[House Report 114-236]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 114-236
======================================================================
AMERICAN SODA ASH COMPETITIVENESS ACT
_______
July 29, 2015.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Bishop of Utah, from the Committee on Natural Resources, submitted
the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 1992]
[Including cost estimate of the Congressional Budget Office]
The Committee on Natural Resources, to whom was referred
the bill (H.R. 1992) to reduce temporarily the royalty required
to be paid for sodium produced on Federal lands, 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. 1992 is to reduce temporarily the
royalty required to be paid for sodium produced on Federal
lands.
BACKGROUND AND NEED FOR LEGISLATION
Soda ash (sodium carbonate) is primarily used for glass-
making, which consumes about half of soda ash output. Another
quarter is used by the chemical industry. Other uses include
soap, paper manufacturing and water treatment. In the United
States, soda ash is refined from trona, a naturally occurring
mineral, or from naturally occurring sodium-carbonate bearing
brines. China makes a synthetic soda ash that requires more
energy and uses a less environmentally-friendly process.
Soda ash is regulated by the Bureau of Land Management
(BLM) under the Mineral Leasing Act of 1920 (30 U.S.C. 181 et
seq.), under which a royalty is assessed on refined soda ash
and trona. The Soda Ash Royalty Reduction Act of 2006 was
included in the National Heritage Areas Act of 2006, Public Law
109-338. The Soda Ash Royalty Reduction Act reduced the royalty
on soda ash to 2 percent, the minimum required in the Mineral
Leasing Act of 1920.
Prior to the 2006 royalty relief legislation being enacted,
the U.S. soda ash industry was experiencing increased pressure
from state-sponsored Chinese companies (state owned) operating
under lax environmental standards, coupled with high domestic
royalty rates that ranged between 5 and 8 percent.
Between 1997 (the year after BLM raised royalty rates on
soda ash) and 2000, China overtook the United States as the
worlds largest exporter of soda ash. By 2003, the growth in
domestic exports had grown by only a few percentage points
since 1997, and approximately 1000 jobs in the domestic soda
ash mining industry had been lost. Between October 2006 and
September 2011, when the 2 percent royalty rate was in place,
the soda ash industry was able to reverse the downward trend in
exports, and was able to add jobs, including during the
recession.
During fiscal years 2003-2006 when the rate was 6 percent,
the federal government collected $74.4 million in royalties on
soda ash and trona. In fiscal years 2007-2011 when the royalty
rate was reduced to 2 percent, the federal government took in
$82 million in royalties. This includes the five-month period
following the 2008 market crash where demand for mineral
commodities fell sharply.
In the four years prior to the October 2006 royalty rate
reduction, the average sale of soda ash was 4,186,172 tons per
year. During that time period the price per ton averaged
$81.82. During the royalty reduction period, the average sale
of soda ash was 6,713,202 tons per year, and the price per ton
averaged $128.86.
Maximum sales of soda ash occurred in fiscal year 2008 and
reached 7,596,799 tons. The economic downturn that began on
September 29, 2008, affected commodity prices for more than a
five month period and is reflected in the sales for fiscal year
2009, which totaled 6,193,071 tons.
In October 2011, BLM reinstated the 6 percent royalty--this
was a discretionary decision. In fiscal year 2012 sales of soda
ash fell to 5,480,816 tons; however, with the 6 percent royalty
rate and increase in the average price of the commodity to
$151.04, royalty revenue doubled from the previous year. Sales
increased by more than 700,000 tons in fiscal year 2013 and
fell back again in fiscal year 2014. Figures for fiscal year
2015 are not available.
Domestic production of soda ash dropped an average of 13
percent in the two years following the royalty rate increases
in fiscal year 2012. Congress included a royalty reduction of 4
percent in the Helium Stewardship Act of 2013 (Public Law 113-
40, section 10) that expires at the end of the current fiscal
year.
COMMITTEE ACTION
H.R. 1992 was introduced on April 23, 2015, by Congressman
Paul Cook (R-CA). The bill was referred to the Committee on
Natural Resources, and within the Committee to the Subcommittee
on Energy and Mineral Resources. On June 10, 2015, the Natural
Resources Committee met to consider the bill. The Subcommittee
was discharged by unanimous consent. Congressman Alan S.
