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Published May 20, 2013, 09:21 AM

No small plans

A farmer-led company is joining the nitrogen fertilizer manufacturing race

By: Mikkel Pates, Agweek

VALLEY CITY, N.D. — Darin Anderson uses a starter fertilizer for his 2013 corn; he looks behind him in the tractor cab to see the product flowing through “sight monitors” on his planting rig that verify the stuff is traveling properly through nozzles.

But he’s also looking ahead. Anderson, 35, president of the board of directors for Northern Plains Nitrogen, which has announced plans to build a $1 billion to $1.5 billion fertilizer factory near Grand Forks, N.D., is a fifth-generation farmer just west of Valley City, N.D. A 1999 graduate of North Dakota State University some 14 years ago, he farms with his father, Bruce. He has served three terms as North Dakota Corn Growers Association president, and will step aside from the presidency on July 1 to focus on the nitrogen company.

He doesn’t seem at all daunted by the size of a project that would manufacture 2,200 tons per day of ammonia — fully four to five times larger than some of the biggest ag-related enterprises in the region.

In a couple of weeks, he’ll be side-dressing urea-ammonium nitrate fertilizer on his corn and top-dressing it on wheat.

“I’d like for one day to put on UAN (urea-ammonium nitrate fertilizer solution) that’s made in a plant in Grand Forks,” Anderson says. “That’s the ultimate goal. I think we have a pretty good shot at it.”

Corn and credibility

Funded by check-offs, the North Dakota Corn Utilization Council has invested nearly $294,000 in studying nitrogen manufacturing in the state in the past five years. As nitrogen fertilizer needs have increased because of corn production in this region, the council has looked for ways to replace nitrogen that is largely imported.

The NDCUC in 2006 started funding research at the University of North Dakota’s Energy & Environmental Research Center, looking for an alternative source of nitrogen fertilizer than the traditional “Haber-Bosch” process of exposing air and natural gas over an iron oxide catalyst, under high pressure and intense heat.

“The board wanted to see if there was an alternative way to make the product,” says Tom Lilja, executive director of both corn groups. In 2009, the North Dakota Corn Growers contracted with Common Enterprise Development Corp. of Mandan, N.D., headed by Bill Patrie.

In a similar vein, the organization in the summer of 2011 heard from investigator Rich Garman, who is a senior project manager for Great River Energy in Bismarck, N.D. Garman had been looking into a so-called “electrolytic” method of producing the fertilizer under lower pressure and lower temperatures.

Garman told the group his company was looking at possibilities connected to Great River’s Spiritwood, N.D., energy park, where it was building a coal-to-electric generation plant. Garman quoted figures a Norwegian equipment company called Stat Oil had provided, which indicated a high capital cost and estimated the nitrogen in that method would cost $2,576 a ton to produce at the smaller scale.

The North Dakota corn grower groups also looked into a University of Minnesota Morris study, which had a grant from the state of Minnesota and the Minnesota Corn Growers. That would convert anhydrous ammonia fertilizer from wind power. The Minnesotans determined that a relatively high investment in the windmills and equipment would produce a small amount of fertilizer and that also wasn’t economically feasible.

Setting aside the novel

Instead of focusing on a “novel” manufacturing approach, the North Dakota corn growers turned to conventional, proven production methods.

Patrie recommended the group look at the availability and cost of so-called “flare gas,” the byproduct from the Bakken oil fields. North Dakota State University became involved in an industry study.

At the spring 2012 meeting, the group created a steering committee called the Northern Corn Development Corp.

“Once we thought the economics were pretty favorable, we decided this was beyond corn and beneficial to other groups, and we wanted to reach out to other groups in the state and region,” Anderson says.

The steering committee found that the higher the capital costs, the cheaper the cost of nitrogen. When the capital costs increase to more than $1 billion, amortized over 30 years, the ammonia costs get down to $409 per ton, which is competitive with imported fertilizer.

Analyses were done on rail data, companies, gas pricing, natural gas contracts and electricity in April of 2012.

