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Published June 02, 2014, 09:07 AM

Study: ND fertilizer plants would enjoy cost advantages

A new study says North Dakota would enjoy some major advantages if it were to produce fertilizer, which could happen as early as 2017 at a proposed plant near Grand Forks.

By: Brandi Jewett, Forum News Service

GRAND FORKS, N.D. — A new study says North Dakota would enjoy some major advantages if it were to produce fertilizer, which could happen as early as 2017 at a proposed plant near Grand Forks.

The state’s access to low-cost natural gas — a resource that can constitute a majority of manufacturing costs — would be one such advantage for two proposed production plants, according to a North Dakota State University Extension Service report.

The study underscores the importance of increasing fertilizer production, according to Don Pottinger, CEO of Northern Plains Nitrogen, which plans to build the plant near Grand Forks.

NDSU’s study analyzed the distribution of fertilizer production in the U.S. and the destination of the product. It also considered the impact of a group of new production plants looking to enter the market.

The country’s fertilizer production plants are mainly concentrated in Oklahoma, Texas and Louisiana, with a few in the Midwest. The estimated number of proposed plants joining these facilities ranges from 12 to 15 to as many as 25 nationwide, study authors say.

In a scenario where all 25 plants are built, low costs would make North Dakota a more successful production area than other states, according to the report.

“For growers, the results should be viewed as positive,” the report says. “The combination of new fertilizer plants producing at a lower cost ultimately will result in lower fertilizer costs and probably less volatile prices.”

An increasing number of plants also could decrease long-distance transportation by rail. Rail delays this spring left farmers and grain elevators waiting longer than normal for fertilizer deliveries.

Meeting demand

Nationwide, the demand for fertilizer has been increasing steadily for years as farmers switch to crops that require more of it to grow.

North Dakota farmers bought more than $1 billion of commercial fertilizer, lime and soil conditioners in 2012, according to the 2012 Census of Agriculture. That’s up 86 percent — about $581 million — from 2007.

Northern Plains Nitrogen seeks to capitalize on that demand and build its plant on land northwest of Grand Forks. Previous estimates put the cost of construction at about $1.8 billion.

A second company, CHS, is looking to build near Spiritwood, but the project has been delayed by higher than expected costs. That plant was initially estimated to cost between $1.5 billion and $2 billion to build.

Northern Plains Nitrogen’s project is “in good shape,” according to Pottinger.

The company is in the midst of applying for permits, reviewing utility contracts and conducting a preliminary front-end engineering design study, which gets a company closer to an estimate for construction and other costs. A FEED study conducted later on would narrow cost estimates even more.

Northern Plains reached its fundraising goal to foot the cost of the $3 million study, which potential investors will review before deciding whether to contribute to the project.

“Investors want to know how you’re going to make it, how much it’s going to cost and where you’re going to sell it,” Pottinger says.

He expects the pre-FEED study to wrap up in mid- to late summer along with completion of business and financial plans, he says.

He adds that the company hopes to begin construction on the plant next year and be operational in 2017.