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Vol. 12, No. 20 Week of May 20, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Legislature passes Alaska Railroad bonding for Agrium

Alan Bailey

Petroleum News

On May 12 the Alaska House of Representatives concurred with Senate changes to a bill authorizing the Alaska Railroad Corp. to issue up to $2.9 billion in bonds for the Agrium Blue Sky project to replace the use of natural gas by gasified coal at the Nikiski fertilizer plant on Alaska’s Kenai Peninsula.

The bill is now going to Gov. Palin for signature.

“The Senate came up big for the Agrium plant, and I’m glad they were able to take up the issue quickly to allow the railroad and company to move forward,” Rep. Mike Chenault, R-Nikiski, said. “Agrium is in danger of being permanently shutdown due to a lack of natural gas feedstock, and that would be a catastrophe for the Kenai Peninsula.”

Agrium has been struggling with gas supplies for the Nikiski fertilizer plant and sees coal gasification as an option to keep the plant in operation. The company is in the process of detailed design of the proposed plant and putting together the commercial arrangements for the project.

In February Alaska Railroad Corp. President and CEO Pat Gamble told the Alaska Legislature that not only was the railroad involved in Blue Sky as a coal transporter, but the company was also hoping to use its ability to generate tax-free bonds to finance a portion of the project. In addition to Agrium and the railroad, other Blue Sky participants include Usibelli Coal Mine, which is working on the coal side of the project, and Homer Electric Association, which is involved in the power plant and would be responsible for sale of electricity to the Southcentral grid.

The bill that the Legislature has now passed authorizes the railroad to issue up to $2.9 billion in tax-exempt bonds to finance all or part of the project, including:

• Facilities and equipment for the transportation of coal from Healy to Kenai;

• Facilities and equipment for coal gasification and electrical power generation adjacent to the Agrium fertilizer plant in Kenai; and

• A possible rail link from Willow to Port MacKenzie near Anchorage.

Alaska Railroad Corp. is wholly owned by the State of Alaska.



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