Brine issues boiling up: bromine industry faces challenges both foreign and domestic.

WISPS OF SALTY AIR waft daily across Albemarle Corp.'s chemical facility at Magnolia and past freshwater marshes to the south.

It makes the Gulf of Mexico seem much closer than the 400 miles away it actually is.

But in one sense, the ocean could be considered just a little more than a mile away -- straight down, that is -- at the Smackover Formation.

That's where Albemarle and rival Great Lakes Chemical Corp. annually drill for billions of gallons of the ancient, superdense, salty water; or brine, to produce one of the state's most valuable chemical elements -- bromine.

"It's Jurassic-age water," said Jeannie Clemmance, a spokeswoman for the Arkansas Museum of Natural Resources in Smackover. "Floating on top of the brine is oil, and on top of the oil is natural gas."

Bromine, when combined with other chemicals to form useful compounds, is used in a variety of products Arkansans use every day -- and may take for granted. It's found in flame retardants, agricultural pesticides, water treatment chemicals, oil and natural gas drilling fluids, fire extinguisher chemicals, film developing chemicals, pharmaceuticals, food additives, makeup and cleaning products.

It's also in the controversial methylbromide, an agriculture fumigation pesticide, which is considered an ozone-depleting chemical along the lines of chlorofluorocarbons by the U.S. Environmental Protection Agency. It's slowly being phased out in most of the world under the Montreal Protocols international treaty.

Bromine's varied uses help generate hundreds of millions of dollars a year in revenue for Albemarle Corp. of Richmond, Va., and Great Lakes Chemical Corp. of Indianapolis. Together they employ about 1,500 people in Union, Columbia and Ouachita counties and pay about $80 million a year in wages (often $18-$20 an hour), $8 million in state and federal income taxes and $2.5 million-$3 million in taxes that go to local schools. They also provide real-world chemistry instruction for area high school students.

They, operate about 150 wells and have 14,000 leases for mineral drilling rights -- covering almost 169,000 acres -- and make combined annual lease payments of about $7.5 million to some 20,000 different landowners.

"Everybody in southeast Arkansas is about oil and gas production, but I have heard of only one new oil refinery," said Dan Redmond, plant manager at Great Lake's El Dorado facility. "All the others have dried up. All that's left is timber and brine. We're vital to Union and Columbia counties; we support a lot of things."

Such abundant brine resources ripple out into Magnolia and El Dorado, where hundreds of jobs in other sectors depend on providing services to brine workers.

Brine was discovered in south Arkansas during the area's oil boom in the 1920s.

"It used to be a big problem back in the oil days," said Matthew Lynch, manager of regulatory affairs for Albemarle. "Saltwater was a liability, and no one thought about whether there was a good use for it."

South Arkansas produces 97 percent of domestic bromine and about 41 percent of the world's bromine supply, according to the Arkansas Museum of Natural Resources. The state has led the world in bromine production since commercialization began in the the mid-1950s. But it now faces a Middle East challenge that has thrown topsy-turvy the world of Albemarle and Great Lakes: Israel's Dead Sea Bromine Group, which practically scoops brine from the high-salinity inland sea.

"It's extremely competitive," Redmond said, "but we've managed to maintain our share in south Arkansas and in the world."

Although bromine compounds, or bromides, may be swilled with a simple swallow of Mountain Dew or fused into plastics to reduce the chances that your TV's frame will ignite, it wasn't an easy path from millions of years ago to your 21st-century belly or living room.

"Bromine is limited to just a few places in the world conveniently -- south Arkansas and the Dead Sea in the Middle East," said John Shelnutt, director the Institute for Economic Advancement at the University of Arkansas at Little Rock. "It's like with Kansas and Oklahoma, where you find unusual concentrations of helium."

The Smackover Formation's brine reserves can be thought of as a saltwater aquifer, said Clemmance. Millions of years ago, what is now Arkansas rested beneath a salty sea; gradually, the receding water left an inland sea. Over time, flooding from the Mississippi River and other geologic occurrences covered over and created the brine-rich formation.

Challenges

The Dead Sea competition and the Montreal Protocols are among several challenges facing south Arkansas' brine industry. One is the threat of higher taxes.

Rep. Sam Ledbetter, D-Little Rock, introduced House Bill 2861, which would increase state severance taxes on barrels of brine by more than 300 percent. The tax would rise from $2.40 per 1,000 barrels to $10.50, effective this year, and would allow for annual increases equal to cost-of-living adjustments rounded to the nearest dollar.

