Fertilizer plant plans go to APUCDarin Anderson, president of the North Dakota Corn Growers Association, on July 19 will be among leaders helping make the pitch for $150,000 from the North Dakota Agricultural Products Utilization Commission to help finance a business plan to construct an anhydrous ammonia fertilizer manufacturing plant.
By: Mikkel Pates, Agweek
VALLEY CITY, N.D. — Darin Anderson, president of the North Dakota Corn Growers Association, on July 19 will be among leaders helping make the pitch for $150,000 from the North Dakota Agricultural Products Utilization Commission to help finance a business plan to construct an anhydrous ammonia fertilizer manufacturing plant.
The plans include using flare gas associated with the oilfields, but the gas could also be from a collected source.
“This would give farmers an opportunity to have a permanent hedge against nitrogen fertilizer,” says Anderson, who farms west of Valley City, N.D. “It used to be you would be able to buy natural gas futures contracts as a hedge against nitrogen fertilizer. That’s only loosely correlated anymore.”
Anderson is chairman of the NDCGA steering committee on the $1 billion project. It’s a collaborative effort between corn and soybean grower groups in the tri-state area. He says if the APUC grant is approved, the organization will step up its efforts in other states and provinces to hit the $500,000 mark needed to do the business study. The groups are evaluating whether other rural economic development grants also might come into play.
The steering committee, which will be expanded as the project moves forward, currently includes Anderson and Kevin Skunes, Arthur, N.D.; Duane Dows, Page, N.D.; Larry Hoffman, Wheatland, N.D.; and Bill Whipple, Wilmot, S.D. Voting members for Minnesota and Manitoba will be named also.
“The key is we want this to be majority farmer-owned and controlled, or someone else is going to own it and we’ll be back to square one,” Anderson says. “There will be a plant built in North Dakota, it’s just that we hope to be the ones to do it.”
Don Pottinger Consulting LLC of Eden Prairie, Minn., and Larry Mackie of Mackie International (U.S.) Inc., of Longbow Lake, Ontario, both industry consultants with a long history in the nitrogen fertilizer business, will conduct the business study.
The project recently passed muster in a North Dakota State University preliminary feasibility study.
Anderson says the idea isn’t to produce fertilizer, cut the market and sell it for cheap. It’s to allow farmers an investment that means if nitrogen prices are high, they’ll get a dividend in the market for producing fertilizer.
The NDCGA has financed several nitrogen-related research projects in the past several years, says Tom Lilja, executive director of the organization. It studied new ways of making it, including an electrolytic process and a wind-related process, but in the end, the traditional method was seen as more economically feasible.
The NDCGA also had hoped a smaller facility might be feasible, but the $1 billion size turned out to be the most economically scaled.
Anderson says the NDCGA is hoping to be in a position Feb. 1 to inform farmers of potential opportunities for investing in a plan. Details aren’t known, but he says there will likely be a minimum investment requirement, although it will be small enough for any commercial farmer to participate. If the project moves forward, it likely will be owned by farmers in North Dakota, South Dakota, Minnesota and Montana, as well as Manitoba and Saskatchewan. The plant developers recently received a financial contribution commitment from a collection of Manitoba farmer groups for the business plan.
If the plant is developed, it might result in a management company analogous to CALAMCO (California Ammonia Co.) of Stockton, Calif. CALAMCO, in business since 1957 according to its website, is made up of 1,500 growers, fertilizer dealers and its industry partner, J.R. Simplot Co.
Lilja says any farmer entity should have a 51 percent controlling equity interest in such a plant. Anderson says it’s possible for the farmer equity to be roughly $300 million to $400 million.
The project would be different from other equity drives for farmers because it would not require delivery of any commodity as a value-added product. The concept might be similar to a farmer investing in a corn ethanol plant, Anderson says. It would make more money on the ethanol in times when corn prices are low, but make more money on corn when corn prices are higher.
The fact that the production facility is in the vicinity of the natural gas source could increase the chances of hedging the nitrogen. The proposed process takes the hydrogen out of the natural gas, which accounts for roughly 80 percent of the cost of making the fertilizer. The higher the cost of gas, the higher the gas cost percentage, Anderson says.