House Report 115-455 - AMERICAN SODA ASH COMPETITIVENESS ACT

[House Report 115-455]
[From the U.S. Government Publishing Office]

115th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 115-455

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AMERICAN SODA ASH COMPETITIVENESS ACT

_______

December 11, 2017.--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. 1399]

[Including cost estimate of the Congressional Budget Office]

The Committee on Natural Resources, to whom was referred
the bill (H.R. 1399) 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. 1399 is to reduce temporarily the
royalty required to be made 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 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
world's 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, 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. In fiscal year 2015 the
U.S. industry exported 6.7 million tons of soda ash and this
increase over the 2000 level of 3.9 million tons has been
attributed to the lower federal royalty rate, which had allowed
the soda ash industry to compete globally. The royalty rate
increased to 6% in fiscal year 2016, with total tonnage mined
on federal lands at approximately 4.7 million tons as compared
to 6.7 million tons in the previous fiscal year. The raising of
the royalty rate resulted in fewer royalties being collected on
soda ash mined on federal lands.
Congress included a royalty reduction of 4 percent in the
Helium Stewardship Act of 2013 (Public Law 113-40, section 10)
that expired at the end of fiscal year 2015. H.R. 1399 reduces
the royalty rate for soda ash from 6% to 2% for five years.

COMMITTEE ACTION

H.R. 1399 was introduced on March 7, 2017, 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 22, 2017, 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 agreed to by voice vote. No further amendments were
offered, and the bill was ordered favorably reported to the
House of Representatives on June 27, 2017, by a bipartisan roll
call vote of 27 ayes and 9 nays, as follows:

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 AND CONGRESSIONAL BUDGET ACT

1. Cost of Legislation and the Congressional Budget Act.
With respect to the requirements of clause 3(c)(2) and (3) of
rule XIII of the Rules of the House of Representatives and
sections 308(a) and 402 of the Congressional Budget Act of
1974, the Committee has received the following estimate for the
bill from the Director of the Congressional Budget Office:

U.S. Congress,
Congressional Budget Office,
Washington, DC, December 5, 2017.
Hon. Rob Bishop,
Chairman, Committee on Natural Resources,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1399, the American
Soda Ash Competitiveness Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Jeff LaFave.
Sincerely,
Keith Hall,
Director.
Enclosure.

H.R. 1399--American Soda Ash Competitiveness Act

Summary: H.R. 1399 would require the Department of the
Interior (DOI) to charge a 2 percent royalty on the value of
sodium compounds and related products produced on federal lands
for a five-year period following enactment.\1\ Under current
law, the royalty rate is about 6 percent. 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, which would have the
effect of increasing direct spending, and the subsequent
payments to states stemming from those royalties.
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\1\Sodium compounds and related products include soda ash,
anhydrous sodium sulfite, borax-decahydrate, borax-pentahydrate, boric
acid, sodium bi-carbonate, sodium bisulfite, sodium sesquicarbonate,
sulfide, and trona. Over the 2012-2016 period, soda ash accounted for
87 percent of the total production of those minerals.
---------------------------------------------------------------------------
CBO estimates that enacting H.R. 1399 would increase net
direct spending by $50 million over the 2018-2027 period.
Because the bill would affect direct spending pay-as-you-go
procedures apply. Enacting the bill would not affect revenues.
Enacting H.R. 1399 would not increase net direct spending
or on-budget deficits by more than $2.5 billion in any of the
four consecutive 10-year periods beginning in 2028.
H.R. 1399 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. 1399 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--
-------------------------------------------------------------------------------------------
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-2022 2018-2027
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INCREASES OR DECREASES (-) IN DIRECT SPENDING

Estimated Budget Authority.................................. 14 13 13 12 11 -6 -1 -2 -2 -2 63 50
Estimated Outlays........................................... 14 13 13 12 11 -6 -1 -2 -2 -2 63 50
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Basis of estimate: For this estimate, CBO assumes that the
legislation will be enacted around the beginning of calendar
year 2018.

Background

The royalty rate on sodium compounds produced on federal
lands has fluctuated in recent years because of Congressional
action. Legislation, which was similar to H.R. 1399, was
enacted to lower the royalty rate from 6 percent to 2 percent
for the five-year period from 2007 through 2011, after which
the rate returned to 6 percent for 2012 and 2013. In 2014,
legislation lowering the royalty rate to 4 percent for 2014 and
2015 was enacted. Beginning in 2016, the royalty rate returned
to 6 percent and CBO expects that it will remain at 6 percent
under current law (see Figure 1).

