Agrium won't seek state gas

Posted: Sunday, May 15, 2005

A governor-appointed task force charged with helping Agrium find ways to stay open decided to drop the issue of selling state-owned gas as a short term solution to supplying the fertilizer plant with more natural gas.

The decision comes after the Alaska Department of Natural Resources Division of Oil and Gas presented information about royalty gas at a Monday, May 9 meeting in Juneau with Gov. Frank Murkowski. Task force co-chairs Bob Favretto and Bill Popp, along with Agrium and oil and gas industry representatives were at the meeting.

The meeting was held to address task force issues. According to Murkowski spokesperson Mike Chambers, it was a "sit-down meeting" and not open to the public.

"We had been looking for a clear analysis of the pros and cons of a royalty sale in Cook Inlet," Popp said. "It's the consensus of the task force that a sale of royalty in-kind gas is just not appropriate."

Discussion about selling state-owned gas, called royalty gas, started when Favretto suggested the state look at ways to hold a sale of its royalty gas as a way to help supply Agrium with some additional gas.

Referring to the Monday meeting in Juneau, Favretto said the task force agreed to drop the issue of a royalty gas sale.

Popp said there are too many unintended consequences of a royalty in-kind sale.

Agrium plans to close its North Kenai fertilizer plant this year unless it finds somebody to sell the company more gas.

In addition to looking for ways to help Agrium stay open, the task force is charged with developing recommendations to spur long-term development in the Cook Inlet basin and trying to assist Agrium employees.

Because Agrium is trying to purchase more gas from Cook Inlet producers, company spokesperson Lisa Parker said at an April 22 meeting the company is not willing to try to pursue purchasing royalty gas because it would complicate negotiations with the producers.

Right now, Cook Inlet gas producers have contracts with their customers to sell the state's royalty gas. In turn, the state receives payment from the producers for royalty gas in cash. If a royalty gas sale was held, it would direct some gas away from existing contracts.

The task force also agreed to adopt a resolution supporting the governor's push to restart the Healy Clean Coal Project in what Popp said would be a symbolic show of support.

This project was a demonstration plant designed to test clean coal technology. The plant is not currently in operation.

Right now, many Alaska utilities, such as Homer Electric Association and Chugach Electric Association, generate electricity with natural gas.

Popp said if the Healy plant came online, it would generate 50 megawatts of electricity per day. This could reduce natural gas demand for power generation by 10 million cubic feet per day, he said. He added that this would not necessarily mean Agrium would have access to that gas.

Friday was the deadline for Inlet gas producers to respond to a request for proposals from Agrium to purchase more gas. Parker, of Agrium, said Saturday that responses were received.

"We did receive some responses to our request for proposals," she said. "We are in the process of evaluating them at this time."

Parker said the proposals must be reviewed to determine if they're feasible for keeping the plant in operation past Oct. 31.

She said she did not know when the company would complete its review of the proposals.

Clarion reporter Matt Tunseth contributed to this story.

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