
markets where U.S. exports have grown in recent years.
Unfortunately, China enjoys preferential access to markets such
as Vietnam, Taiwan, Pakistan and the Philippines. U.S. natural
soda ash faces tariffs in all these countries, but China has
none due to regional free trade agreements. Adding to industry
concerns is the fact that demand for soda ash has weakened in
key markets in Asia and Latin America.
If China continues to benefit from unfair trade practices,
economic growth is stalled in many emerging economies. Glass
production, especially for the use in construction in
automotive markets, is expected to decline. The consequences
are likely to be felt by U.S. soda ash exporters.
The last time there was a decline of U.S. soda ash exports
was in 2009, a result of the global recession. At that time,
the two-percent royalty rate on soda ash was the key to our
competitiveness and helped to ensure that U.S. exports could
rebound quickly.
Mr. Chairman, now more than ever a royalty policy that
factors in the competitiveness of U.S. soda ash exports is
needed. The current convergence of an increasingly aggressive
government supported competition from China combined with a
weak outlook for foreign demand poses a high risk for U.S. soda
ash exports. If we are not careful, a bright spot on the U.S.
economy, the $1.3 billion soda ash trade surplus, is in
jeopardy.
Thank you very much for the opportunity to provide our
views and we urge your support of S. 2031.
[The prepared statement of Mr. Douville follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Barrasso. Thank you very much, Mr. Douville.
Mr. Finn?
STATEMENT OF RICK FINN, FEDERAL AFFAIRS MANAGER, PORT OF
PORTLAND (OREGON)
Mr. Finn. Thank you, Mr. Chairman. The Port of Portland
appreciates this opportunity to express our support for S.
2031, the American Soda Ash Competitiveness Act.
The Port of Portland is a consolidated public port
authority in Portland, Oregon that owns and operates marine,
aviation and industrial park facilities. Our marine assets
consist of four marine terminals on the Willamette and Columbia
Rivers and a large pipeline dredge. In addition, the Port owns
and operates Portland International Airport, two general
aviation airports and several industrial parks.
Together with several other ports on the Columbia Snake
River navigation system, the Port of Portland is an export
gateway for products from the Pacific Northwest and the
interior of Canada and the United States. Agricultural products
and mineral products dominate our export trade. And one of the
most important mineral products that we export is soda ash.
The Port of Portland has been exporting soda ash since 1987
when we built a marine terminal dedicated exclusively to the
handling of this cargo.
In 2014, 75 ships or about one ship every five days docked
at the Port of Portland to load soda ash. We exported about 2.8
million short tons of the product, primarily to Pacific Rim
countries. In fact, about 40 percent of all soda ash exports
from the United States whether exported by marine or by land go
through the Port of Portland, so it obviously comprises a very
important cargo for us.
All of the activities associated with receiving soda ash at
the Port of Portland by rail and then loading on board ships
generates significant local economic benefits. We estimate that
about 200 direct, indirect and induced jobs are associated with
the handling of this cargo. And each of those direct jobs pays
an average of $50,400.
I might just add that these are very important blue collar
jobs with benefits that are available to a variety of people,
some of whom cannot go to college or for whatever reason,
choose not to go to college. So it's the very kind of blue
collar job that the Portland region has historically tried to
support and cultivate.
Another important but unquantifiable benefit from the
handling of soda ash in Portland is that it helps to maintain
and improve our local, regional, rail network. The Union
Pacific railroad transports soda ash from Wyoming to Portland.
And the long haul, steady, reliable nature of this business
encourages the Union Pacific to invest and improve the regional
rail network in Portland. As a result other domestic and
international exporters and importers than have nothing at all
to do with soda ash benefit from the rail improvements that the
Union Pacific makes to facilitate its soda ash business.
So for a variety of reasons, especially the local economic
benefits that this cargo provides to Portland, the Port of
Portland is happy to join with our colleagues in the U.S. soda
ash industry to urge you to support S. 2031.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Finn follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Barrasso. Thank you very much, Mr. Finn.
Mr. von Ahrens?
STATEMENT OF FRED VON AHRENS, VICE PRESIDENT, MANUFACTURING,
TRONOX ALKALI
Mr. von Ahrens. Thank you.
