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Fertilizer: What Happens if Retailers Stop Selling Anhydrous Ammonia? – DTN

Ernst Undesser
By Russ Quinn, DTN Staff Reporter March 25, 2016

Fertilizer: What Happens if Retailers Stop Selling Anhydrous Ammonia? – DTN

As John Oehlerking was busy applying anhydrous ammonia Tuesday on his farm near Elmwood, Nebraska, he had more on his mind than the usual precautions and care typically given the fertilizer. Oehlerking wondered if he would even have access to the popular, and low-cost, nitrogen fertilizer in the future.

If the Occupational Safety and Health Administration (OSHA) succeeds in changing the rules governing the storage and handling of anhydrous, some fertilizer retailers have said they’ll stop carrying it.

“While this would affect fertilizer retailers first, it also would also have a huge negative effect on farmers and Main Street,” Oehlerking told DTN.

Historically, agricultural retailers had an exemption to OSHA’s Process Safety Management of Highly Hazardous Chemicals (PSM) regulations, which governed storage and handling rules around products such as anhydrous ammonia. The PSM was written with large-scale anhydrous manufacturing and distribution facilities in mind.

Those facilities, which store many times the amount of anhydrous gas a retailer has on hand during the application season, have strict storage and safety requirements such as a high level of storage security, specific tank testing and replacement requirements, specific signage, and a higher level of worker safety training.

The retailer exemption from PSM rules is expected to end on Oct. 1. Originally, in a July 2015 announcement that it would end the PSM exemption, OSHA said retailers would fall under full rules at the end of that year.

On Dec. 18, buried in the 2016 Omnibus Appropriations Act, was a rider that forbid OSHA from requiring fertilizer retailers to comply with PSM regulations. The rider further required that OSHA conduct a formal rule-making process, complete with public comment period, before any change could be implemented.

OSHA PRESSES ON

OSHA officials responded that the specifics of the exemption meant the agency did not have to follow Congressional dictates.

“The courts have said we can make interpretations without going through the full regulatory process,” Jordan Barab, OSHA deputy assistant secretary, told DTN. “This is not regulatory change but an interpretation change.”

The agency plans to begin PSM enforcement activities Oct. 1, at the start of the 2016-17 government fiscal year.

Rocky Weber, president and general counsel of the Nebraska Cooperative Council, took a delegation of state ag retailers to Washington D.C. the week of March 14 to visit Nebraska’s senators and representatives about the PSM exemption.

“What we are pushing for is statutory requirements in the Appropriations Bill or some other legislation that extends the date of enforcement and requires OSHA to take more time with this,” Weber said. “We don’t think OSHA has thought about the unintended consequences.”

With Congress in the beginning stages of marking up the 2017 appropriations bill, Weber said his group is seeking one or more legislators in each house add language to stop the enforcement of the PSM standard against fertilizer retailers until OSHA undertakes formal rule making and allows greater public input.

Nebraska Sen. Deb Fischer introduced an amendment to the Energy Modernization Act this winter that included several stipulations for OSHA before submitting the final rule on the removal of the retail exemption from the PSM standard. Cloture on this bill was invoked before Sen. Fischer’s amendment could be heard.

HIGH INDUSTRY COSTS

Weber points out his organization fully supports the safe handling of anhydrous and also understands it is OSHA who makes these regulations. The unintended consequences of this change could cost millions of dollars to fertilizer retailers and ultimately farmers.

OSHA estimated that the cost to retailer would be fairly small, roughly $2,100 per location. In a report on the issue, The Agricultural Retailers Association put those estimates in excess of $20,000 per site.

Retailers have told DTN the costs, including the cost of engineering plans to alter existing storage facilities, would be near $77,000. At those cost levels, retailers have said, they’d likely stop handling anhydrous ammonia, and push farmers to alternative, and more expensive, nitrogen fertilizers.

“The removal of this exemption has the potential to take significant dollars out of farmers’ pockets,” Oehlerking, the Nebraska farmer, said.

Oehlerking is on the board of directors of Midwest Farmers Cooperative in Elmwood and also sits on the board for the Nebraska Cooperative Council. He is concerned about retailers deciding they can’t afford the costs associated with these new OSHA regulations with smaller independent retailers and even some cooperatives may decide to stop selling anhydrous completely.

The Nebraska Cooperative Council surveyed some of their Nebraska cooperatives members. Four cooperatives out the 32 located in the state estimated approximately $40 million in costs. It is a foregone conclusion that nationally the cost to the agricultural industry of removing the retail exemption from PSM standard application far exceeds $100 million, he said.

Weber said that one example of application of the PSM standard would be that all anhydrous tanks have a legible data plate. Tanks without this plate would have to be replaced and replacement costs for one tank would cost approximately $110,000. Most retailers have several of these tanks that would need replacing.

“In addition, it would take six months to get one tank and that does not even meet their deadline this fall,” Weber said.

Barab said the need for data tags, “essentially birth certificates,” is an existing requirement under EPA and other OSHA requirements dealing anhydrous, and is a requirement under many local laws. “It does not have anything to do with the changes in PSM.”

“I think there are a lot of misinterpretations about what is going on with these PSM changes,” Barab said. “Most of the elements of the PSM are already required for these employers and these additional requirements should not add any more burdens.”

UNINTENDED COSTS

Oehlerking and Weber said there are many indirect costs that will happen if retailers stop carrying anhydrous.

“I just bought an anhydrous applicator a year and half ago and I worry about the value of that machine if anhydrous sales are discontinued if these change occur,” Oehlerking said. “There is part of me who wants to sell it now before it has no value.”

There could be major logistic issues if anhydrous is not in the farmers’ tool box of fertilizers, he said.

His local co-op handles 30,000 tons of anhydrous annually, and estimates it will take 60,000 tons of dry fertilizer to replace that anhydrous. This would require roughly 6,000 rail cars annually to deliver product to Midwest.

Replacing the anhydrous with UAN liquid would require the coop to purchase, store and deliver another 75,000 tons of liquid fertilizer, which would require 7,500 rail cars annually. Oehlerking noted it would also require 2 to 3 times more truck traffic to move dry or UAN products to farmers on an already stressed road and infrastructure system.

A shift away from anhydrous could have major implications for farmers even if they don’t use anhydrous in their operation.

“With one less N source, some estimated nitrogen prices would increase anywhere from $30 to $50/acre for farmers,” he said.

Oehlerking said he believes OSHA needs to go through the formal rule changing process and also needs to slow down and not begin enforcing their changes this year. He understands the need for safety regulations and does not want to circumvent safety rules but he would like to see OSHA take years not months to implement these changes.

“The best option would be if they just continue to exempt fertilizer retailers like they have for 20-plus years, this would solve a lot of our issues,” Oehlerking said.

“This is an issue that will negatively impact the financial well-being of all farmers in an already struggling ag environment,” he said.

Russ Quinn can be reached at russ.quinn@dtn.com

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Ernst Undesser
By Russ Quinn, DTN Staff Reporter March 25, 2016