Agrium plant closure in Kenai won’t slow Port Mac rail extension

MAT-SU — A Kenai fertilizer plant that could be a main user of a planned $300 million rail extension to Port MacKenzie is closing its doors soon and cashiering 100 workers due to a shortage of natural gas in the Cook Inlet. A Mat-Su Borough official said the closure has no impact on the Borough’s plans for the rail line that might feed the plant’s energy needs in the future if it converts to coal.

While coal heading to Agrium’s Kenai facility would be one use, many other uses justify the rail line’s construction, Borough Economic Development Director Dave Hanson said.

“The rail extension is not a one-horse project,” he said. The 30- to 45-mile rail spur would bring trains to Port MacKenzie and open up a new corridor for moving minerals out of interior Alaska and goods and equipment in. A series of public open houses is happening next week to gather ideas about what route should be used.

Agrium, a major North American producer of specialty fertilizers, is studying whether to covert to coal and re-open the plant with that new power source. That decision could come later this year or next year.

Gov. Sarah Palin on Wednesday pledged state support for workers displaced by the Nikiski plant’s closure and deployed Department of Labor rapid response teams to work with them.

“It's unfortunate to see the closure of a facility that has provided so many jobs that support families on the Peninsula,” Palin said. “I am heartened to hear that Agrium is willing to keep its options open if sufficient long-term supplies of gas can be found. We know there is more gas to be found and developed in Cook Inlet, so I remain hopeful that those jobs can be preserved.”

Among those options is converting the plant from natural gas to coal.

A 2012 date for conversion to coal by that plant was a major driver of the Matanuska-Susitna Borough’s and the Alaska Railroad Corp.’s 2012 deadline to get a new rail spur to Port MacKenzie finished.

Hanson said Agrium officials would consider using Anchorage to import coal a less attractive option than Port MacKenzie. He was in conversation with Agrium officials Wednesday morning after news of the closure broke. Agrium wanted assurances that the Borough and railroad were still working toward building the rail project.

Hanson said gas supply to run the plant, not economics, caused the shut-down. Agrium couldn’t round up even a three-month supply.

The closure “has nothing to do with coal gasification, except to show the urgency of it,” he said. “They are very interested in seeing that we are staying on our timeline.”

Agrium managers said they were struggling to get adequate natural gas contracts, but could not buy enough gas in volume to make the nitrogen fertilizer operations run.

“It is a sad day for us to have to close this facility, which has added much value to the Alaskan economy for the past 40 years,” said Mike Wilson, president and CEO of Agrium, in a prepared statement. “It has been a major supplier to international markets in the Pacific region and was Alaska’s third largest exporter in 2006, despite running at 50 percent of capacity.”

The Associated Press contributed to this report.