Good afternoon, Chairman Barrasso. My name is Fred von
Ahrens. I'm the Vice President of Manufacturing for Tronox
Alkali in Green River, Wyoming. I'm here representing Tronox
Alkali and the four other U.S. producers of natural soda ash,
Tata Chemicals, OCI, Solvay, Searles Valley Minerals, in
support of S. 2031.
I'm pleased to report that the soda ash industry is the
country's largest inorganic chemical export by volume
contributing more than one billion dollars annually to our
trade balance. Combined, the five U.S. natural soda ash
producers employ more than 3,000 full time, skilled workers
with an average salary of more than $122,000. Approximately
1,000 of these workers are represented by the United Steel
Workers.
More than 18,000 indirect jobs are also dependent on the
U.S. industry including the railroads, glass packaging, window
manufacturing, the auto industry and port workers in Washington
State and Oregon, California and Texas. The five companies also
have corporate offices in Connecticut, New Jersey, Oklahoma,
Pennsylvania and Texas with a staff totaling more than 500
employees.
Recent history has demonstrated that a two-percent Federal
royalty rate can have positive impacts. First, it fosters
robust export growth consistent with the President's National
Export Initiative. Second, it leads to expanded domestic
manufacturing capacity and job growth. Third, it results in an
increase rather than a decrease in Federal royalty revenues by
spurring development of the resource.
Mr. Chairman, today, approximately 58 percent of our
production is exported primarily to the Pacific Rim and Latin
America. The 2006 and 2013 royalty rates enacted by Congress
came out of recognition that global economic conditions,
specifically the emergence of subsidized Chinese competition,
were eroding America's natural soda ash advantage.
There are two methods of producing soda ash, the natural
method, utilizing Trona ore employed by the five U.S.
companies, and a synthetic process. China is the largest
producer and exporter of the synthetic process. The natural
process is the more efficient way of making soda ash and has
significant environmental advantages over the synthetic
process, which generates a larger carbon footprint and has
other negative environmental impacts.
Mr. Chairman, I would like to submit for the record a life
cycle assessment commissioned by the IMANA that demonstrates
that U.S. soda ash is better for the world than Chinese
synthetic soda ash.
Senator Barrasso. Without objection.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. von Ahrens. Thank you.
The new synthetic soda ash facilities in countries such as
India and Vietnam, lack the environmental regulation and the
associated cost of manufacturing that we have in the United
States. Emissions from a recently commissioned plant in Vietnam
have poisoned local waters, resulting in mass fish kills, and
have lowered air quality to unhealthy levels in surrounding
communities.
Mr. Chairman, from 1996 to 2006 and 2011 to 2013 when the
royalty rate was six percent approximately, 1,000 jobs were
lost, the global market share declined, and China went from
importing more than one billion tons of soda ash to being a
major exporter, and is now the United States' largest
competitor.
When the royalty was lowered to two percent from 2006 to
2011, in the midst of a global recession, a number of positive
things happened. Royalties to the government rose to more than
$80 million. The industry not only retained jobs, it created
100 new jobs. The industry nearly doubled its rate of
investment in spending to nearly $150 million annually to
expand capacity and much needed improvements. The program
continued to support education systems as confirmed by the
current and past Governors of Wyoming.
Congress has the opportunity to increase global
competitiveness, increase jobs and reduce global greenhouse
gases by passing this bill.
Thank you for your consideration of our views. I'd be
pleased to take any questions.
[The prepared statement of Mr. von Ahrens follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Barrasso. Thank you very much to each of you.
Mr. Finn, I would like to start, if I could, with you
because I mentioned yesterday's Wall Street Journal article.
Would you discuss some of the challenges that the Port of
Portland is facing in trying to boost exports?
Mr. Finn. Yes, Mr. Chairman.
Historically the Port of Portland and other ports on the
Columbia Snake River system have been an export gateway for
products from the Pacific Northwest and the interior of the
United States and Canada. And we continue, actually, to grow in
that capacity. Bulk products, in particular, continue to be
very strong from the Port of Portland and other Columbia River
ports.
