Agrium’s peninsula future looks brighter

Developments could keep plant open, expanding

Posted: Friday, February 17, 2006


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  Agrium's Nikiski fertilizer plant is a significant component of the Kenai Peninsula Borough economy. Photo by M. Scott Moon

Tamara Bronner works in the ammonia plant control room at Agrium's Nikiski fertilizer plant earlier this winter. The facility hopes to find additional sources of the natural gas it uses to create its product.

Photo by M. Scott Moon

Agrium USA’s two ammonia and two urea plants in Nikiski were the focus of speculation and the catalyst for economic fears in 2005. The announcement of a study brought new hope for the future of the facilities and the Kenai Peninsula’s economic outlook — but there are no guarantees that hope will be realized.

In January 2005, the plant employed 230 people, but a grim future loomed on the horizon. With job cuts in 2005, Agrium employs 170 people. Agrium’s natural gas contracts were set to expire, leaving the facilities without power to operate. According to a study of Southcentral natural gas usage prepared by Enstar for the U.S. Department of Energy in June 2004, Agrium’s operations accounted for 27 percent of the natural gas used in the region.

The termination of gas contracts pushed the company to announce in December 2004 it would cease operations in fall 2005, but the company was able to negotiate contracts last summer to keep one ammonia and one urea plant running through November 2006.

According to Agrium spokesperson Lisa Parker, that left the company with two options for the future.

“One was trying to negotiate contracts with producers to keep the plant operating and the second path we were looking at was shutting the plant down, and the process for shutting the plant down,” Parker said.


Agrium's Nikiski fertilizer plant is a significant component of the Kenai Peninsula Borough economy.

Photo by M. Scott Moon

Then came November 2005. That month, Agrium announced it was entering into a feasibility study with the Usibelli Coal Mine and engineering firms Black and Veach in Kansas and Uhde in Germany on the Blue Sky Project.

The project, so named because of its environmentally friendly nature, would see the opening of the Beluga coal fields across Cook Inlet and the building of a coal-fired power plant and a gasification plant. The gas produced from the coal would be used to operate Agrium’s facilities. If the results of the study prove favorable, the gasification plant could be operational by 2011. An announcement is expected by May.

“If we come online in 2011, this plant will be operating at full capacity,” Parker said. Full capacity means about 700,000 metric tons of ammonium and 1.1 million metric tons of urea.

Using coal gasification as a means to continue production would do more than just keep Agrium’s operations going. A successful Blue Sky Project would have far-reaching impacts. Agrium could expand its operations, direct and indirect jobs would be created and excess power from the power plant could be resold and used to help meet the peninsula’s energy needs.

The jobs would cover many areas.

“There would be jobs in the coal mine, jobs in the gasifier, jobs in the power plant and jobs at our facility. Between the various entities, there would be 600 direct jobs,” Parker said.

Indirect, support-related jobs could push the total number to 2,000.

Still, there is concern for the more immediate future. If Blue Sky proves too costly because of regulatory hurdles or any number of other financial or engineering factors, Agrium is in the same uncertain predicament. If Blue Sky does go forward, Agrium still only has enough natural gas to continue limited operations, which Parker said will trim the work force to about 150 in the next few months, through this fall.

“If that project turns out to be feasible, we would still have to shut the plant down,” Parker said.

Agrium is continuing to search for gas contracts.

Headquarters: Calgary, Alberta, Canada

CEO: Mike Wilson

Nitrogen operations manager for Nikiski: Bill Boycott

Employees: 170

Web site:

Plant outlook: In late 2005, Agrium joined with industry partners to look into the the feasibility of building a coal gasification plant next door to its existing facility to manufacture feed gas for its ammonia and urea plants. The accompanying coal-fired power plant would produce enough electricity to pump back into the power grid. The results should be announced by May.

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