[House Report 108-739]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-739
======================================================================

 
                  POTASH ROYALTY REDUCTION ACT OF 2004

                                _______
                                

October 6, 2004.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Pombo, from the Committee on Resources, submitted the following

                              R E P O R T

                        [To accompany H.R. 4984]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Resources, to whom was referred the bill 
(H.R. 4984) to provide that the royalty rate on the output from 
Federal lands of potassium and potassium compounds from the 
mineral sylvite in the 5-year period beginning on the date of 
the enactment of this Act shall be reduced to 1.0 percent, and 
for other purposes, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                          PURPOSE OF THE BILL

    The purpose of H.R. 4984 is to provide that the royalty 
rate on the output from Federal lands of potassium and 
potassium compounds from the mineral sylvite in the 5-year 
period beginning on the date of the enactment of this Act shall 
be reduced to 1.0 percent, and for other purposes.

                  BACKGROUND AND NEED FOR LEGISLATION

    Potash is used primarily as an agricultural fertilizer 
(plant nutrient) because it is a source of soluble potassium, 
one of the three primary plant nutrients; the others are fixed 
nitrogen and soluble phosphorus. Modern agricultural practice 
uses these primary nutrients in large amounts to assure plant 
health and proper maturation. The fertilizer industry used 
about 85 percent of U.S. potash 2003 sales (imports and 
domestic production), and the chemical industry used the 
remainder. There are no substitutes for potassium as an 
essential plant nutrient and an essential nutritional 
requirement for animals and humans.
    The domestic potash industry is being threatened by foreign 
producers in countries with substantial state support. 
Additionally, because potash is primarily used as a fertilizer, 
the economics of the industry are almost directly tied to the 
farm economy. During the 1980s, farm production commonly 
yielded large commodity inventories that depressed market 
prices. Farmers lowered production costs, thereby decreasing 
potash usage which drove down potash prices and sales volume. 
Support programs to reduce farm product oversupply reduced 
acreage in production. The farm economy subsequently purchased 
less equipment, chemicals and fertilizers with negative impacts 
on the potash industry. The cyclic nature of the farm economy 
does not allow for relaxed vigilance with respect to the health 
of the potash market.
    The United States Geological Survey reported that the 2003 
production value of marketable potash was about $260 million. 
Domestic potash is produced in Michigan, New Mexico, and Utah. 
Most of the domestic production is from southeastern New 
Mexico, providing more than 70 percent of total U.S. producer 
sales. A 5-year reduction in royalty rates would provide the 
industry the ability to employ new and more efficient 
production methods in potash mining, sustain and create new 
jobs, extend the life of existing deposits and make 
technological advances that will expand the availability of the 
Nation's potash resources.
    H.R. 4984 provides that for a five-year period the royalty 
rate on the quantity or gross value of the output from federal 
lands of potassium compounds from the mineral sylvite at the 
point of shipment to market shall be 1.0 percent. The bill 
prescribes implementation guidelines under which fifty percent 
of such royalties, together with interest earned from the date 
of payment, shall be refunded by the Secretary of the Treasury 
to the payor of the royalties to be used solely for land 
reclamation purposes. The Secretary of the Interior is required 
to assess the impact of the royalty reduction and report to 
Congress during the fifth year of the royalty reduction. The 
report is to include recommendations on whether the reduced 
royalty rate should continue after the five year period.

                            COMMITTEE ACTION

    Representative Steven Pearce (R-NM) introduced H.R. 4984 on 
July 22, 2004. The bill was referred to the Committee on 
Resources, and within the Committee to the Subcommittee on 
Energy and Mineral Resources. On September 9, 2004, the 
Subcommittee held a hearing on the bill. On September 15, 2004, 
the Full Resources Committee met to consider the bill. No 
amendments were offered and the bill was ordered favorably 
reported to the House of Representatives by unanimous consent.

            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Resources' oversight findings and recommendations 
are reflected in the body of this report.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Article I, section 8 of the Constitution of the United 
States grants Congress the authority to enact this bill.