The challenge we face at the Port of Portland is with one
particular kind of cargo and that is containerized cargo. We
have always operated a medium-sized niche container terminal,
primarily for containerized products from Oregon, Washington
and Idaho. Due to some differences between labor and management
over the operation of that container terminal, we have lost
almost all of our container service for the time being.
Efforts are underway to try to restore that container
service, but for the time being we only have one, very limited,
container carrier calling at the Port of Portland.
Senator Barrasso. So then what role does soda ash play in
Portland's strategy going forward?
Mr. Finn. Going forward, Mr. Chairman, soda ash is one of
the many bulk products that form the foundation, really, for
our marine business. Since 1987, soda ash has been a steady
cargo at the Port of Portland, and it's very important,
actually, to our financial foundation that we maintain and try
to grow these kinds of foundational cargos while at the same
time trying to address this other issue.
Senator Barrasso. Ms. Leiter, in your testimony you state,
``The royalty rate reductions from 2006 to 2011 did not appear
to have contributed in a significant way to the creation of new
jobs.''
I would note that the royalty rate reduction was in effect
during one of the worst recessions in decades. I am just
wondering if you think how did the royalty rate reduction,
maybe, help save or preserve existing jobs within the soda ash
industry?
Ms. Leiter. Thanks for the question.
As we say in the written testimony we don't, actually, have
the data to assess. The job rate stayed approximately constant
through those six years, five years, and we don't have the data
to assess what would have happened in the industry during the
recession in the absence of that.
Senator Barrasso. Mr. Douville and Mr. von Ahrens, I wonder
if you have some thoughts and would like to respond to that
same idea of preserving jobs since things have stayed stable in
a time, economically, when our own economy was having
significant challenges?
Mr. von Ahrens. Mr. Chairman, we were not only allowed or
not only able to protect jobs, but we added over 100 jobs
during that time period. Exports were up, production is up, and
Federal revenues are up. Our capital access, as I said in my
testimony, was also up.
Senator Barrasso. Yes.
Is there anything you would like to add, Mr. Douville?
Mr. Douville. Yeah, during the window, exports were up
about 640,000 tons from 2007 through 2011. In the year 2009,
exports were actually down almost 900,000 tons year over year.
So we were able to come back from the dip in 2009, in large
part, because of the royalty rate reduction that we had
received, and the fact that we were able to readjust our
position in a number of these marketplaces.
Senator Barrasso. Okay.
Mr. von Ahrens, in your testimony you stated that during
the royalty rate reduction from 2006-2011, the U.S. soda ash
industry nearly doubled its rate of investment spending more
than $158 million to expand capacity and make needed
improvements, and that approximately 58 percent of your
production is exported. Ten years ago this export to domestic
ratio was the reverse with more than 60 percent of it being
used here at home domestically.
You then explained this change is directly correlated to
the historic fluctuation in the royalty fees that the U.S.
companies pay for mining in Federally-owned lands as an impact.
Mr. Douville, you also say that the royalty rate reduction
has greatly helped to support additional export growth.
This afternoon, Ms. Leiter testified that the royalty rate
reduction from 2006-2011 did not appear to have contributed in
a significant way to increased exports or a notable increase in
capital expenditures.
Would any of you like to respond to that testimony?
Mr. von Ahrens. Mr. Chairman, we believe that the BLM takes
a narrow view to this. When we look at our investments from a
trade perspective, over $300 million of additional trade
balance for the increase from 2007 and 2011, and the numbers do
not include tax revenues resulting in increased production.
Senator Barrasso. Mr. Douville, is there anything else you
would like to add? Then I will give Ms. Leiter an opportunity
to respond.
Mr. Douville. At the same time as I talked about before, we
were up 640,000 tons during the window, and that equated to
about $300 million in trade balance improvement during that
time. So as Mr. von Ahrens said, we were able to find some real
positives in other areas during that time.
Senator Barrasso. Ms. Leiter, anything on that? I do have
another question for you.
Ms. Leiter. I would like to add two things.
The first is that our understanding is that we have seen a
growth in exports and that has largely been due to the close of
Trona or, excuse me, soda ash manufacturing facilities in
various other countries and the U.S. has absorbed that
manufacture.