In 2011, the last year in which the royalty rate was set at
2 percent, firms produced 7.8 million tons of sodium compounds
on federal lands, and the federal government received net
royalties totaling $11 million. (About half of all gross
federal royalties collected from the affected minerals
production are paid to the states where those minerals are
produced.) In 2012 and 2013, when DOI assessed a royalty of 6
percent, annual production of sodium compounds decreased to an
average of 6.6 million tons; however, net royalty collections
increased to an annual average of $27 million.
During 2014 and 2015, when the royalty rate on sodium
compounds declined to 4 percent, production on federal lands
increased to an average of 7.3 million tons while net royalty
collections decreased to an average of $22 million a year. In
2016, when the royalty rate was again at 6 percent, production
on federal lands fell by about 30 percent to 5.5 million tons
and royalty collections declined slightly (by about $100,000)
from 2015. Using information from DOI, CBO expects that the
amount of those minerals produced on federal land in 2017 will
be about 30 percent lower than in 2015 (the last year the
royalty rate was 4 percent) but net royalties will be roughly
$3 million higher because of higher mineral prices. (Actual
figures for fiscal year 2017 are not yet available.)

Direct spending

CBO estimates that by reducing the royalty rate, enacting
H.R. 1399 would reduce net offsetting receipts (and thus
increase direct spending) by $50 million over the 2018-2027
period (see Figure 2).

Over the 2018-2022 period, CBO estimates, enacting H.R.
1399 would reduce offsetting receipts from royalties on sodium
compounds by $63 million. We estimate that, under current law,
production of those compounds on federal lands will increase at
a slightly slower pace than the expected growth in the soda ash
industry as a whole (about 2 percent a year), with annual
production increasing from 5.3 million tons to 5.6 million tons
and net royalty receipts increasing from $23 million to $27
million annually over that period.
Under H.R. 1399, CBO estimates that production of sodium
compounds on federal lands would be significantly higher than
under current law, ranging from 6.1 million tons in 2018 to 8.9
million tons in 2022. That increase would stem primarily from
firms shifting operations from nonfederal lands to federal
lands to take advantage of the lower royalty rate. Despite the
higher production levels, net receipts would be significantly
lower than under current law because of the much lower royalty
rate, and would total $10 million in 2018 and $16 million in
2022, CBO estimates.
In 2023 and 2024, the first two years after the royalty
rate would return to 6 percent, CBO expects that production
levels would fall sharply as firms rapidly shift operations
back to nonfederal lands that they would have bypassed to take
advantage of reduced royalties on federal lands. After 2024,
production on federal lands would increase at a higher rate
than average industry growth until the federal share of
production reaches about 50 percent, CBO estimates. The lower
costs of production over the 2018-2022 period would prompt
firms to increase production capacity, which would result in
higher production and a greater share of the global market.
Over the 2023-2027 period, CBO estimates that production of
sodium compounds on federal lands would be about 500,000 tons
higher each year, on average, and net receipts would be $13
million higher over that period than estimated receipts under
current law.
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. 1399 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON NATURAL RESOURCES ON JUNE 27, 2017
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By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-2022 2018-2027
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NET INCREASES OR DECREASES (-) IN THE DEFICIT

Statutory Pay-As-You-Go Impact.............................. 14 13 13 12 11 -6 -1 -2 -2 -2 63 50
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Increase in long-term direct spending and deficits: CBO
estimates that enacting the legislation would not increase net
direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2028.
Mandates: H.R. 1399 contains no intergovernmental or
private-sector mandates as defined in UMRA. The royalty
reduction required by the bill would reduce federal payments to
California, Colorado, New Mexico, Utah, and Wyoming by about
$60 million over the 2018-2022 period.
Estimate prepared by: Federal costs: Jeff LaFave; Mandates:
Jon Sperl and Amy Petz.
Estimate approved by: H. Samuel Papenfuss, Deputy Assistant
Director for Budget Analysis.
2. 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 reduce temporarily the royalty
required to be made 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. This bill does not contain any
directed rule makings.
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 to 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.'' (Report appended
to these views.)
Furthermore, in the two years after that 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. In Fiscal Years 2014 and 2015 the soda ash
industry again received a royalty rate cut, yet employment,
production, and exports have stayed flat from 2013 through
2016.
The Majority has claimed 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. Soda ash prices are currently at their
highest levels in decades, which makes it even less necessary
to provide royalty relief to this industry, and makes the
potential royalty revenue loss even greater.
The official CBO score of $50 million in automatically lost
revenues to the federal government is only half of the issue.
Since royalties are split with states, California and Wyoming
also stand to lose $50 million, at least, under this bill.
Instead of $100 million that could be going to fund schools,
build roads, and provide medical care, that money will go
straight into the pockets of mining company CEOs.
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.
While the sponsor of the bill pointed out that production
of soda ash on federal land fell significantly in 2016 after
the most recent royalty relief expired, this could very likely
be due to companies hopping on and off federal lands based on
whether they're currently receiving the royalty giveaways that
Congress has been repeatedly providing. It seems like companies
are gaming the system, and this bill would indicate that
Congress is all too happy to play along.
H.R. 1399 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 a $50
million giveaway of taxpayer money.

Raul M. Grijalva.
Jared Huffman.
Grace F. Napolitano.
Colleen Hanabusa.

[all]