House backs Agrium plan

Railroad could pay for part of gasification coal project

Posted: Sunday, April 29, 2007

Alaska House members Wednesday voted unanimous approval of a bill authorizing the Alaska Railroad Corporation to issue up to $2.6 billion in tax-free bonds to finance parts of Agrium’s proposed coal gasification project, as well as a rail link to Port MacKenzie.

Rep. Mike Chenault, House Bill 229’s prime sponsor, said the measure, if it becomes law, would help protect a valuable economic asset of the Kenai Peninsula Borough.

“The Agrium plant is in danger of being permanently shut down due to a lack of natural gas feedstock, and that would be catastrophic for the Kenai Peninsula,” he said in a press release. “My community relies on the plant as a major taxpayer and provider, and the project that is on the table calls for gasification that will help the plant operate at optimal capacity. Allowing the railroad to bond out the project helps its feasibility and enhances the project’s economics, which enables the project to move forward.”

The bill would provide financing for facilities and equipment for transporting coal from Healy to Kenai and financing for facilities and equipment for coal gasification and electrical power generation adjacent to Agrium’s fertilizer plant.

Chenault said any actual bond issue and use of its proceeds still is a long way off, and could occur only after a project is seen to be a profitable venture.

“Until Agrium comes back and says, ‘We have run the numbers’ and they like the numbers, and that they have people interested in going forward, the bill accomplishes nothing,” Chenault said.

Presuming a project gets the go-ahead, the Alaska Railroad could profit, Chenault said, by moving coal, and through the negotiated deal the corporation would make with the gasification plant operator.

“If they are smart, there will be a mechanism for them to get some money, an interest point or something,” he said.

The bill now moves to the Senate where Chenault said he anticipates no difficulties for the funding measure.

Agrium Plant Manager Chris Sonnichsen said this week that the plant will start up production next week after a winter shutdown. He said the gasification plant project remains in the feasibility study phase, and that the next decision point would likely occur in late summer.

The proposed gasification plant would turn coal into natural gas as feedstock for Agrium’s fertilizer and ammonia plants (there are two of each at the Nikiski complex), as well as electrical power for the plant. Excess energy could be sold to the Railbelt energy grid.

Hal Spence can be reached at

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