County OKs bond sale for solution mining project

CARLSBAD, Aug 20, 2009 (Carlsbad Current-Argus - McClatchy-Tribune Information Services via COMTEX) -- IPI | Quote | Chart | News | PowerRating -- The Eddy County Commission has approved the issuance and sale of New Mexico taxable industrial revenue bonds totaling $60 million for a solution mining project.

The commission unanimously approved the bond ordinance on Tuesday and praised the company, Intrepid Potash, for moving forward with the project that will create new jobs in Eddy County.

Intrepid Potash, a wholly owned subsidiary of Denver-based H.B. Potash LLC., requested the bonds to help finance the cost of acquiring and constructing facilities for the company's evaporation potash production project, a solution mining process at select parts of what's referred to locally as the old Eddy Potash Mine.

Michael Groshek, a bonding attorney with Sherman & Howard law firm which has represented the county on bonding issues since 1979 assured leaders that the county would be held harmless if the potash company were to default on its bond payments. He said the legal documents drawn up by his firm fully protect the county.

Under the New Mexico Industrial Revenue Bond Act, the county may authorize a company to seek the industrial revenue bonds with the understanding that the county is not liable for repaying the debt.

In October 2008, the commission approved an inducement resolution that paved the way for Intrepid Potash to obtain the industrial revenue bonds.

The company has estimated the project will cost about $417 million and will provide about 40 to 60 permanent jobs.

Groshek

said the sale of the bonds should be completed in about 30 days.

Company officials told county leaders Tuesday that during the construction stage, an additional 200 temporary jobs will be created.

Although the company has the financing in place, the actual construction could be at least two years away.

Holding up the project is the federal Bureau of Land Management, which is currently conducting a full environmental impact study on federal lands pertaining to the project. A portion of the surface mine involves the company's federal leases.

Company officials said that although the BLM is supportive of the project, it believes it would be in the best interest of everyone to make sure there are no future issues that could pop up and further hold up the federal permitting process.

"At this point, it looks like it will be September of 2011 when BLM will have completed the assessment. Then, from that point, it will probably be another year or so before we can move dirt and go into full production," said Martin Litt, Intrepid executive vice president and general counsel.

Litt said the $60 million generated from the sale of the industrial revenue bonds will enable Intrepid to purchase equipment at today's prices.

Hugh Harvey, Intrepid's chief of technology and engineering, and one of the company's founders, said the solution mining project at the former Eddy Potash mine site has been on the drawing board for more than five years. He said the company has experience in solution mining that is conducted at its facility in Moab, Utah.

"I never dreamed it would take five-and-a-half years to get this project off the drawing board," he told the commission.

He said the former Eddy mine still has a large amount of potash, and solution mining is a way to get it to the surface.

Solution mining techniques are used to extract soluble ores, such as potash and salt, where conventional mining methods are not economical. Water and chemical reagents are pumped into the mine, where the ore is dissolved into a solution, pumped back to the surface and dried in solar ponds.

Harvey said the company will use water from a rustler formation that produces non-potable water.

Although the county will not see any direct monetary benefit, indirectly, the county and city of Carlsbad will see a small increase in gross receipts taxes during the construction phase of the project, company officials said.

To get the blessing for the project from the Carlsbad Municipal School District and New Mexico State University's Carlsbad campus, Intrepid has agreed to make payments in lieu of taxes to the education entities if it is determined that all or a portion of the leased land mine property is exempt from property taxes.

Intrepid has agreed to make payments in the amount of tax revenue that would be remitted to the university and school district if the property was not exempt.

The payment in lieu of taxes will remain applicable for each year during which the exempt property is not subject to general property taxes.

Intrepid purchased its Carlsbad mining operation from Mississippi Chemical in 2004. The company has recently spent millions of dollars on other renovations at its Carlsbad holdings, including the building of a state-of-the art langbeinite processing facility at its Carlsbad east facility.

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