According to the Arkansas Department of Finance and Administration, the bill would generate about $1.4 million for fiscal 2004 and $1.875 million for fiscal 2005, based on annual production rates of 240.265 million barrels of bromine.

"It will crush us, especially when we add in the advantage that Dead Sea production costs are about half of ours. It creates an uphill battle," Redmond said. "It's very significant. I can't say it will put us out of business, but I can say that in 2001 we didn't make any money -- we lost money. Last year, we just started making money again.

"We're nowhere near where we were at five years ago. Price pressures have gone out of control."

The bill is in limbo as legislators wait to deal with revenue issues in a special session later this spring. Ledbetter insists company officials are overstating the impact of raising the severance tax for the first time since its creation in 1971.

"It's really not a tax increase; it just brings them to the correct level where they would be if the tax rate wasn't fixed," Ledbetter said. "It's a matter of equity. At the time, it was a fledgling industry. I can understand they're unhappy -- they don't want to get taxed.

"Anytime they're forced to spend more money, they complain about the Dead Sea."

Steve W. Card, regulatory affairs supervisor for Albemarle, said the company didn't want to pay a disproportionate amount of tax but understood the state's dire situation.

The Dead Sea

A much more serious threat to Albemarle and Great Lakes is Israel's Dead Sea Bromine Group, a subsidiary of Israel Chemicals Ltd., which in turn is majority-owned by Israel Corp.

"The Israelis are coming up and they're forcing the prices in the market to collapse," Redmond said. "Costs have been driving us into the gutter -- there is extreme cost pressure."

Dead Sea's chief advantage is far cheaper production -- about 60 percent of south Arkansas' costs. Rather than drilling 7,500 to 8,500 feet down like Albemarle and Great Lakes, the Israelis simply drop a pipe into the Dead Sea and start pumping.

"The big difference between us and Dead Sea is that we spend tremendous amounts on electricity at the Smackover Foundation," Redmond said. "We're the No. 2 electricity user in Arkansas -- we spend millions of dollars."

The Dead Sea brine is also twice as rich in bromine as south Arkansas brine, according to company officials. While south Arkansas brine has 4,000-5,000 parts per million of bromine, the Dead Sea has, about 10,000 parts per million. (Gulf Coast seawater has about 50 parts per million.)

The Dead Sea's production capability is expected to last at least another 1,000 years, while south Arkansas is facing the end in about 50 years.

DSBG is also aided through partial state ownership by the Israeli government. Its share of world bromine production has steadily grown over the last 15 years.

"It's hard to compete. They've grown tremendously in the last 10 to 15 years, and their distribution network has grown," Redmond said. "We compete primarily in two ways -- with people and technology. And we try to eliminate waste."

Great Lakes has whittled its work force from from 1,000 to 700 employees to help stay competitive.

"One of our advantages is that distribution is a little easier for us. Even though they sell (bromine) here for the same price, it's harder for them to get it here. But their profits are still higher."

Albemarle and Great Lakes advantages include easy access to U.S. markets and the technology that allows them to turn bromine into next-level compounds for manufacturers, Lynch said. Other proprietary technologies at the drilling, extraction and processing levels -- which both companies declined to discuss -- have in production and efficiencies.

While the Israelis have relied on commodity markets to sell raw bromine, "we convert the bromine to other products -- flame retardants, water treatment chemicals, oil well completion fluids -- at our plant," Redmond said.

But it's hard to tell how much longer the technology cushion will allow the Arkansas operations to remain competitive, said Redmond and Lynch. And transportation advantages may wane as a primary shareholder in Dead Sea Bromine Group's controlling companies is Ofer Bros. Group, a multibillion-dollar Israeli corporation with significant shipping holdings.

Perhaps with that in mind, Albemarle and Great Lakes have both invested in Dead Sea operations with a nod to the region's longer term supplies. Great Lakes made a small investment in Dead Sea Bromine Group a few years ago, while Albemarle started a 50-50 joint venture with The Jordan Dead Sea Industry Co. Ltd. of Aman, Jordan, a subsidiary of Arab Potash Co.

Albemarle financed 40 percent of a $120 million bromine production plant in Afa, Jordan. It won't bring its proprietary compound technologies and instead focuses on selling raw bromine.

"To complete globally, we had to do it," said Steve W. Card, regulatory affairs supervisor for Albemarle. "It's a very important market to have access to. For us, that's where the competition is. We'll start out with lower-cost, lower-value products.

"We want to take the battle to them."

Albemarle and Great Lakes are under Dec. 31, 2004 deadlines to eliminate production of agricultural methylbromide -- which fumigates crops -- as part of the Montreal Protocols to drastically reduce production of ozone-depleting chemicals, said Dave McAllister, a Great Lakes employee and chairman of the Methylbromide Industry Panel.

