A Conversation with a Risk Taker: State Senator Bob Worsley

By Julie Murphree, Arizona Farm Bureau

Senator Bob Worsley is the Vice-Chair of the Finance Committee, and also sits on the Transportation and the Commerce, Energy & Military committees. He ran successfully in 2012 against former Senate President Russell Pearce in the newly redistricted LD 25, to represent Mesa. He brings a wealth of practical, problem-solving, and entrepreneurial successes with him to the Senate. So, how does this businessman turned part-time politican take the risk-taking and visionary cunning of an entreprenuer and apply it to state politics?

 

After acquiring a BA in Accounting at BYU in 1980, he started his career as a CPA with Price Waterhouse in Phoenix and became an audit manager before he left to start ExecuShare with former-Mayor Scott Smith of Mesa. He founded SkyMall in 1989, and after selling it 13 years later he maintains an advisory relationship with the company. In 1999 he was recognized as Entrepreneur of the Year from Ernst and Young. He founded NZ Legacy in 2002, a land, mineral and energy development company. He developed a 27 megawatt biomass generating plant in Snowflake, Arizona, providing a green source of electricity to 27,000 homes in the White Mountains, by utilizing the remains of the forest after the 2002 Rodeo Chediski fire and now, forest thinning product to help prevent future forest fires. Currently, NZ Legacy has a joint venture with a large Texas oil and gas company to market the vast potash deposits of the Holbrook basin as a fertilizer for agricultural use. The mine is slated to create 500 new high paying Arizona jobs.

 

Regarding his joint venture, Arizona’s potash deposit was discovered as far back as the 1960s but no commerical interest emerged until 2008, when the price rocketed from $200 to $1,000 per ton and a report by the Arizona Geological Surevey estimated a trove of up to 2.5 billion tons. While potash is in high demand in India, Brazil and China, the U.S. is a major consumer which means much of Arizona’s potash will likely feed domestic agriculture. Plus, Arizona’s source is closer to the surface and should be easier to mine.

His only previous venture into politics was to participate in the Romney presidential campaigns of 2008 and 2012. Mr. Worsley is very active in finding a long-term total solution to the immigration problem in Arizona and feels strongly that compassion and keeping families together needs to be part of the ultimate answer. He is currently aligned with Maricopa County Attorney Bill Montgomery to promote the S.A.N.E. solution to immigration reform.

In this context, Worsley and Arizona Agriculture visited about the future of agriculture and the potash industry.

 

 

Arizona Agriculture: Most of our agriculture members are entrepreneurs, running their own businesses. They’re risk takers and leaders. They try new things. What makes the profile of the entrepreneur so interesting?

Worsley: In my opinion, we’re proactive people with some flair for creativity; seeing possibilities. My wife tells me often that I uncanningly can see around the next corner. But most entrepreneurs will tell you it’s just an instinct.

 

I started SkyMall when I was 32 years old. Everybody always asks, “How did you come up with that great idea? It’s like CocaCola, when you get on an airplane, you see a copy of SkyMall. It’s an instinctive thing I was born with. I grew up with this since I was 11 when I was selling newspapers door-to-door.

 

I bought and sold real estate when I was 13 and 14 starting with my own savings.

 

I think entrepreneurs help us solve pressing issues in the country; doing it either on a macro level or micro level. I’m having an opportunity as a senator to tackle some statewide issues that have not been addressed. It’s been fun to take my entreprenural skills and apply them to public policy.

 

When it comes to government, you’re dealing with a large, bureaucratic entity. Despite this, I think entrepreneurs see possibilities. They see, okay, there’re always negative forces you have to deal with but its doable.

 

For example, farmers understand this. They know they’re enterprising folks and know how to deal with the situation as it is and create what we want regardless of the challenges and hurdles that oftentimes have to be jumped over. Sometimes we get there easily; sometimes it’s difficult and sometimes we don’t get there. But entrepreneurs take that risk.

 

 

Arizona Agriculture: What inspired your venture into the potash business?

Worsley: Well, after I sold SkyMall I wanted to get into a business that had more diversity. So, I bought the New Mexico and Arizona Land Company - it was the oldest public company on the American Stock Exchange. Its main assets were a 100-year-old portfolio of land and minerals. The portfolio included 100,000 fee acres and a million acres of minerals. And then like all good entrepreneurs, one asks what do I do with this? So I went through almost 100 years of files and discovered that there was uranium and coal in New Mexico, there was some oil and gas in McKinley County; there was potash in the Holbrook area; a large salt deposit below the potash; some helium potential and more.

 

So we created different businesses to go and start taking advantage of those previous discoveries that were latent and had not been developed.

 

The potash opporunity was very exciting because the price of potash began spiking a few years ago going all the way up to $1,000 a ton and had never been more than $150 to $200 a ton. Anytime you have a commodity spike like that for anything a farmer uses – or others –  all of a sudden you have people getting into the business that might not have otherwise ever gotten into the business.