I'd also like to note that the quantity of U.S. exports
appears to have trended upward from 2011 to the present even as
the royalty rates initially from 2011 to 2013 were restored to
the lease rates and then from 2013 to the present as those
rates were set at four percent. So we've seen a fairly steady
trend upward in exports even as the royalty rate fluctuates in
the background.
And that, I think, is also what I would like to point out
about the job growth as well. It is true that jobs held steady
from 2006 to 2011 but jobs have continued to hold steady and
fluctuate only around 100 jobs even from 2011 to the present as
the royalty rates returned to the lease rates.
Senator Barrasso. Yes, you mentioned the fluctuation in
rates because it was two percent from 2006 to 2012; Congress
enacted legislation and it was four percent from 2013 to 2015.
Your testimony discusses the Department's views on these
effects of the royalty rate reductions.
I am wondering what your thoughts are on the rate reduction
from 2013 to 2015. We heard about the previous years but what
about these last couple of years?
Ms. Leiter. So the figures that I have are for 2000. I
don't have any figures for 2015. The figures that I have for
2013 and 2014 suggest that production has continued to trend
slightly upward. Exports have continued to trend slightly
upward, and jobs have stayed approximately constant. And that
was true in 2010 and 2011 at the background lease rates of
about 5.6 percent, on average, and also in 2013 and 2014 under
the four-percent rate.
Senator Barrasso. Does the Department believe it actually
helped save or create jobs, increase investment, boost
production, and promote exports of soda ash? And you do not
have the numbers for 2015.
Ms. Leiter. Does the Department believe that reducing
royalty rate does those things?
Senator Barrasso. Yes. Help?
Ms. Leiter. No. I think I'd have to say not. [Laughter.]
Senator Barrasso. Would either of you like to respond on
that?
Mr. Douville. If you look at the period of time, and I'll
let Mr. von Ahrens talk about the--any capital that may have
been invested in 2011 going into 2012.
If you look at what's happening today, today is very
similar to what we saw back in 2009. The Chinese are trying to
export their way to achieve some of their GDP objectives, and
we've seen a significant reduction in pricing and a significant
market share grab.
As I mentioned in my testimony, we anticipate this year
that the Chinese will be exporting about 22 percent more than
they did a year ago. So as you look at where we are today, our
position is that, again, we need this support more than ever so
that, again, the benefits that we saw back in '09 we can see
those benefits as we continue to carry forward because the
industry certainly does need to continue to grow.
Senator Barrasso. Yes. Anything you would like to add?
Mr. von Ahrens. Thank you, Chairman.
In the front part of the question is that exports are up.
Jobs are up. Production is up. Federal revenues are up, and our
capital investment is up.
But, as Mr. Douville mentioned in his testimony, with the
headwinds, there's a lag in the impact to our business and
we're starting to see that impact now as the yuan is revalued
and the consistent support that the Chinese get on export. We
are seeing those exports go up, and that will impact us as we
go forward.
Senator Barrasso. Well since you mentioned devaluation and
the currency, if we could just spend a couple minutes on this:
China's unfair trade practices.
Since 2009, China has given its synthetic soda ash
producers a nine percent rebate on China's value added tax.
More recently, China devalued its currency by 4.4 percent. It
seems that these actions give Chinese soda ash producers what
has been described as a $27 per metric ton benefit.
Could you explain what that actually means so people
understand how that fits into all of this, this $27 per metric
ton benefit?
Mr. Douville. Yeah.
Senator Barrasso. Whoever is the best on the panel?
Mr. Douville. Thank you, I can take that.
If you look at the current market pricing, it's around $200
per metric ton, FOB China. So the nine-percent rebate that they
get would be about $18 of the $27. The 4.4 percent devaluation
of the currency would be another $8.80, so that's how we get to
the approximately $27 benefit.
This year, they're going to export around 2.2 million tons,
so together when you multiply that out it's around a $60
million benefit for the Chinese industry. And we saw directly,
after the August 11th devaluation, an immediate response from
the Chinese producers into the marketplace looking to increase
exports. And our market share is definitely at risk.
Senator Barrasso. To what extent would our bill, if
enacted, reduce this unfair benefit?
