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For community's sake, gas dispute needs to be settled

Posted: Sunday, December 07, 2003

Sure, business is business.

There's nothing personal about corporate decisions.

Companies have to do what they can to protect their bottom line, please their shareholders and make a buck or two.

That's all understandable in theory at least.

Kenai Peninsula residents should be forgiven, however, if they take the current dispute over gas supplies between Unocal and Agrium somewhat personally. If not resolved, the dispute threatens to close Agrium's Nikiski fertilizer manufacturing complex by the end of 2005, and that's a big deal. To those who live on the peninsula, it isn't just about business; it's about a community's way of life and quality of life.

You can't just shut down a plant the size of Agrium's Nikiski nitrogen operations without expecting to see the ripple effects extend to nearly every aspect of life in the community not just the lives of those workers who would lose their jobs.

Numbers tell a little bit about the importance of the plant to the economic vitality of the entire Kenai Peninsula Borough: In 2002, Agrium ranked as the eighth largest employer in the borough and was the borough's No. 2 taxpayer, right behind Unocal.

A 2002 study by the McDowell Group expands on the meaning of those numbers and points out a few others:

Agrium's payroll average is $83,865 per employee; the average salary in the borough is $32,784. The plant's $25 million in direct payroll generates additional indirect and induced earnings of $25 million, for a total of $50 million in salaries and wages in the peninsula's economy.

The borough receives $2.4 million in industrial property tax from Agrium, an estimated minimum of $212,700 in residential property tax from Agrium employees' homes and $1.4 million in state funding for Agrium workers' school-age children's education for a total of $4 million in direct revenue to the borough.

In 2001, Agrium contributed $138,329 to 87 nonprofit organizations and programs, most of them in the Kenai area.

In 2001, Agrium spent about $95.2 million on Alaska goods and services; 95 percent of it on the peninsula.

"In summary, by Alaska economic standards, the Agrium operation is exceptional by its combination of high pay levels, amount and concentration of expenditures in the local area, and the degree of value-added manufacturing that occurs in Alaska prior to export. The result is a high multiplier impact," notes the McDowell report.

The irony of the current gas dispute between Unocal and Agrium is that both companies have done much to be good corporate neighbors to the Kenai Peninsula Borough.

Unfortunately, the dispute stands to unravel the upstanding images they've worked so hard to weave. In the worst-case scenario the plant closes at the end of 2005 because the firms were unable to reach a resolution to their dispute and Agrium could not find another source for a sufficient supply of natural gas memories of the firms' generosities will be replaced by bitter feelings and economic hardship.

Even now, the uncertainty of what will happen dampens other good news, including Unocal's recent announcement that it has discovered natural gas at its Happy Valley prospect and likely will drill three development wells next year.

That leads to another irony about this whole gas dispute mess. If the Agrium plant were to close, it likely would bring to a screeching halt the promising gas exploration efforts now under way in the region because there would be no immediate need for new supplies of gas. Agrium's nitrogen operations, as well as the ConoccoPhillips liquefied natural gas plant, are the primary driving forces behind the exploration efforts. With Agrium out of the picture, there would be sufficient supplies of natural gas to meet the consumer demand for power generation in the Cook Inlet region for several years. Losing those exploration efforts would be another major blow to the economy.

The consequences to the community if this issue is not resolved quickly cannot be overstated. While it may be a straightforward contract dispute to Agrium and Unocal, the borough's economic health is at stake, not to mention the future of Agrium employees and their families.

The ripple effects, however, reach beyond the borough and the plant's employees. As the McDowell study noted, the Agrium plant is one of the few major manufacturing operations in the state that contributes to Alaska's economy by adding value to Cook Inlet natural gas production.

In short, the Agrium plant is too valuable to the state and borough economies to lose. Agrium and Unocal, both of which have invested much in the borough, the Nikiski plant and the people who work there, will only reap long-term benefits from their investments by settling this gas dispute quickly and in a manner that allows the plant to continue operating.

Gov. Frank Murkowski might be well advised to keep his eye on the situation. This is no time for the state to lose a major player in the economy, and the governor's interest might prove to be a catalyst that could hasten a resolution to the dispute.

A settlement is needed for far more reasons than any one company's bottom line. A whole community stands to lose without it.



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