 

Anytime you have a commodity spiking like that, one needs to look again at his portfolio and see if there is an opportunity. So when potash started spiking I was excited because I knew we had it in our portfolio. The Holbrook deposit is one of only 20 in the world. It’s an 8-foot to 12-foot seam of potash that sits on top of 600 feet of salt.

 

Prior to making the investment I had about 90 days to look through things and I knew that there were minerals there, potash included. But if you look at commodity history, for years potash has never gone anywhere. So you have to be willing to take some risk. You’ve got to tell yourself, if and when this moves we’ll take advantage. I did not dream the potash market would move within eight years of buying the property, going up by five-fold. We’re unique in the ownership of the mineral rights in that we own the surface, the minerals and we have the opportunity without a lot of federal and state land to actually open a mine without all the federal EPA permits.

 

Potash, in the meantime, has leveled off just under $500 a ton but still way above the historical averages. It’s about a $3 billion project to bring it into production and we’ve hired the premiere players in the world to help. J.P. Morgan works with the potash global players and has done a deep dive assessment for us. The $3 billion project means potash must remain at $500 a ton on the market for us to get a return on our investment. Right now, it’s been a little below that.

 

We are doing some geo-technical work to see how strong the roof of the mine would be and no one has done that in the area yet; would it support a room and pillar underground mine for example. We’re assessing the geo-technical and hydraulic issues. We’re basically watching the market and preparing for a potash market that would go back over $500 a ton.

 

We know all the players that would come and play. They would have to get a return on investment knowing that they’d have to invest $3 billion. We’ve already put about $25 million into the project and are looking to the big mining ventures to help us make this happen.

 

What killed this project in the 1960s is the Saskatchewan Potash find. There is a large potash depost in Canada. It was so plentiful, thick and so easy to get to that the [Saskatchewan find] kept the price down under $200 all those years. With the ethanol boom and a lot of farmers needing more productivity from their farms the Canadian supply was tapped and we saw this spike in prices a few years ago. The Holbrook potash deposit will always be there until we get into it.  

 

Arizona Agriculture: The vast potash deposits of the Holbrook basin, a prime fertilizer for agriculture, what does this mean for agriculture and especially for Arizona agriculture?

Worsley: The U.S. uses about 10 million tons [of potash] a year and they import all but two. So the United States is importing 80% of its demand. So any supply in the United States would hopefully make potash less expensive for farmers especially here in the southwest where it now has to be transported long distances to get here.

 

Arizona Agriculture: Besides the usual suspects, what could hinder the development of this potash find?

Worsley: The biggest wildcard is the Russians. As you see Putin invade Crimea and Ukraine, the Russians are an unpredictable lot these days. There are criminal elements and strange relationships. The reason for the most recent collapse in price on potash is because the Belarus Russian group decided to flood the market to grab market share and they kind of broke the cartel that was marketing potash around the globe. They have now been bought out and are being brought back into control.

 

Rogue countries may want money for the government by attempting to grab more market share which will keep markets unpredictable. It would be like Saudi Arabia needing more money for its government, flooding the market with oil and then causing a breakup of OPEC.

 

That commodity risk is there and with the Russians’ activity, that’s why you might see these wild fluctuations.

 

Arizona Agriculture: Have we underestimated Arizona’s natural resources? Even our forests seem to be constrained by environmental concerns. How can we appropriately utilize our resources and still be environmentally proactive?

Worsley: It’s kind of like a rancher. You’ve got a certain amount of grass. We learned in the 1800s when we first brought cattle to Arizona and the open range that we overgrazed. We know what we do to our ranches if we overgraze. It’s similar with mining and our other natural resources.

 

Though, we have not even come close to this with our forest lands. We have a lot of opportunity to properly thin and properly maintain our forests. When we arrived here in the 1800s, there were 7 to 9 trees per acre in Arizona’s forest because we only get 21 inces of rain [in our forest areas] per year. Today we have over 2,000 trees per acre in our forests. State lands have not been thinned.

 

The Native Americans burned the forests. We need to return the forest to less than 20 trees per acre; that’s what our forests are supposed to be and that means we have to have aggressive mechanical thinning. We need to think of these trees as a multi-year crop.

 

The environmentalists have made it impossible for us to think of our national forests as a crop. That’s how it’s treated in plantations in the southeast. It’s how the Black Forest in Germany is treated. It’s very well taken care of. These resources will last for millennia if we manage them properly. In the 100 years we’ve been here in Arizona we haven’t gotten into a cycle of treating our forests like they are a well-managed multi-year crop.

 

The good thing is God knows what he’s doing and if we don’t do it He will and that’s why we’ve had the devestating fires of recent years. We’ve now inadvertantly burned up a third of our forest. If we don’t get it under control, nature will use beetles and fire to do so and we will be the losers; merchantable timber lost to natural disasters.