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Fertilizer facility inches closer to reopening, but natural gas prices still high

Alaska State Legislature

A Nikiski facility that was once the country’s second largest producer of ammonia and urea is one step closer to getting up and running again. But with Cook Inlet natural gas prices still high, it seems unlikely a reopening will happen without big changes to the market.

The Kenai Nitrogen Operations Facility turned natural gas into fertilizer for decades under Unocal and, starting in 2000, Agrium. Located at Mile 21 of the Kenai Spur, the plant employed over 300 staff at its height, many of them residents of the central peninsula.

When there was no longer enough affordable natural gas to keep the plant going, Agrium closed it and laid off 100 employees in 2007. Since then, Agrium has merged with Potash and become Nutrien.

Nutrien has been talking about reopening the Kenai facility for a few years. But it won’t make any moves until it can pinpoint an affordable and available natural gas supply.

“That’s really important to make sure that we have gas affordability and availability if we were to reopen the plant," said Communications Manager Kathy Baker. "Just reopening the plant would require that steady gas supply.”

Nutrien is going through the permitting process anyway. Most recently, the Alaska Department of Environmental Conservation approved Nutrien’s air quality control construction permit. The permit authorizes Nutrien to restart one ammonia and one urea plant at the facility.

“Right now, no decisions have been made," Baker said. "But the permit in hand helps us keep our options open.”

There’s been more natural gas exploration and production in the inlet since the plant closed. But Larry Persily, who’s worked in and reported on Alaska’s oil and gas industry, says current natural gas prices in the inlet are still high.

“The price of that feed gas, the price that their raw materials come in, is essential to this being economically viable. And right now, Hilcorp and other Cook Inlet producers are charging two or three times for their gas as the going rate for the Lower 48," Persily said. "It’s just a closed market here —  limited suppliers, higher costs. Too much gas in the Lower 48, prices are low. So, at current prices, restarting that plant, putting a few hundred million dollars into it to bring it back up, just doesn’t make sense. But getting the air quality permit is a low-cost option to keep the dream alive in case the markets change.”

Natural gas at the city gate — or the point when gas goes from producers to distribution companies — is priced around $4.10 per 1,000 cubic feet nationwide. In Alaska, it’s $8.08 for the same volume.

Nutrien has had an active permit from the ADEC for years. Its latest permit draft is much like the previous one, adjusted to accommodate changes in design plans like new, cleaner turbines.

The ADEC would require Nutrien to start construction on the plant 18 months from when it’s issued. After that period, it would have to renew its permit to build.

Nutrien has six active nitrogen plants in the U.S. and six in Alberta, Canada. The company’s headquarters is in Saskatoon, Saskachawan.

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