While not devastating to the companies' business, methylbromide nevertheless makes up about 10 percent of bromine use, McAllister said. He and other panel members still plan intensive lobbying efforts for a long deadline extension.

"It's a very small part of the business and (a minor cause of) ozone depletion," he said. "We're lobbying on that basis."

Other issues the companies face include poor Arkansas transportation infrastructure and, oddly enough, a lack of consumer safety regulations, Redmond said.

Widening two-lane local highways would facilitate more efficient transportation of bromine and related products, Redmond said.

Albemarle's Lynch wasn't as concerned with local highways. Long-discussed Interstate 69 -- the proposed Mexico to Canada highway -- would alleviate some of those issues.

Faster transportation would help reduce hourly wage and inventory storage costs, Card said.

The companies would also benefit from increased government regulation of consumer product safety. Markets would expand, for instance, if Europe were to implement flame-retardant requirements, as much of the United States has done, Redmond said. California, for instance, requires all new furniture to be flame-retardant, but regulations vary by state.

"We do believe we're making life better for people," Redmond said. "We're helping cause. fewer deaths."

Arkansas Brine 1990-2001

Year     Barrels
      (millions)

2001         308
2000         321
1999         299
1998         324
1997         352
1996         324
1995         311
1994         275
1993         237
1992         231
1991         235
1990         241

Source: Arkansas Oil and Gas Commission

RELATED ARTICLE: A Valuable Nuisance

BRINE'S INDUSTRIAL uses may go back to the Romans, who took bromine from mussels to make purple dyes, but it wasn't until 1826 that French scientist A.J. Balard officially discovered the 25th most abundant element.

Bromine was first produced in the United States in 1845 from salt brine and began to take on industrial uses when Dow Chemical Co. founder Herbert H. Dow began manufacturing pharmaceuticals in Michigan in 1889.

Arkansans, however, were less than thrilled when they tried to jump on the oil boom in the 1920s and their oil drills bit through natural gas and oil shelves and into the saltwater aquifer.

The result was great geysers of scalding brine geothermally heated to about 220 degrees and propelled by natural gas pressure.

"It was boiling saltwater," Lynch said. "Can you imagine?"

Brine mixed with oil burned workers as it erupted from the ground, making for difficult oil drilling, Clemmance said.

"For years and years and years, it was a disaster," Clemmance said. "It's still in much of south Arkansas, and it's still a problem, and you still have to get rid of it. There was so much pressure because of the natural gas that drilling in 1921 (caused) huge oil-and-brine geysers, which killed agriculture and plants over many square miles ... It was a dead area, but now its been reclaimed."

El Dorado's Lion Oil Co. discovered the Smackover Formation's rich brine reserves in the early 1950s, but it wasn't until 1957 that the Michigan Chemical Co. and Murphy Oil Corp. of El Dorado invested $600,000 in a Catesville plant south of the city and began producing 3 million pounds of bromine annually. Success prompted the relocation of plants from Ohio and Michigan to Arkansas.

Brine is pumped from remotely monitored unmanned wells in Union, Columbia and Ouachita counties through miles of pipes to Albemarle and Great Lakes facilities.

There, brine is steam-heated and injected with chlorine to create the chemical reaction allowing extraction of bromine, which has a reddish brown color and is corrosive and volatile, Card said. The whole process takes seconds to produce bromine.

Nearly all leftover brine is re injected back into the Smackover Formation to maintain pressure equilibrium, according to company officials.

One 42-gallon barrel of brine produces one cup of bromine, which weighs in -- due to bromine's dense nature at 1.5 to 1.8 pounds per cup, according to Grant Black, director of the Arkansas Oil and Gas Commission. Bromine sells for about $1.05-$1.25 per pound.

About 308 million barrels of brine were pumped in 2001, according to the Oil and Gas Commission -- a 27.8 percent increase from 1990's 241 million barrels. Still, the most recent figure is 12.5 percent off of 1997's peak of 352 million barrels.

The estimated value of bromine produced or sold in the United States -- almost all of which comes from south Arkansas -- is $150 million-$200 million, according to the U.S. Geological Survey. And most of it stays in the United States.

Arkansas exported internationally raw bromine valued at about $6.25 million in 2002, an increase from $4.65 million in 2001 and $2.56 mil lion in 2000, according to the U.S. Department of Commerce's Foreign Trade Division. The biggest customers were Canada, Israel, Japan, Belgium, Mexico and the United Kingdom.