Lowenthal (D-CA) offered an amendment designated 001; it was
not adopted by a roll call vote of 12 to 18, as follows:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Congresswoman Norma J. Torres (D-CA) offered an amendment
designated 002; it was not adopted by a roll call vote of 14 to
20, as follows:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
No additional amendments were offered, and the bill was
ordered favorably reported to the House of Representatives on
June 11, 2015, by a bipartisan roll call vote of 22 to 12, as
follows:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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 Natural Resources' oversight findings and
recommendations are reflected in the body of this report.
COMPLIANCE WITH HOUSE RULE XIII
1. Cost of Legislation. Clause 3(d)(1) 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)(2)(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. 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. 1992--American Soda Ash Competitiveness Act
Summary: H.R. 1992 would require the Department of the
Interior to charge a 2 percent royalty on the value of soda ash
and related sodium compounds produced on federal lands for a
five-year period following enactment of the bill. Under current
law, CBO expects the average royalty rate to be about 6
percent, beginning in 2016. About half of the royalties
collected by the federal government are paid to the states
where the minerals are produced. Thus, enacting the bill would
reduce both offsetting receipts (a credit against direct
spending) and the subsequent payments to states stemming from
those royalties.
As a result, CBO estimates that enacting H.R. 1992 would
increase net direct spending by $80 million over the 2016-2020
period; therefore, pay-as-you-go procedures apply. Enacting
H.R. 1992 would not affect revenues.
H.R. 1992 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 1992 is shown in the following table.
The costs of this legislation fall within budget function 300
(natural resources and environment).
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By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016-2020 2020-2025
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CHANGES IN DIRECT SPENDING
Estimated Budget Authority.................................. 16 16 16 16 16 0 0 0 0 0 80 80
Estimated Outlays........................................... 16 16 16 16 16 0 0 0 0 0 80 80
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Basis of estimate: For this estimate, CBO assumes that the
legislation will be enacted near the beginning of fiscal year
2016.
H.R. 1992 would reduce the royalty rate on the value of
soda ash and certain related minerals produced on federal lands
to 2 percent for a five-year period following enactment of the
bill. Under current law, the royalty rate on soda ash is
expected to increase from 4 percent to 6 percent near the
beginning of 2016. Because royalty rates charged on state and
private lands will probably be higher than 2 percent, CBO
expects that, under the bill, the amount of soda ash and other
affected minerals produced on federal lands would be greater
over the next five years than it would be under current law.
However, any increase in production on federal land would not
generate enough additional royalty revenue to offset the loss
of receipts due to the lower royalty rate through 2020, CBO
estimates.
In 2011, the last year in which the royalty rate was set at
2 percent, firms produced about 9 million tons of soda ash and
related products on federal lands and the federal government
received net royalties totaling $11 million. (About half of all
federal royalties collected on the affected minerals are paid
to states where those minerals are produced.) Over the 2012-
2013 period, the Bureau of Land Management assessed an average
royalty rate of about 6 percent. Production of soda ash and
related products decreased to about 7.5 million tons in those
years; however, net royalty collections increased to an average
of about $27 million a year. When the royalty rate on soda ash
and related products was reduced to about 4 percent in 2014,
production on federal land increased slightly, while net
royalty collections decreased by about $6 million from the
previous year.
Based on information from the Office of Natural Resources
Revenue, CBO estimates that, under current law, the federal
government's net royalty receipts from soda ash and related
minerals will total between $25 million and $30 million a year
over the next five years. Under the bill, CBO estimates that
net royalties would total roughly $10 million annually over
that period. Thus, CBO estimates that enacting H.R. 1992 would
reduce net offsetting receipts by about $16 million a year over
the 2016-2020 period.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays that are subject to those
pay-as-you-go procedures are shown in the following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 1992 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON NATURAL RESOURCES ON JUNE 11, 2015
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By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015-2020 2015-2025
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NET INCREASE IN THE DEFICIT
Statutory Pay-As-You-Go Impact....................... 0 16 16 16 16 16 0 0 0 0 0 80 80
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Intergovernmental and private-sector impact: H.R. 1992
contains no intergovernmental or private-sector mandates as
defined in UMRA. The royalty reduction required by the bill
would reduce federal payments to Arizona, California,
Louisiana, Colorado, New Mexico, Utah, and Wyoming by about $80
million over the 2016-2020 period.
