Agrium gets more gas, plant to stay open for one more year

Posted: Thursday, July 14, 2005

After downsizing its work force by 50 employees since last December, Agrium postponed closing its North Kenai fertilizer plant until November 2006 unless it can negotiate more contracts to buy natural gas.

According to an Agrium press release, the decision to stay open is because Agrium was able to negotiate one-year contracts with Cook Inlet gas producers to purchase more gas. Citing confidentiality reasons, Agrium would not disclose the sellers of the gas.

In the meantime, Agrium will look at its options and see if more gas contracts can be negotiated to continue running the plant past November next year, said company spokesperson Lisa Parker.

After a settlement with Unocal Corp. in December over a dispute regarding the purchase and sales agreement of Unocal's chemical operations, Agrium announced it only had gas to run the plant through Oct. 31 and would have to close.

In March, Agrium issued a request for proposal to Cook Inlet gas producers to purchase more gas to run the plant through 2009. Parker said one-year gas contracts were decided by the other companies at the negotiating table and Agrium agreed.

Agrium historically has paid less than $2 per thousand cubic feet for natural gas. The offer in the request for proposal was to pay $3 per thousand cubic feet. Agrium would not disclose the negotiated price.

"It's not a permanent fix, obviously," said Bill Popp, oil, gas and mining liaison for the Kenai Peninsula Borough.

Popp also was the co-chair of an Agrium task force appointed by Gov. Frank Murkowski.

Agrium manufactures anhydrous ammonia and urea, both forms of fertilizer, at the North Kenai plant. Right now it is operating two ammonia plants and two urea plants. In the middle of October, the company will downsize the plant's operations to one ammonia plant and one urea plant.

Parker said Agrium will look at a variety of issues to see if running the plant beyond November 2006 is worth it new gas contracts only being one factor. She acknowledged that the commodity price of ammonia and urea will be another factor in the company's decision.

Agrium employed 230 people in December. There are 180 employees left. The average salary of those employees is $84,000. Through direct and indirect employment and payroll, Agrium accounts for 4 percent of the total employment and 7 percent of the payroll on the Kenai Peninsula, according to a report from the McDowell group. This is based on 2003 data.

Agrium paid more than $1.5 million in property taxes to the borough in 2004.

Parker said it had not yet been determined how many employees would be needed to staff the plant for the next year.

"The primary focus has been on seeing if we could secure enough gas to continue to operate," she said. "It's not a concern that we are going to have enough qualified employees to run the plant."

Chris Rhodes, an operator at Agrium, said losing employees is somewhat of a concern, but only running two plants reduces the chances of becoming short staffed.

"Attrition's always a problem in a situation like this," Rhodes said.

He said he was happy the plant would continue to operate for another year.

"I think it's great that Agrium got this extension," he said.

"I think it's a great thing for the employees," said Loren Hollers, an operator at Agrium. "In a year, we have no idea what will happen on the Kenai Peninsula."

Commenting on staffing issues, Hollers said he expects employees to look for other employment opportunities.

"I don't expect the employees to just do nothing over the next year," he said. "Hopefully, Agrium will offer more opportunities for us long-term employment."

He said he would like to stay on the peninsula and continue to work at the plant. If not, "then I'm going to have no choice but to keep knocking on doors," he said.

He said he knows a lot of his peers feel the same way.

After Agrium issued a press release announcing it would continue operations, Murkowski said in a press conference: "This represents a very committed act by the state."

"I'm very pleased that we have a year's grace," he said.

When asked to elaborate on that comment, he said he helped coordinate efforts between Agrium, gas producers and state agencies to get everybody working together.

The negotiated contracts happened privately between Agrium and natural gas producers, Parker said. Murkowski was not part of those negotiations.

Bob Favretto, co-chair of the Agrium task force reinforced the governor's involvement and said that without the governor's participation "we wouldn't be here today."

The task force has had a number of meetings that included an April meeting in Kenai that the governor attended.

Favretto said there were two meetings the governor attended that were particularly helpful one in Juneau and a follow-up meeting in Anchorage. He said the meeting in Juneau lasted seven hours and included various state agencies, natural gas producers and Agrium.

The meeting in Juneau and the meeting in Anchorage were closed to the public.

Popp said the task force will look at ways to promote exploration in the Cook Inlet basin as a short-term solution to help Agrium stay open beyond November 2006.

"We very, very much appreciate everything that has been done," Parker said.

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