Mr. Douville. From what I understand, the CBO has scored
this at about $16 million per year and certainly not the full
$60 million that the Chinese exporters are seeing today. And if
there's a devaluation, again at that $200 number, for every one
percent that's devalued it's another $2 per ton. So the 15 to
20 percent could be another $30 to $40 per ton.
Senator Barrasso. That is the question then if in recent
media reports that we have seen, China is considering a further
15 to 20 percent devaluation in the currency.
Mr. Douville. Yeah.
Senator Barrasso. So additive, you would have another 30 to
40 based on the $2 per ton.
Mr. Douville. Right.
Senator Barrasso. Okay.
I want to ask you about ANSAC for a second.
You have written at least five letters to the
Administration asking them to encourage China to eliminate the
value added tax rebate to its soda ash producers. Since 2009,
members of the House and Senate have also sent letters to the
Administration urging the elimination of China's value added
tax rebate for soda ash producers.
I am going to enter these letters into the records after
today's hearings.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Barrasso. Would you elaborate on the efforts that
ANSAC and others in the soda ash industry have taken to
eliminate China's rebate, China's value added tax rebate?
Mr. Douville. Yeah. It's in support of the, with the
Industrial Minerals Association which represents all of the
soda ash companies here in the U.S., as you said, have sent
letters to the U.S. Trade Representative's Office, to the
Secretary of State and to the Secretary of Commerce, I believe,
I'm sorry, Secretary of the Treasury, the three of those, over
the last five, six years. To date, we have received from the
USTR a commitment that it will be included in JCCT discussions,
and to date we are still pushing hard for that to happen.
Senator Barrasso. Could I ask you about any other unfair
trade barriers that are out that countries, other than China,
have imposed on American soda ash exports?
Mr. Douville. Yeah, that's a great question. There's three
in particular I'd like to talk about.
India has a market of around three million tons of demand.
If you look at the future growth opportunities for U.S. soda
ash, the Indian per capita consumptions are on five pounds per
person. In the U.S., it's around 35. As India matures and that
number grows from five to 35, you're talking about a 14 million
ton opportunity. The Indian market has both import tariffs on
U.S. soda ash as well as significant dumping duties for very
diminimus quantities that have been shipped there.
In Vietnam, Mr. von Ahrens talked about the issue there
with the soda ash plant that started up in June of this year
with no environmental controls for a synthetic plant with a
mass kill of fish for local fisherman. The government's
response was we will look at relocating individuals and not so
much as we will look at, you know, including environmental
controls. But the two-percent that was added into the import
duty for Vietnam started only about 12 months ago. So that was
totally to support this new plant that came on.
In Taiwan, there's a 3.5 percent import duty with no soda
ash operation there. And because of the Chinese trade
agreements with Vietnam and Taiwan, they don't have import
duties on either Vietnam or Taiwan.
Senator Barrasso. Yes, and what steps have you taken to
reduce these unfair trade practices?
Mr. Douville. We've sent letters to the Office. I don't
have the name here, unfortunately, but to one of the offices
within Taiwan, within Taipei. The responses we have gotten back
are that they'd be interested in a larger free trade agreement
but they're not interested in talking about individual
products.
On a larger level, the Trans Pacific Partnership, we've
been very supportive of that as well as the Trade Promotion
Authority. If that were to happen, we would see benefits in
both Vietnam and Japan, which could amount to a significant
benefit for us.
Senator Barrasso. Thank you.
Mr. von Ahrens, U.S. natural soda ash producers, according
to your testimony, employ more than 3,000 full-time, skilled
workers. About 1,000 of these are represented by the United
Steel Workers. You go on to explain the production of soda ash
from U.S. natural resources in Wyoming and California is done
by skilled workers with an average salary, I just want to make
sure I got it right, an average salary of more than $85,000 per
year and in very small rural communities.
Mr. von Ahrens. Yes, and that number has actually gone up
to almost $122,000 now.
Senator Barrasso. Could you explain the importance of the
soda ash industry, the jobs the industry provides to rural
communities in Wyoming and in California?
Mr. von Ahrens. During the last recession we actually did
not even lose jobs in Sweetwater County. They look at us as a
very stable employer. The industry, by far, is valued by the
region as well as the state. They are some of the best jobs in
the world.