                    COMPLIANCE WITH HOUSE RULE XIII

    1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(3)(B) 
of that rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.
    2. Congressional Budget Act. As required by clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, this 
bill does not contain any new budget authority, credit 
authority, or an increase or decrease in revenues or tax 
expenditures. According to the Congressional Budget Office, 
enactment of this bill would increase direct spending by $10 
million over the 2005-2009 time period.
    3. General Performance Goals and Objectives. The bill does 
not authorize funding and therefore clause 3(c)(4) of rule XIII 
of the Rules of the House of Representatives does not apply.
    4. Congressional Budget Office Cost Estimate. Under clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 403 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for this bill from the Director of the Congressional Budget 
Office:

H.R. 4984--Potash Royalty Reduction Act of 2004

    Summary: H.R. 4984 would temporarily reduce the federal 
royalty rate charged to producers of potassium and potassium 
compounds (potash) on federal land. The bill would direct the 
Secretary of the Treasury, without further appropriation, to 
return the federal share of potash royalties to producers to 
support projects to reclaim federal land where potash is mined.
    CBO estimates that enacting H.R. 4984 would increase direct 
spending by $2 million in 2005 and $10 million over the 2005-
2009 period. Enacting the bill would not affect revenues. H.R. 
4984 contains no intergovernmental or private-sector mandates 
as defined in the Unfunded Mandates Reform Act (UMRA). Enacting 
this legislation would, however, result in a reduction in 
payments to the states where potash is mined totaling $1.3 
million annually over the 2005-2009 period. The bill would 
impose no other costs on state, local, or tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 4984 is shown in the following table. 
The costs of this legislation fall within budget function 300 
(natural resources and environment).

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal year, in millions of dollars--
                                                                    --------------------------------------------
                                                                       2005     2006     2007     2008     2009
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING

Estimated Budget Authority.........................................        2        2        2        2        2
Estimated Outlays..................................................        2        2        2        2        2
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: CBO estimates that enacting H.R. 4984 
would increase direct spending by $2 million a year over the 
next five years. (The bill would not affect direct spending 
after 2009.) That amount includes the cost of providing royalty 
relief and other payments to producers of potash.
    H.R. 4984 would reduce the federal royalty rate charged to 
producers of potash on federal land over the 2005-2009 period. 
Based on information from the Minerals Management Service about 
the level of potash royalties in recent years, CBO estimates 
that providing royalty relief under H.R. 4984 would reduce 
gross offsetting receipts (a credit against direct spending) by 
$2.6 million a year over the 2005-2009 period. Because states 
generally receive half of those royalties, we also estimate 
that direct spending for payments to states would fall by $1.3 
million annually over that period, resulting in a net increase 
in direct spending of $1.3 million in 2005 and $6.5 million 
over the next five years for this provision.
    Over that same period, the bill also would direct the 
Secretary of the Treasury, without further appropriation, to 
return the federal share of potash royalties to producers to 
support projects to reclaim federal land where potash is mined 
(thus, resulting in no net receipts to the federal government). 
CBO estimates that those payments would increase direct 
spending by nearly $700,000 in 2005 and $3.5 million over the 
next five years.
    Intergovernmental and private-sector impact: H.R. 4984 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. Enacting this legislation would, however, 
result in a reduction in payments to the states where potash is 
mined totaling $1.3 million annually over the 2005-2009 period. 
The bill would impose no other costs on state, local, or tribal 
governments.
    Estimate prepared by: Federal Costs: Megan Carroll; Impact 
on State, Local, and Tribal Governments: Marjorie Miller; and 
Impact on the Private Sector: Karen Raupp.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                    COMPLIANCE WITH PUBLIC LAW 104-4

    This bill contains no unfunded mandates.

                PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

    This bill is not intended to preempt any State, local or 
tribal law.

                        CHANGES IN EXISTING LAW

    If enacted, this bill would make no changes in existing 
law.

                                  
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