Officials of Calamco, a farmer-owned Stockton, Calif., cooperative, came to Fargo, N.D., at their own expense to make a presentation to the Northern Corn Development Corp. Calamco was established in 1957 and has produced and marketed anhydrous ammonia on behalf of its members since 1961. Its 1,500 members produce fertilizer in partnership with the J.R. Simplot Co. and have received patronage returns averaging 20 percent since 1961. The co-op has ownership in one of two ammonia terminals in California.

In June 2012, the steering committee decided the signs were positive enough to warrant more study. They were convinced of the ongoing needs for nitrogen fertilizer, the availability of natural gas as a low-cost source of hydrogen for ammonia production, and the opportunity to partner with natural gas companies to predict long-term prices and supplies.

In December, the steering committee held its last official meeting and shortly thereafter organized the new group and named a board of directors. The group is buying the research from the Northern Corn Development Corp., but the corn grower and corn council work is completed.

Loads of learning

When the plant was announced in Grand Forks on May 9, Anderson was busy farming — applying anhydrous ammonia.

Don Pottinger, CEO of Northern Plains Nitrogen, was introduced. Pottinger is a former vice president of global partner relations for AGCO Corp., and president of AG-Chem Equipment, president of J.R. Simplot’s Agribusiness Group and president and CEO of SaskFerco (now Yara).

Bill Owens, a North Dakota native and former four-star admiral who served as vice chairman of the Joint Chiefs of Staff in the Pentagon, and then chairman of Century Link, has strong international experience and has joined the company’s board. Doug Stone, recently added to the board, spent his career with Terra Industries, marketing 6 million tons of nitrogen per year in the agriculture area. Stone is president of Consolidated Sourcing Solutions.

Also on the board are four farmers and grower representatives: Anderson; Duane Dows, Page, N.D.; Larry Hoffman, Wheatland, N.D., and Bill Wipple, Wilmot, S.D.

“I think that’s a good mix,” Anderson says. “If we’re going to organize a company that’s ultimately going to cater to farmers, it’s good to have farmers on the board.”

The group announced the project will take 4,000 gallons of water per minute and primarily will use waste water from the city sewage lagoons. “If you run 2050 population projections and match them to the 1930s drought scenario, Grand Forks has plenty of water,” Lilja says. “A number of the other sites couldn’t say that.”

Grand Forks also has transportation infrastructure, including Burlington Northern Santa Fe rail mainlines and Interstate Highway 29 and U.S. Highway 2. The Viking Gas Transmission Co. has a 500-mile pipeline running through Grand Forks. The plant will consume about 80,000 million Btu per day, with a dedicated lateral from the existing mainline.

The cost range of $1 billion to $1.5 billion depends on many factors, including construction costs. One issue is the availability of labor and potential competition with the Bakken oil field labor markets. The plant will need up to 2,000 construction workers at various times, but will provide permanent jobs for 135 people.

Financing details aren’t yet available. “I’d love to say exactly how we’re going to do it,” Anderson says, but things need to be done “in order, and done timely.”

Anderson says he thinks the Northern Plains project is only one among a growing field. CHS Inc. has announced a potential project in Spiritwood, N.D., and smaller projects have been announced or are in the works in the Red River Valley area and in Canada.

Northern Plains Nitrogen

Anderson says a nitrogen fertilizer plant in the Northern Plains is good because of the abundance of natural gas and the increasing demand for nitrogen. A viable plant can’t be based on one or two years of economics, he says.

He acknowledges he hasn’t evaluated competing or complementary projects, but he guesses that the CHS project is “fairly similar” because of its size and scope. “They’re looking at the same numbers we are,” he says. “I think they are all quite different,” he says. He says he doesn’t know much about the smaller plant models, but he thinks the competition isn’t the biggest worry.

“As a farmer, I’d worry more that there were zero plants built than one or two or four in the United States,” Anderson says. He says building nothing means continuing to import nitrogen from overseas, “paying three months in advance, not knowing if we’re going to get the product on time or not.”

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