Senator Barrasso. Mr. Finn, would you explain the
importance of the jobs that soda ash, the soda ash industry,
supports at the Port of Portland?
Mr. Finn. Yes, Mr. Chairman.
As I mentioned in my remarks, we estimate that the average
salary of those jobs to be about $50,400, which constitutes a
good, healthy family wage job with benefits. The people
employed by the soda ash, handling it at the Port of Portland
include longshore labor, railway men, tugboat operators, river
and bar pilots and several other occupations that depend on the
export of soda ash.
Senator Barrasso. Mr. von Ahrens, we talked a little bit
about the two methods of producing soda ash, the natural
method, utilizing Trona, and the synthetic process. The natural
process, with significant environmental advantages over the
synthetic process, it has always appeared that way to me. The
synthetic process, I know, generates a large carbon footprint
and has negative environmental impacts. I understand that all
soda ash producers in the United States produce natural soda
ash while China is the largest producer of synthetic soda ash.
Would you elaborate on some of the environmental advantages
that natural soda ash has over synthetic soda ash?
Mr. von Ahrens. Yes.
The primary is energy. To make the conversion from Trona to
soda ash it takes about 30, just under 40 percent less energy
to make that conversion as opposed to all synthetic
manufacturing. In addition, there's other chemicals used in the
process which leads to liquid and air emissions.
Senator Barrasso. Also is it fair to say that for people
who want to reduce the carbon emissions, they really ought to
support taking steps to ensure the U.S. soda ash producers grow
our market over, say, China synthetic soda ash producers?
Mr. von Ahrens. Absolutely, including our customers who are
looking at buying natural soda ash because of the natural lower
greenhouse gas footprint as submitted in life cycle analysis.
They see it as a benefit as well.
Senator Barrasso. I want to go ahead and start now with Ms.
Leiter and then ask any of the other witnesses if there is
anything else you would like to add.
Ms. Leiter. I think I'd just like to emphasize that our
mandate is to provide a fair return to the American taxpayer,
and the best evidence we have in front of us of that fair
market rate is the average of the private and state lease rates
which is about 5.6. This would reduce the royalty rate for soda
ash produced on Federal lands significantly below that fair
market rate. It would reduce royalties to the Federal and State
treasury.
And all of the data we have suggests that its only impact
is that manufacturers of soda ash, quite sensibly, shift their
production from private and state over to Federal leases but
that it does not have the beneficial impacts on soda ash
production, jobs and exports that the Committee is looking for.
Senator Barrasso. Mr. Douville, is there anything you would
like to add?
Mr. Douville. During the window from '06 through 2014--I
talked before about just the window from '07 to '11. But during
the window from '06 to '14 is about 1.4 million tons of
increased exports during that window, the majority of which
came during the times when the soda ash royalty was reduced. So
the benefit on the export side has certainly been there.
Senator Barrasso. Okay.
Mr. Finn, anything you would like to add?
Mr. Finn. No, sir. All I want to do is thank you for
introducing us to S. 2031, and we urge the Committee to approve
it.
Senator Barrasso. Thanks.
Mr. von Ahrens?
Mr. von Ahrens. My one request is that when we look at the
data, we don't look at any single year. Our mine plans are 20
years long. Our business plans are five years long.
As we see the royalty rate potentially going up tomorrow,
it will have an impact that will show up a year or two from
now. And as Mr. Douville talked about, the headwinds are
already upon us.
That's all I have to say, sir.
Senator Barrasso. Well, thank you.
I want to thank all of you for being here. Before
concluding the hearing I would like to enter into the record
letters and testimony in support of the bill from the Governor
of Wyoming, Matt Mead, his predecessor, Governor Dave
Friedenthal, Natural Soda LLC, the Glass Packaging Institute,
the Beer Institute and Union Pacific Railroad.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Barrasso. I want to thank each of you for being
here today. Thank you for your time.
Some of the other members may submit written questions. I
ask that you please promptly respond. The hearing record will
be open for two weeks.
With that, the hearing is adjourned.
[Whereupon, at 3:25 p.m. the hearing was adjourned.]
APPENDIX MATERIAL SUBMITTED
----------
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[all]