Estimate prepared by: Federal Costs: Jeff LaFave and Ben
Christopher; Impact on State, Local, and Tribal Governments:
Jon Sperl; Impact on the Private Sector: Amy Petz.
Estimate approved by: H. Samuel Papenfuss, Deputy Assistant
Director for Budget Analysis.
2. Section 308(a) of 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. The Congressional Budget Office
estimates that enacting H.R. 1992 would increase net direct
spending by $80 million over 2016-2020.
3. General Performance Goals and Objectives. As required by
clause 3(c)(4) of rule XIII, the general performance goal or
objective of this bill is to reduce temporarily the royalty
required to be paid for sodium produced on Federal lands.
EARMARK STATEMENT
This bill does not contain any Congressional earmarks,
limited tax benefits, or limited tariff benefits as defined
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of
the House of Representatives.
COMPLIANCE WITH PUBLIC LAW 104-4
This bill contains no unfunded mandates.
COMPLIANCE WITH H. RES. 5
Directed Rule Making. The Chairman does not believe that
this bill directs any executive branch official to conduct any
specific rule-making proceedings.
Duplication of Existing Programs. This bill does not
establish or reauthorize a program of the federal government
known to be duplicative of another program. Such program was
not included in any report from the Government Accountability
Office to Congress pursuant to section 21 of Public Law 111-139
or identified in the most recent Catalog of Federal Domestic
Assistance published pursuant to the Federal Program
Information Act (Public Law 95-220, as amended by Public Law
98-169) as relating to other programs.
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.
DISSENTING VIEWS
This bill is an entirely unnecessary giveaway to a healthy
industry that will cost American taxpayers tens of millions, if
not hundreds of millions of dollars, while doing nothing to
achieve the positive benefits that the supporters of this
legislation claim it will bring.
Similar royalty relief for the soda ash industry was
enacted in 2006, and after five years of the lower royalty the
Department of the Interior concluded that the royalty rate
reduction, ``does not appear to have contributed in a
significant way to the creation of new jobs within the
industry, to increased exports, or to a notable increase in
capital expenditures to enhance production.'' The report
further concluded that the loss in royalties was over $150
million, roughly five times the initial estimate of the cost.
Furthermore, in the two years after the previous royalty
relief expired, under every relevant metric, the soda ash
industry performed better than it did with that relief in
place. During the royalty relief period production dropped,
U.S. market share dropped, employment went down, and the
average rate of export growth was 3.4 percent. In the two years
after royalty relief expired, production went up, U.S. market
share went up, employment increased, and the average rate of
export growth was 8.8 percent.
The Majority claims that the royalty relief did not cost
taxpayers much because royalty collections from 2007-2011 were
only $2 million below the collections from 2002-2006. However,
the price of soda ash more than doubled between 2004 and 2009,
which is the only reason that total collections were able to
keep pace.
None of the reasons the Majority provides for supporting
this bill are substantiated by the facts. Vague arguments about
the need to remain competitive and increase employment could be
made for every extractive resource industry in the nation, yet
lowering royalty rates for no reason simply cheats the American
people of their fair share of revenues from the development of
public resources on public land. The situation is even worse
for the States: the Interior Department found that one of the
main consequences of the previous royalty relief was that
companies would move their operations from state lands, where
states receive all the royalties, to federal lands, where
states only receive half.
During markup on H.R. 1992, the Majority rejected an
amendment by Energy and Mineral Resources Subcommittee Ranking
Member Lowenthal that would have protected taxpayers by ending
the royalty relief after two years if that relief was not
having a measurable positive impact on soda ash production on
employment. The Majority also rejected an amendment by Ms.
Torres that would have made royalty relief contingent on a
determination that the relief would not result in less revenue
going to schools. Schoolchildren should not be harmed in order
to provide handouts to soda ash mining companies.
H.R. 1992 has no redeeming benefits for the American
public, is completely unsupported by our previous experience
with soda ash royalty relief, and is nothing more than an $80
million giveaway of taxpayer money.
Raul Grijalva,
Ranking Member, Committee on
Natural Resources.
Alan Lowenthal,
Ranking Member, Subcommittee
on Energy and Mineral
Resources.
Grace Napolitano.
Norma Torres.
[all]