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Weekly UpdatesFor almost 40 years, Agrium has been making and exporting fertilizer from its nitrogen facility located on the Kenai Peninsula. As natural gas supplies have begun to diminish, however, the company has had to consider alternative ways to provide the factory with the feedstock it needs to keep the plant running and to keep its 230 employees on the job.
One option now under serious consideration is the establishment of the Kenai Blue Sky project, which would result in a world-class gasifier and power-generation plant being constructed adjacent to the Kenai Nitrogen Operations (KNO) facility. The gasifier, which would utilize coal from nearby reserves as its carbon source, would produce the hydrogen, nitrogen, steam and carbon dioxide that the nitrogen facility needs, while also providing a number of value-added benefits to Southcentral communities.
"The end result of the Kenai Blue Sky project is that Agrium would be able to get the feedstock we need to run our fertilizer plant, and to continue to make ammonia and urea," explained Lisa Parker, Agrium's government relations manager. "The power plant would allow us to generate the power we need to run our equipment, as well as enable us to make excess power that we could then sell into the Railbelt power grid."
The Blue Sky project also is expected to provide excess carbon dioxide, which could then be used to recover up to 300 million barrels of oil through enhanced oil recovery in Cook Inlet, according to Agrium's Phase 2 Project Summary. When the project is fully operational in 2011, more than 500 year-round jobs will be created in the coal industry, and at the gasification facility and power plant.
FROM START TO FINISH
The idea to create a coal-gasification facility is not new; there are already operating facilities in North Dakota, Kansas and Tennessee, and the Energy Policy Act of 2005 included legislation to encourage the use of coal gasification for power generation and industrial use. Still, the process has been slow to catch on, especially in the 49th state.
"We started discussing the idea about two years ago, after reading an article in Green Markets about a company that was considering building a coal-gasification project," said Parker. "We'd been struggling for the last five years to get sufficient feedstock to keep the plant running, and this looked like it might be an option since there's a lot of coal available in Alaska."
Without an alternative source of feedstock, the nitrogen facility is expected to permanently shut down on Oct. 31, 2007. In October 2006, the plant suspended manufacturing due to gas supply problems, and is not expected to restart until March of 2007.
Phase 1 of the Kenai Blue Sky project consisted of environmental work to determine if there were any obstacles that would prevent the facility from being built. "We didn't identify any showstoppers at this point, so we went on to Phase 2, which we hope will be completed in the next 18 months," said Parker.
The end goal of Phase 2 is the development of a Front End Engineering Design (FEED) package, sufficient to support an Engineer, Procure and Construct (EPC) offering for the final design and construction of the project. Phase 2 also will begin the environmental permitting and establish the corporate structure and commercial agreements needed to advance the project. A RFP (request for proposal) has already gone out to environmental consulting firms, and a firm will be selected in early 2007 to begin the permitting process.
If everything goes as planned in Phase 2, Phase 3 will be implemented in the summer of 2008, which will include detailed design and engineering. Phase 4 will begin in the spring of 2009, which will include procurement, construction and commissioning. The facility, which is estimated to cost between $1.5 billion and $2 billion, is expected to go online in late 2011 or early 2012.
"At this point, we are optimistic that the plant will go forward-we haven't identified any major obstacles that might preclude its being built," said Parker, who adds that Agrium is talking with a number of potential investors about funding the project. Kenai Blue Sky is currently receiving funding from the Homer Electric Authority, the Denali Commission and the State of Alaska.
HOW IT WORKS
Gasification is the controlled but incomplete combustion of carbon-containing molecules. In the case of Kenai Blue Sky, coal, potentially from Healy and other coalfields, will be partially oxidized using pure oxygen to form a mixture of carbon monoxide and hydrogen. This mixture, otherwise known as syngas, will be further refined into pure hydrogen. The hydrogen will be used to make ammonia, which Agrium can store for sale. It can also be combined with carbon dioxide to make urea, which can be sold as the highest grade of solid nitrogen fertilizer.
In addition to providing enough feedstock to keep the Agrium nitrogen plant viable, the facility also will be producing excess power from its 190-megawatt power plant. While 120MW is required to run the facility, as much as 70MW may be generated that can be sold to the Railbelt power grid. Excess carbon dioxide produced by the plant also can be injected into aging Cook Inlet oilfields, which could produce an estimated 300 million barrels of additional crude oil. Carbon dioxide can change the flow of heavy oil, resulting in more oil reaching the reservoir to be recovered.
According to the Phase 2 Summary, Kenai Blue Sky could utilize 2.5 million to 3 million tons of coal per year, with nearby coal reserves projected to provide enough resources to last 100 years or more.
"Some people have voiced concerns about the utilization of coal for power generation and for providing feedstock because of the belief that coal-fired power plants are dirty," said Parker when asked about environmental concerns. "But the technology has changed a lot since these types of power plants were first developed. There is proven technology that will enable us to run a clean plant and minimize any environmental impacts.
"We live here, and we love it here-Alaska is our home," she continued. "We believe that we can build a facility that minimizes impacts and preserves the beauty around us."
According to Oil, Gas and Mining Liaison and special assistant to the mayor, Bill Popp, the Kenai Peninsula Borough agrees that the facility will be an asset to the community. "While we understand that right now Agrium is in the process of refining and defining their plans, on the face of it, we believe that the Kenai Blue Sky project is a tremendous opportunity for the Kenai Borough," he said. "Anything that we can do to support them responsibly, legislative or otherwise, we will do to help make this project a reality."
THE BENEFITS OF BLUE SKY
While the construction of the Blue Sky facility will certainly help Agrium to keep its doors open, there are other benefits to building the coal-gasification facility along the shores of Cook Inlet. "To start with, the Kenai Blue Sky project will create several hundred jobs in value-added manufacturing, and will help to support coal mining in the borough," said Popp.
"Because they will be generating excess power, they will be helping to diversify the area's energy mix, so people will not need to rely as heavily on natural gas," he added. "And construction of the new facility also will have a significant impact on the tax base."
"Certainly, the benefits to the community are immense," agreed Parker. "The new plant will allow us to retain more than 230 jobs, and to add additional jobs. We estimate that it will enable us to continue to operate the nitrogen plant for at least 2,5 more years.
"The facility also will help the support industries in the area," she added. "Right now, Agrium spends in excess of $100 million a year on the Kenai Peninsula, and a new, 75-acre industrial facility will not only increase the tax base, but allow us to continue to put money into the local economy."
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