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1 (The following proceedings were
2 had in open hearing.)
3 (Astaris Exhibit Nos. 203 through
4 205, having been previously marked for
5 identification, were admitted into evidence.)
6 COMMISSIONER KJELLANDER: And are you
7 ready to tender the witness?
8 MR. TARPEY: And I would tender the
9 witness for cross-examination.
10 COMMISSIONER KJELLANDER: And we will
11 jump around a little bit, start with Mr. Richardson.
12 MR. RICHARDSON: Thank you,
13 Mr. Chairman. I have no questions for this witness.
14 COMMISSIONER KJELLANDER: Okay. And
15 in the course of jumping around, Mr. Hammond.
16
17 CROSS-EXAMINATION
18
19 BY MR. HAMMOND:
20 Q. Good morning.
21 A. Good morning.
22 Q. I just have a few questions. Hopefully
23 we'll move through fairly quickly.
24 Can you tell me what the environmental
25 costs and the general range of dollar amounts were
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 incurred during 2001 at the following sites:
2 Pocatello plant, the Astaris Pocatello plant; the
3 silica mine; the Dry Valley operation; and the
4 Kemmerer plant?
5 A. I could prepare such information, but
6 I could not give you an estimate of that cost off
7 the top of my head. And I would also need you to
8 clearly define what you included under the category
9 of "environmental" and to distinguish between
10 operating and capital. And such information could
11 be prepared, but that isn't something that I could
12 just rattle off off the top of my head.
13 Q. Without quantifying it, do you know if
14 there are additional costs from 2001?
15 A. The Pocatello site has been a site of
16 scrutiny by the Environmental Protection Agency for
17 a number of years. As the FMC Corporation entered
18 into a Consent Decree and completed a very large
19 series of projects to comply with that Consent
20 Decree, and over the time frame of let's just say
21 the mid '90s through 2001, the plant sustained
22 increased costs associated with the compliance of
23 that Consent Decree.
24 Q. Okay. Please explain -- I'm sorry.
25 Without quantifying, could you please explain what
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 incremental costs might have been required at these
2 other sites if the Pocatello plant did not close?
3 A. At silica mine, Dry Valley, and
4 Kemmerer?
5 Q. Yes, I'm sorry, silica mine, Dry
6 Valley, and Kemmerer.
7 A. At the silica mine, I am not aware of
8 any particular new environmental regulations. It
9 was a very small operation and a very simple
10 operation.
11 The Dry Valley mine is obviously still
12 in operation, and I do not know of any major changes
13 as yet in any environmental regulations that would
14 have substantially changed the cost profile of the
15 mine. And as I said, the mine continues to operate
16 and supply our facility in Conda, Idaho.
17 At Kemmerer, I do not know of any
18 major environmental regulation changes at that site.
19 It is a site that has some sulfur -- had some sulfur
20 dioxide emissions that had to stay in compliance
21 with a permit, but I don't know of any pending
22 regulation.
23 Q. Were there any new requirements that
24 you're aware of that would affect -- environmental
25 requirements -- that would affect the Pocatello
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 plant?
2 A. At the Pocatello facility, we were
3 completing a series of projects associated with
4 compliance of the Consent Decree. Several of them
5 would have come to fruition at the end of 2001 and
6 into 2002, and one of the elements around operating
7 the plant at one furnace that we saw was that the
8 cost of compliance running the plant at one furnace
9 was virtually the same as running it at two
10 furnaces, which was going to add an additional
11 burden on the cost of the plant going into the
12 future.
13 Q. Can you tell me, what does the
14 abbreviation "TID" as used in the Astaris monthly
15 production report stand for?
16 A. Certainly. That's taxes, insurance,
17 and depreciation.
18 Q. Thank you. And can you tell me also,
19 what does the abbreviation "AFE" as used in the
20 Astaris Monthly Production Report stand for?
21 A. That was an FMC terminology for
22 Authorization For Expenditure, a proposal for a
23 formal capital request.
24 Q. Can you tell me, was there a penalty
25 paid -- actually paid -- during 2001 for coal
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 shortfalls under a Contract?
2 A. I believe that there was about an
3 $850,000 payment made to P&M Coal as part of the
4 penalty for -- it was an adjustment to the cost of a
5 Contract that FMC has with P&M Coal and Astaris
6 participates in. It was a volume, because at
7 certain volumes, we paid -- they had to pay
8 different prices.
