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Potash mining could be next economic boost for region

If land and mineral owners in northwest North Dakota approve, specifically those in north central Burke County, potash development could possibly be the next economic boom to this region.

5/05/10 (Wed)

By Glen Froseth

Potash
• 93% of potash produced
   is used as fertilizer.
• The majority of U.S.
   production of potash is
   in New Mexico, Utah,
   and Michigan.
• Canada leads the world
   in potash production
   with three mines in Saskatchewan.
 
 
If land and mineral owners in northwest North Dakota approve, specifically those in north central Burke County, potash development could possibly be the next economic boom to this region.
 
At a meeting of developers and landowners at Lignite on April 27, it was apparent there are several hurdles that need to be resolved before any development can take place.
 
Dakota Salts, LLC, a potash and energy development corporation headquartered in Denver, Colo., and a subsidiary of Sirius Exploration are exploring the possibility of a potash development in Burke County.
 
The project specific to Burke County would be located just south of the Canadian border between Portal and Lignite.
 
Spokesmen for the company said they had approximately 6,000 acres leased and their target goal for the project is 30,000 acres.
 
The “Town Hall” type, informational meeting in Lignite drew about 40 land and mineral owners, some of which had been offered lease agreements, and others interested in how the development would affect their property.
 
J. T. Starzecki, Senior Director of U.S. Operations, and Theodore Pagano, P.G., P.E., Manager, told the group of the company’s plans and briefly explained the potash possibilities, mining techniques, and leasing agreements that would be in place for the proposed project.
 
The Prairie Evaporate Formation of potash in Canada also extends into northwestern North Dakota, known as the Williston Basin Formation, and extends into Divide, Burke, Renville and Bottineau Counties.
 
The formation is considered to contain 33 percent of the world’s supply of potash, according to Dakota Salts Web site. Dakota Salts estimates approximately 50 billion tons of potash could be claimed in North Dakota, but the mineral is anywhere from 5,000 to 9,000 feet deep, therefore requiring solution mining. Solution mining is a process quite similar to drilling for oil. Water must be injected into the potash and brought to the surface in a soluble form. It is then dried and much of the water can be reclaimed. The dried potash is then shipped by rail to points of distribution to customers. Most of the North Dakota potash would likely go to China.
 
Mr. Starzecki told the group at Lignite that the price was about $1,000 per ton in 2008, but has dropped to between $400-$500 per ton today, which is still a very viable price for the product.
 
Underground caverns created by mining potash can be used to store surplus natural gas supplies to fulfill future market demands.
 
Raw potash produces three saleable components--the first being the main ingredient found in crop fertilizers, along with magnesium and hydrochloric acid.
 
It also produces a by-product much similar to table salt (sodium chloride), some of which can be a saleable quantity, but most of which has to be mixed with water into a soluble solution, then returned to underground caverns.
 
Mining the product is expensive, as the cost of one well is estimated between $5 to $7 million. The spokesmen said the potash field would look similar to a field of horizontal oil wells, with the possibility of the 30,000 acre project being unitized into one unit.
 
Downside
The commodity became the center of much discussion at the Lignite meeting, as some of those present had visited a similar potash mine near Regina, Sask. where a huge mountain of the salt substance is piled on the ground waiting to be disposed of. In the meantime, winds blow particles of the salt substance across the prairies, and wind currents carry these particles as far as 15-20 miles before they are deposited over a wide area of crop, hay and pasture land. These salty deposits are environmentally disastrous and are basically destroying the growing potential of crops and hay, diminishing the value and making these lands almost useless. Also, the aesthetics of this mound of salty by-product is very much an eye-sore to the area and is probably the most detrimental aspect of potash mining.
 
Land and mineral owners also asked many questions in regard to the lease agreement with Dakota Salts, LLC. Mr. Starzecki and Mr. Pagano both assured them they are more than willing to work with the terms of the lease agreement to make it agreeable between both parties.
 
Lease provisions
Provisions of the lease dealt with the value of return to mineral owners. Present leases are offering $25.00/acre for a 5-year lease, which will allow the company time to drill test wells, and if feasible, begin drilling to mine the soluble potash and build the infrastructure and processing plant needed to produce a saleable commodity.
 
Payment to mineral owners would be based on net revenue of the product to the lessee. The proposed lease agreement stated a 3% royalty to mineral owners.
 
The present proposed timetable would take from 4 to 5 years to develop, which would include a time frame for leasing, permitting, environmental studies, and exploration. Although, the spokesmen said test holes may be drilled as early as this summer.
 
Test holes would verify the potash supply and confirm the quantity and thickness of the formation, along with the quality of the product. Each test hole is estimated to cost $700,000.
 
Meeting held in Minot too
A second information meeting was held in Minot on April 28th, as Dakota Salts, LLC is attempting to inform land and mineral owners of the potential for this new industry to the region. The Dakota Salts website can be seen at www.dakotasalts.com.
 
J.T. Starzecki can be reached at 612-719-5076 and Mr. Pagano at 970-590-3944.