Ran fine as a material effect on a terrain of mine with no changes after I set <Cullmode=None;> and disabled the entity fog (nofog set true).

First, set the cullmode to None to see what happens, unless you really think you need it.

If still no luck, then goto the entities properties and select "nofog". If the material effect shows, then you will need to:
A). either forget fog all together.
B). Look at my HLSL Cubemapping example to see how you would handle the fog.