9 Q. Do you know if that invoice or
10 documentation regarding that penalty was provided
11 anywhere in this record?
12 A. No, I don't. And I would want to
13 point out that certainly my testimony was prepared
14 from normal management reports and did not go down
15 to source-level detail, although I know that Staff
16 required and requested source-level detail, which to
17 the best of our ability we tried to supply.
18 Q. During 2001, is it true that you only
19 had one Contract signed for replacement of P4 raw
20 materials and that it was for a small quantity?
21 A. If you -- if you mean a -- a Contract
22 in the sense of an umbrella Agreement, that may be
23 true. However, we had Purchase Orders and cut
24 thousands, I would guess, of Purchase Orders, which
25 I believe would be considered as a Contract,
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 although I'm not a lawyer, so I won't make that
2 legal opinion.
3 And I guess I want to amend what I
4 said, because there is a Contract between Astaris
5 and Monsanto for a very large quantity of elemental
6 phosphorus.
7 Q. How many Contracts with different
8 suppliers were signed, do you know?
9 A. How many Purchase Orders?
10 Q. Yes. Oh, I'm sorry, Contracts.
11 A. There were thousands of Purchase
12 Orders.
13 Q. Contracts, not Purchase Orders.
14 A. Well, there were Contracts for raw
15 material supplies associated with phosphoric acid.
16 I believe there were two umbrella Contracts such as
17 you described in that area.
18 Again, we had Purchase Orders for
19 purified phosphoric acid from a number of suppliers.
20 Q. What -- I'm sorry. What term lives
21 were contracted in 2001?
22 A. For what materials?
23 Q. For the raw materials, the P4.
24 A. We had Purchase Orders and Agreements
25 with a number of suppliers for different terms.
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Some were, you know, very spot and maybe only lasted
2 a month or two in nature. Others were in the form
3 of maybe a one-year kind of Agreement.
4 Q. Did you have a one-year Contract in
5 2001?
6 A. We had Agreements with certain
7 suppliers that were an annual nature, but you keep
8 going back to Contract in terms of an umbrella
9 Agreement, and many of these things were contracted
10 more on verbal basis.
11 Q. So there's no documentation regarding
12 these?
13 A. The Purchase Orders, which we
14 supplied.
15 Q. Are there any actual Contracts? Just
16 there's no actual Contracts, just Purchase Orders.
17 Is that --
18 A. That's correct.
19 Q. Okay. Can you tell me what the power
20 cost was -- what was the power cost budgeted for
21 2001 for the Pocatello plant?
22 A. I heard that earlier yesterday and I
23 thought someone would come up with it. I really
24 don't recall, precisely, the number. I think it was
25 in the 30 area, if you took both blocks.
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Q. The 30 -- the price would be $30 a
2 megawatt?
3 A. Right. But our budget was on
4 215 million pounds of phosphorus produced, and so it
5 envisioned a certain amount of Block 2 power, as
6 well as Block 1.
7 Q. So if it envisioned using Block 2
8 power, are you aware that FMC had a strike price for
9 Block 2 power?
10 A. No.
11 MR. HAMMOND: I don't think I have
12 anything further. Thank you.
13 COMMISSIONER KJELLANDER: Okay,
14 Mr. Hammond.
15 Let's move to Mr. Ripley.
16 MR. RIPLEY: Just a few that's been
17 prompted by Mr. Seder.
18
19 CROSS-EXAMINATION
20
21 BY MR. RIPLEY:
22 Q. If I look at your prepared testimony,
23 page 1, lines 14 through 16, you say you're
24 testifying on behalf of Astaris LLC, Astaris Idaho
25 LLC, and FMC Corporation. Is that correct?
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 A. Yes.
2 Q. And if I understand correctly from
3 page 1, line 6, you are actually employed by Astaris
4 LLC as the CFO of that company?
5 A. That's correct.
6 Q. Let me ask you this: Does Astaris LLC
7 or Astaris Idaho Power LLC have any interest in the
8 Pocatello plant today?
9 A. I don't believe so.
10 Q. So it's all FMC Corporation?
11 A. Yes.
12 Q. Now, at the present time, is Astaris
13 LLC or Astaris Idaho LLC providing power to FMC
14 Corporation?
15 A. Yes.
16 Q. And is Astaris LLC or Idaho LLC
17 billing FMC for that power?
