Nitrogen plants popping up like mushrooms

Lured by the promise of cheap and plentiful natural gas, more hopefuls are jumping into the nitrogen fertilizer production.

Earlier this spring, Northern Plains Nitrogen (NPN) launched plans for building a $1.5 billion North Dakota project, and in mid-September, CHS Inc., the largest farmer co-op in the United States, unveiled its plan to open a $1 billion plant in Spiritwood, ND, by the end of 2016.

The latest entry comes from Farmers of North America, who are in the early stages of trying to drum up support from their members for a new plant in Western Canada.

“It must be a popular idea,” said Brian Chorney, who was chosen to represent the Manitoba Canola Growers Association in discussions with the North Dakota Corn Growers, the main farmer group backing the NPN project.

Chorney, who recently attended an NPN board meeting in mid-September, said that discussions regarding the plant’s best future location in terms of natural gas supplies, water and infrastructure links, are still ongoing, but investor interest is strong.

CHS’s announcement of a competing operation came prior to the meeting, and directors were able to review their plans, he added.

“We very much think there is room for two plants. As for a third plant, we’ll have to evaluate that as well,” said Chorney. “Announcements are one thing, but building plants is another.”

In the end, if all three plants are built, more local nitrogen production capacity will benefit Prairie farmers on both sides of the border and reduce reliance on imports from other countries, he added.

For example, there is concern that shipments up the Mississippi river might be hindered by persistent low water levels this year.

“Whether it’s our plant, CHS’s plant or the Farmers of North America, more capacity built locally is good for Manitoba farmers in general,” said Chorney.

Doug Chorney, president of KAP, said that the first two plants, which already have financing in place, are much further along than FNA’s.

“The CHS plant is obviously a very real opportunity for them and they have the financial wherewithal to do it,” said Chorney, who is Brian’s cousin.

“And the project we’re involved in (NPN) has a very solid financial plan and investors already lined up.”

Given the enormous capital investment required to build a billion-dollar plant, Chorney believes that small players will find it difficult to gain entry into the market.

FNA’s Western Canada project may find favour with Canadian farmers due to the logistical advantages of its location, but on the other hand, the plants in North Dakota will be filling a gap that is currently underserved, he added.

On Sept. 26, FNA issued a press release outlining its plans to create a limited partnership that would provide its 10,000 farmer members with a mechanism for equity ownership in a fertilizer plant. NFA, which negotiates input deals with suppliers on behalf of its membership, intends to “connect committed purchase contracts” for the plant’s production, but a third party would be needed to provide additional investment capital and run the operation.”

With imports of nitrogen fertilizer estimated at seven million tonnes per year, FNA spokesman Bob Friesen said adding three more plants in North America still wouldn’t eliminate the need for imports.

“We’re not trying to compete with anybody,” said Friesen. “We would hope that Canadian farmers would invest in a Canadian farmer-owned fertilizer plant as much as possible.”

Dubbed “ProjectN,” the FNA’s Fertilizer Limited Partnership will begin raising seed capital immediately. Depending on the response it receives through a website (www.ProjectN.ca), it may be in a position to make “additional concrete announcements” in the coming weeks, said Friesen in a press release.

“It needs to be clear that FNA is not talking about getting into the manufacturing business itself,” said Friesen in the release.

“Rather, as we have done in the past, we are organizing and providing the catalyst to see a fertilizer plant built.”

FNA’s ProjectN working group sees a positive outlook for a plant in Western Canada following analysis of natural gas pricing, plant scale, market demand, competition and other indicators.

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