Dec. 14, it was announced Unocal and Agrium USA had settled long-standing disputes involving the sale and operation of the Nikiski nitrogen facility. The direct impact of that settlement has yet to be felt by the community, borough and the state of Alaska.
Part of the settlement involved the deliverability of natural gas as feed stock to the Agrium plant. That portion of the agreement states that after Oct. 31, 2005, Unocal will no longer be obligated to supply any gas to Agrium. Currently, Agrium is supplied the lion's share of natural gas by Unocal with additional quantities of gas being purchased on the spot market from the other area gas producers. The spot market gas is an interruptible source meaning that it is not dedicated to Agrium and can be stopped at any time for any reason the producer sees fit.
With that in mind, the very notion of the Agrium facility stopping production and closing its doors should send shivers down the spine of every resident of not only the communities of Soldotna and Kenai, but those who reside on the Kenai Peninsula from Seward to Homer and beyond. There are even statewide implications with such a closure.
The media reports 230 jobs will be lost as a result of a plant closure.Unfortunately, this is a horrendous understatement of the actual number affected. In addition to these 230 Agrium employees, 50 contract jobs will be lost. Another 20 to 30 vendors will see a drastic and crippling decrease in their business.
The supporting businesses to those vendors will suffer economic hardship. In reality, as reported in an economic study, the closing of the Kenai plant would directly impact more than 700 workers.
These are all easily comprehensible losses for our economy. What the public at large fails to see is the following:
n The tax base for the borough will take a huge hit when Agrium no longer pays its current tax rate on the facility. Since it will no longer be producing, the plant's value will decrease dramatically and thus the property tax Agrium pays will decrease in conjunction with the plant.Who will be left to make up the deficit that will be incurred? The residents. Without that tax base, the ability of government to deliver basic services will be crippled by a lack of capital to provide those services. This will mean additional layoffs and reductions for the people who provide those services.
n There are approximately 250 school-aged children who have one or more parents employed directly by Agrium. This does not include the untold numbers of children whose parents depend on the Agrium facility to put food on their table. The children of vendors and contractors quite possibly would triple the number of children. Without those children, or without even half of them, the school district will need to pare down teaching and support staff in our schools. School programs will need to be reduced or cut. The businesses involved with the school district will see a decrease in business and the local economy would suffer an even greater crisis.
n Just as with the oil crash of 1986, the number of foreclosures would be staggering. If there is not the income to sustain a mortgage, the home will go back to the bank. With the 1986 crash, the most prominent sign in the community was a U.S. marshal's sticker on the door of the homes
being foreclosed. It seemed at that time that every fourth door had a foreclosure notice on it. The results of a plant closure in this respect would be infinitely worse.
This is not a sudden impact. This is something the gas producers and Agrium have been warning us about for the past two years. Unfortunately, now we find ourselves in a reactive state of mind when we have in the past had the opportunity to be proactive. But, it is what it is and now we must deal with it.
Is this political posturing by Agrium and the oil and gas producers of Cook Inlet? Possibly! But truthfully, can we afford to be of the mind that this is all a front? I honestly don't think so. We would be gambling with our economic future, our economic survival here on the peninsula. We must look at this as a very real possibility if not a definite reality.
A cheap source of gas must be allocated or acquired soon or we all may face the notion of moving to a community that will afford us employment and the opportunity to raise our families in a comfortable fashion.
What can we do as a community? At this point, there is very little that can be done. We are at a juncture where we have little choice but to lobby our representatives at the state and federal levels to do all that they can to assure the continued operation of the Kenai facility.
To bury our heads in the sand and think to ourselves "They'll never close that plant down, it makes too much money" or the notion "Who cares? It really doesn't affect me! I don't work there!" may be a fatal mistake on all of our parts.
Write our governor, call our representatives in Juneau and Washington, D.C., and let them know the commitment this community needs from them to get a cheap source of gas to the Agrium facility.
The impact of a plant closure will be anything but sudden. We have been warned for quite some time this may happen, but we chose to bury our heads in the sand. Now it is (past) time to take action in any way we can.Our problems will not stop with the closure of the Agrium plant. It is
not that far down the road and the next economic fatality will be the LNG plant.
Our economy cannot survive on tourism and fishing alone. We need these facilities to continue operating in our community.
The problems Agrium and the gas producers face are not insurmountable. We, as a community, can help find answers. In some respects we may need to make sacrifices to see to it that this facility continues to operate. But the sacrifices we make will be minimal compared to the sacrifices we
will have to make should the facility close its doors.
The above stated effects of Agrium abandoning its Kenai operations are just the surface of the problems we will face. The effects will be felt all the way down to the most unsuspecting resident of this community.
We have no choice but to act now. It's a matter of survival!
Mark Schams is a 25-year Kenai resident.
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