18 A. I believe so.
19 Q. Is Astaris LLC retaining the benefits
20 of the take-or -- or, excuse me.
21 Is Astaris LLC retaining the payments
22 that are paid by Idaho Power Company for the
23 voluntary load reduction?
24 A. Yes.
25 Q. But at the current time, neither
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Astaris LLC or Astaris Idaho LLC have any load
2 requirement at the Pocatello plant?
3 A. That would appear to be correct.
4 Q. Do you believe that FMC Corporation is
5 an affiliate of Astaris LLC or Astaris Idaho LLC?
6 A. From an accounting perspective, that
7 is correct.
8 Q. Do you think from a legal perspective
9 they are?
10 A. I have no --
11 MR. TARPEY: I would object to
12 question about legal perspective.
13 Q. BY MR. RIPLEY: Now, as I understand
14 it, your role of CFO is strategy and planning,
15 mergers and acquisition, supervision of negotiations
16 of critical Contracts, and yet you don't have an
17 opinion as to whether or not --
18 MR. TARPEY: I would object.
19 Mr. Ripley is getting argumentative with the
20 witness. And the objection was about the earlier
21 question when asking for her legal perspective, as
22 opposed to her accounting.
23 COMMISSIONER KJELLANDER: Mr. Ripley.
24 MR. RIPLEY: I'll re-ask the question.
25 COMMISSIONER KJELLANDER: Thank you.
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Q. BY MR. RIPLEY: In your capacity as
2 CFO in charge of strategy and planning, mergers and
3 acquisition, supervision of negotiations of critical
4 Contracts, do you have the necessity to determine
5 what an affiliated subsidiary of LLC, of Astaris,
6 would be?
7 A. I would again say that I feel very
8 confident from an accounting perspective Astaris LLC
9 is an affiliate of FMC Corporation, and FMC
10 Corporation is an affiliate of Astaris LLC. I am
11 not a lawyer and I would not like to make a legal
12 judgment.
13 Q. When did -- let me ask you this first:
14 Did Astaris LLC convey its interest in the Pocatello
15 plant to Astaris Idaho LLC, do you know?
16 A. I am not the best person to ask that
17 question. I really don't know. I know that
18 appropriate legal transfers were taken, but I didn't
19 pay a lot of attention to that.
20 Q. Then did Astaris Idaho LLC convey its
21 ownership to FMC Corp.? You don't know?
22 A. Again, our General Counsel could give
23 you the precise answer. I'm sure that it was
24 conducted properly. I just didn't pay attention to
25 the actual conveyance process.
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HEDRICK COURT REPORTING McCARVILL (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Q. From an accounting standpoint, on
2 page 13 of your testimony, you were asked the
3 question How much more money is due to Astaris under
4 the buyback arrangement?
5 Could you define for me what entities
6 you are including in the term or as you understand
7 it, in the question that's asked, "Astaris"?
8 A. It was Astaris LLC.
9 Q. Who is going to be responsible for the
10 payments of power on an ongoing basis to Idaho Power
11 Company? Would that still be Astaris LLC?
12 A. Yes, it is.
13 Q. And so the arrangement is contemplated
14 that Astaris LLC will provide power to FMC?
15 A. Yes.
16 MR. RIPLEY: That's all the questions
17 I have. Thank you.
18 COMMISSIONER KJELLANDER: Thank you.
19 Are there questions from the
20 Commission? Commissioner Smith.
21
22 EXAMINATION
23
24 BY COMMISSIONER SMITH:
25 Q. Ms. McCarvill, I've been a
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HEDRICK COURT REPORTING McCARVILL (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Commissioner for 11 years, which I guess is neither
2 here nor there except that during that period of
3 time, I've had the benefit of numerous presentations
4 about this industry, both from Monsanto, Solutia,
5 FMC, and perhaps even Astaris, and those seem to
6 indicate that the production of elemental phosphorus
7 in the manner done at the Pocatello facility was
8 clearly a diminishing business because there was a
9 new process called wet acid. Are you familiar with
10 that?
11 A. I'm familiar. I don't --
12 Q. That it exists?
13 A. That it exists, not that I'm an
14 engineer and can describe the process.
