November 16, 2005 --- Vol. 11, No. 94November 2005

Agrium, Usibelli look to use Beluga coal to power Kenai fertilizer operations

Agrium said today that in conjunction with industry partners it would conduct a feasibility study to evaluate the potential use of coal gasification as a feedstock for the Kenai Nitrogen facility.

Industry partners listed in Agrium’s press release include Usibelli Coal Mine and the engineering firms Black & Veatch and Uhde.

The proposed gasification plant would use local low-sulphur coal to produce the feedstock needed for ammonia and urea production. It would also produce a significant amount of energy that could be sold into the Alaska power grid, including the possibility of selling power to the proposed Pebble mine, a government official told Petroleum News.

The coal would be sourced from the Beluga Coal Field, which is about 40 miles across Cook Inlet from the Agrium plant. The field contains more than two billion tons of proven reserves, making it one of the world’s largest low-sulfur coal fields.

“We believe this proposal contains a lot of merit,” said Bill Boycott, general manager, Agrium Kenai Nitrogen Operations. “We plan on working with a number of partners to evaluate the potential to commercialize one of Alaska’s largest natural resources in an environmentally responsible manner. This project would create an off-take gas agreement opportunity for Agrium and generate another source of competitively priced electricity into the power grid, if it were to proceed to completion. It would also provide excess CO2 for use in the exploration of oil and gas and keep Alaska’s largest value-added industry in business for decades to come.”

Boycott said the company has been working with the U.S. Department of Energy and Alaska’s Congressional delegation, noting that “Senators Ted Stevens and Lisa Murkowski have been very supportive.”

Agrium is in discussion with Shell for its proprietary coal gasification technology.

The project name, Blue Sky, is in reference to the new environmentally friendly coal gasification process.

Agrium’s Kenai operations consist of two ammonia plants and two urea plants. The facility could produce over 1.5 million product tonnes if it were to operate at full capacity, Agrium said.

Blue Sky could retain 230 direct jobs at Agrium and create additional jobs at the coal gasification facility and related coal mine, the company said.

The gasification facility could be in operation as early as 2011 if results from the analysis were positive, Agrium said.

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