Fertilizer firms build, expand

U.S. moving to nitrogen self-sufficiency | CHS, a farmer co-op, plans to start construction in Spiritwood, N.D.

The company behind one of three farmer-owned nitrogen fertilizer plants proposed for North Dakota and Saskatchewan is preparing to build.

The board of directors of CHS Inc., the largest farmer-owned co-operative in the United States, has ap-proved the final plans for constructing a $3 billion plant in Spiritwood, North Dakota.

CHS is the sole investor in a facility that will produce 2,425 tonnes of ammonia daily.

Construction will start this fall as long as all the permits and contracts are in place. The facility is expected to be fully operational in the first half of 2018.

The project would compete against a Saskatchewan plant proposed by Farmers of North America and Northern Plains Nitrogen, a project in North Dakota spearheaded by the North Dakota Corn Growers Association.

The CHS plant plans to produce 150,000 to 170,000 tonnes of anhydrous ammonia, 800,000 to 900,000 tonnes of urea and 500,000 to 600,000 tonnes of UAN fertilizer a year.

It would service growers primarily in North Dakota, western Minnesota, northern North Dakota and eastern Montana through the co-op’s distribution network.

However, it will also be looking north of the border.

“We are in the process right now of expanding into Canada,” said Brian Schouvieller, senior vice-president of ag business with CHS.

Earlier this year, CHS bought 16 retail crop input assets in Saskatchewan and Alberta from Agrium Inc.

The estimated cost of the Spiritwood facility has escalated dramatically since the project was first an-nounced in 2012 at a projected price tag of $1.1 to $1.5 billion.

Schouvieller said the $3 billion figure is an “all-in price” that includes things like financing costs, while the earlier estimate was construction costs only.

However, he acknowledged that construction costs increased to the point where the co-operative temporarily postponed its final decision on the project. In the end, the co-op was able to find savings by taking on some of the general contractor duties.

Schouvieller knows of four other companies working on U.S. nitrogen fertilizer projects that are either underway or likely to proceed.

CF Industries is spending $3.8 billion to build new ammonia, urea and UAN plants in Louisiana and Iowa.

Koch Nitrogen Co. has budgeted $1 billion to add more than one million tonnes of production to its plant in Oklahoma.

Agrium is investing $720 million to expand its nitrogen plant in Borger, Texas.

OCI Iowa Fertilizer is building a $1.8 billion plant in Iowa that will produce 1.5 to two million tonnes of nitrogen fertilizer a year.

The United States imports more than 50 percent of the nitrogen fertilizer it uses, according to the U.S. Department of Agriculture. That will be greatly reduced if all the projects Schouvieller mentioned come to fruition.

“We would anticipate that the U.S. becomes very close to self-sufficient in nitrogen production,” he said.

Schouvieller didn’t talk about Northern Plains Nitrogen.

Don Pottinger, chief executive officer of Northern Plains Nitrogen, said the project is still alive.

The company bought a site for the plant near Grand Forks, N.D., after raising more than $4 million in seed capital from area growers.

It has a water use agreement with Grand Forks and a memorandum of understanding with Northern Plains Marketing to take all of the production and sell it.

The target market will be the area within a six hour truck drive of Grand Forks, which is slightly more than 100 kilometres south of the Manitoba border. As a result, there should be significant penetration into Manitoba and Saskatchewan.

“We see it as a good market because at this point in time it’s a higher priced market than the U.S.,” said Pottinger.

The plant would be slightly smaller than the CHS facility, producing 2,200 tonnes of anhydrous ammonia per day.

A detailed engineering and design study is due later this month, which will provide a solid cost estimate.

Pottinger’s best guess is that the price tag has risen to $2 billion from the original estimate of $1.7 billion because of stiff labour competition from the oil and gas sector.

Northern Plains Nitrogen is almost finished getting the permits and contracts in place and will then look for an investment partner.

“Before too long we’ll be positioned to go after the big players,” said Pottinger.

Targets will include the oil and gas companies operating in the Bakken oil field.

The governor of North Dakota has signalled that he will be placing restrictions on the flaring of natural gas in the region, and the proposed nitrogen plant needs natural gas, so Pottinger sees a good fit.

“In North Dakota right now, there is enough gas being flared on a daily basis for at least three plants the size of ours,” he said.

The proposed corn grower plant is expected to be operational by 2018.

Pottinger sees no conflict with the CHS facility.

“The market dynamics show that there is ample room for both of them based upon what’s being imported mostly from offshore,” he said.

Schouvieller isn’t as convinced.

“Certainly there is room for one,” he said. “On the second one, obviously we prefer that they wouldn’t build.”

The third regional farmer-owned plant is proposed for Saskatchewan.

Farmers of North America is attempting to build a $1.76 billion plant that would produce 1.2 million tonnes of urea and 425,000 tonnes of UAN fertilizer annually.

The company has bought a site in Belle Plaine, Sask., for the facility. FNA Fertilizer Ltd. Partnership says it has raised $9 to $10 million of seed money for the project through in-vestments from 2,500 farmers.

The goal is to have up to 6,000 farmer investors in the plant.

FNA is in talks with potential strategic partners, who would provide the capital to build the plant.

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