15 Q. Right. I'm not either. I'm just
16 familiar that it exists, and by all representations
17 of knowledgeable industry people, it is
18 significantly lower cost than using the amounts of
19 electricity which are required at Pocatello. Is
20 that your understanding?
21 A. Yes.
22 Q. So it's been over these 11 years the
23 discussion was how to manage a diminishing business
24 that everyone knew would eventually be gone when the
25 wet acid process could ultimately produce a product
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HEDRICK COURT REPORTING McCARVILL (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 of high enough quality that it could replace what's
2 being produced or what was produced at Pocatello.
3 Now, given that background, I guess --
4 and your seeming testimony that all of these costs
5 are attributed to the buyback -- I guess just have
6 to know, wasn't the Company planning for these
7 anyway, because by all respects over the last 11
8 years, there was every indication that this facility
9 would close, it was just a question of time?
10 A. I -- I would want to just make one
11 point about the thought that the only inevitable
12 replacement was wet process acid. This is a global
13 industry.
14 Q. And this was the only facility left
15 doing it by this process, correct, this and
16 Monsanto?
17 A. No, Monsanto.
18 Q. Yes.
19 A. There's a facility in Europe, but
20 there are probably over 100 producers in China,
21 there are some other producers in Asia. And I just
22 wanted to make that clear that there are other
23 sources of elemental phosphorus in the world.
24 As Astaris was formed and I joined the
25 Company -- I had been working in other areas of
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HEDRICK COURT REPORTING McCARVILL (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 FMC -- the plans were clear that we were going to
2 continue to sell a family of products that require
3 elemental phosphorus, and there was a belief that
4 the Pocatello facility could produce that phosphorus
5 at a price that would be economical and comparable
6 to what it would take us to land elemental
7 phosphorus into the United States from these
8 overseas sites. So I would say that, you know, the
9 first plans that I saw for the Company when I joined
10 the Company showed Pocatello, two-furnace
11 operation --
12 Q. And when was that?
13 A. I joined the Company -- I officially
14 joined Astaris in March of 2000, but I first was
15 exposed to the idea of the job in September of 1999,
16 and those long-range plans showed Pocatello in
17 operation through 2010.
18 Q. Okay. Thank you.
19 COMMISSIONER KJELLANDER: Commissioner
20 Hansen.
21
22 EXAMINATION
23
24 BY COMMISSIONER HANSEN:
25 Q. I've got a question here on page 12 of
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HEDRICK COURT REPORTING McCARVILL (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 your testimony, if you could turn to that page. And
2 you talked here about the financial impact on
3 Astaris of the Buyback Agreement, and you actually
4 have a table here at the bottom of the page that
5 showed the different costs. And my question:
6 Are you 100 percent sure that all
7 these amounts you list in this table as being Letter
8 Agreement Amendment related?
9 A. Yes.
10 Q. Well, let me ask you this then:
11 On the second item, the 50 megawatts
12 of power from Idaho Power and you show 12 million,
13 isn't this the result of the take-and-pay amount
14 Astaris pays to Idaho Power?
15 A. Yes, it is.
16 Q. Well, wouldn't this cost have been
17 incurred whether or not the Letter Agreement
18 Amendment was entered?
19 A. You're right, but I was trying to show
20 from an accounting perspective that we still had to
21 pay the $12 million. It still had to flow from an
22 accounting perspective through my books, the cash
23 had to come out of the door. That's what I was
24 showing. It's not an economic analysis here; it is
25 an accounting analysis.
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HEDRICK COURT REPORTING McCARVILL (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Q. So these dollar amounts really do not
2 totally relate all to the Letter Agreement in total?
3 A. In my mind, they do.
4 Q. In my mind, I think they're
5 overestimated.
6 COMMISSIONER HANSEN: Thank you.
7 COMMISSIONER KJELLANDER: Okay. I
8 think we're ready now for redirect.
9 MR. TARPEY: Excuse me. Thank you.
10
11 REDIRECT EXAMINATION
12
13 BY MR. TARPEY:
14 Q. Just a couple of questions following
15 up on what Commissioner Hansen was asking you, and
16 this distinction you were making about the "economic
17 analysis" I think is the word you used and what you
18 were doing from an accounting perspective.
