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Published January 21, 2014, 11:26 AM

Proposed ND fertilizer plant takes key step

Backers of a proposed $1.7 billion nitrogen fertilizer plant in Grand Forks, N.D., have reached a fundraising goal.

By: Jonathan Knutson, Agweek

Backers of a proposed $1.7 billion nitrogen fertilizer plant in Grand Forks, N.D., have reached a fundraising goal.

Northern Plains Nitrogen has topped its seed capital target of $3 million, says Darin Anderson, a Valley City, N.D., farmer and Northern Plains Nitrogen’s president and managing partner.

The seed capital raised will be spent on a pre-FEED (front-end engineering and design) study, the results of which will be shown to potential investors, he says.

Anderson says the study will begin “soon,” but is reluctant to give a specific date.

The pre-FEED study, once begun, would take 60 to 90 days to complete, he says.

He describes the study as a “formality. It’s a third-party verification of what we already have, our own internal estimates.”

Such a study is intended for investors who might commit large amounts of money to the project. Once the proposed plant has secured the bulk of its financing, a regular FEED study — “a huge $20 million to $30 million detailed engineering study” — could begin, Anderson says.

Corn and fertilizer prices have plunged in the past year, but the proposed plant remains financially viable and attractive to potential investors, he says.

“Even at these levels, a plant is still very profitable. There’s still a lot of room on the downside before this becomes unprofitable,” he says. “We’ve been told by multiple sources that this is a totally financeable project. The fundamental are there.”

The proposed plant, if built, could make nitrogen — crucial to good corn yields — less expensive and more available in the region.

The plant would convert natural gas currently being flared from oil wells in western North Dakota. It would produce nitrogen fertilizer to be marketed in the north-central United States and southern Canada.

The seed capital fundraising, though successful, might have gone even better a year ago when corn prices were higher and farming was more profitable, Anderson says.

“It’s tough writing a check knowing the next year will be pretty tough for break-evens in farming,” he says.

But investors in the seed capital phase understand farming is cyclical and that the plant would bring long-term benefits, he says.

Nearly 200 investors invested a minimum of $15,000 each in the seed capital phase. More than 90 percent are farmers, most from North Dakota, western Minnesota and South Dakota. A few are from Iowa and Nebraska.

Northern Plains Nitrogen remains optimistic that the proposed plant will open in 2017, Anderson says.

“I’d say we’re still on track to reach that. It’s definitely doable,” he says.