39–006

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. 

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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. 

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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

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By fiscal year, in millions of dollars—

2005 2006 2007 2008 2009

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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