19 Would you explain in more detail what
20 you were -- what the purpose of your putting these
21 numbers together was and what it was you were
22 addressing for this Commission?
23 A. Yes. What we were trying to do was
24 show that when we entered into the Letter Agreement,
25 Astaris had to embark on a really big set of
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HEDRICK COURT REPORTING McCARVILL (Di)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 initiatives to comply with the Letter Agreement; and
2 that meant that we went through severance at sites,
3 wind down at Kemmerer, we had to scramble to procure
4 the substitute raw materials. And that supply line,
5 as I mentioned, had to extend into China, and not
6 the coast of China, it's the inland part of China.
7 We really had quite a task in front of us. And I
8 was simply trying to assemble in one place that
9 whole set of activities.
10 Q. And was this addressing the costs that
11 were being incurred by Astaris as well as what I
12 will call -- to me, I guess "costs" might
13 be "cash" -- but also expenses and write-offs?
14 A. Yes, it includes the expenses and the
15 write-offs, all of the things from an accounting
16 perspective as we reviewed our monthly results with
17 our auditors and our owners' auditors that we were
18 categorizing.
19 Q. Now, you mentioned earlier that you
20 were not trying to do an economical study, or I
21 think that was the terminology?
22 A. Yes.
23 Q. And would you explain what it was that
24 you were not trying to do?
25 A. I wasn't trying to kind of come up
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HEDRICK COURT REPORTING McCARVILL (Di)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 with what was the value of the 50-megawatt buyback
2 deal, you know, to try to come up with some sort of
3 an estimate of that. That was not my purpose.
4 My purpose was to show the activities
5 and the kinds of costs and cash or book write-offs
6 that we were incurring as a result of complying with
7 the Letter Agreement.
8 Q. And from your perspective, were the
9 steps taken, were they significant?
10 A. Yes, they were extremely significant.
11 MR. TARPEY: I have no other
12 questions, Mr. President.
13 COMMISSIONER KJELLANDER: Thank you
14 very much.
15 And I believe that you are excused.
16 THE WITNESS: Thank you.
17 (The witness left the stand.)
18 COMMISSIONER KJELLANDER: And we're
19 ready for your next witness.
20 MR. NELSON: Mr. Chairman, at this
21 time, we would call Mr. Ronald Binz to the stand,
22 please.
23
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25
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HEDRICK COURT REPORTING McCARVILL (Di)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 RONALD BINZ,
2 produced as a witness at the instance of Astaris,
3 being first duly sworn, was examined and testified
4 as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR. NELSON:
9 Q. Would you please state and spell your
10 name and give us your business address, please?
11 A. My name is Ronald, initial J, Binz.
12 It's B-I-N-Z. My address is 333 Eudora -- that's
13 E-U-D-O-R-A -- Street, Denver, Colorado, 80220.
14 Q. Mr. Binz, what is your occupation?
15 A. I'm a consultant in the area of public
16 utility regulation. I operate a business called
17 the -- well, actually, I have two occupations. My
18 consulting practice is known as Public Policy
19 Consulting. I'm also the president of a nonprofit
20 organization in Washington, D.C., called the
21 Competition Policy Institute.
22 Q. Mr. Binz, did you prepare and cause to
23 be filed direct testimony and Exhibits Nos. 206 and
24 207 in this proceeding?
25 A. Yes, I did.
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HEDRICK COURT REPORTING BINZ (Di)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Q. And, Mr. Binz, do you have any
2 corrections or changes to that testimony or to those
3 exhibits at this time?
4 A. I do not.
5 Q. Mr. Binz, if I were to ask you the
6 same questions today under oath as appear in that
7 testimony and those exhibits, would your answers be
8 the same?
9 A. Yes, they would.
10 MR. NELSON: Mr. Chairman, at this
11 time, I would move that Mr. Binz's testimony be
12 spread upon the record as if read, and that
13 Exhibits Nos. 206 and 207 be admitted into evidence.
14 COMMISSIONER KJELLANDER: And without
15 objection, we will spread the testimony across the
16 record as if read, and admit Exhibits 206 and 207.
17 (The following prefiled direct
18 testimony of Mr. Binz was spread upon the record.)
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HEDRICK COURT REPORTING BINZ (Di)
P.O. BOX 578, BOISE, ID 83701 Astaris