Mosaic's 'Phos-Fate': Florida Mine Battle Looms

(Updated with response from Mosaic on the contested permit for the expansion of its Four Corners phosphate mine.)

NEW YORK (TheStreet) -- The future of the Florida phosphate industry could hang in the balance early next month when a federal appeals court in Atlanta convenes to hear a set of arguments that pits two ancient adversaries -- environmentalists vs. big business.

At the center of the dispute sits Mosaic(MOS). Based in Plymouth, Minn. -- 1,400 miles from its operations in the Sunshine State -- the global fertilizer giant takes more phosphate out of Florida's rich peninsular loam than any other company by far, accounting for about half of the nutrient produced in the U.S. in recent years. (Potash (POT), a distant No. 2, accounts for about 25%, though most of that comes from North Carolina, not Florida. CF Industries(CF) is third, with 11% of U.S. production).

The phosphate industry in Florida has long been controversial. Since modern dragline excavation techniques, capable of eating acres each day, came into use in the 1940s, it has strip-mined hundred of square miles of watershed in the center of the state, mostly from a region dubbed the Bone Valley by locals -- excavations that have, on occasion, dried up rivers, critics and scientists claim. Its tailings have been poured into enormous, semi-toxic settling pools that have been known to spring leaks. The processing of phosphate rock into fertilizer produces radioactive gypsum, a byproduct that now covers about 3,400 acres, rendering it unusable.

But phosphate rock also happens to be the source of one of the world's most important and effective plant nutrients -- a substance that has taken on new relevance, rising to the level of national security, at a time of burgeoning fears over global food shortages. (Indeed, the element phosphorus is one of the fundamental building blocks of life).

For decades, the controversy in Florida remained little more than loud talk by local environmentalists who clashed in vain with Fortune 500 corporations. (The industry mined without any regulation at all until 1975.) But just within the last six months, all that seems to have changed. A series of lawsuits over mining permits has threatened to imperil Mosaic's financial health.

In July last year, several local environmental and community groups, including a Florida chapter of the Sierra Club, sued to block Mosaic's plan to expand its South Fort Meade mine. The company already has exhausted the rest of the plot. To lose the expansion then, would mean to lose between 4 million and 6 million metric tons per year of phosphate-rock production, or 32% of the company's total output in its fiscal 2010.