Kenai, Alaska-Agrium Inc. officials think they may have a way to finance the conversion of its troubled Nikiski nitrogen plant to coal gasification – that is, if state legislators agree. The legislature has been asked to authorize the issuance of $2.6 billion in tax-free bonds, with the proceeds being used for the Alaska Railroad, which wants to haul coal for the gasification plant and for construction of the plant itself. Agrium spokeswoman Lisa Parker said the railroad needs to purchase railcars and locomotives and upgrade its system, and under an unique authority granted by Congress can issue the tax-free bonds with legislative approval. The existing rail route extends from Fairbanks to Anchorage and Seward, and the coal trains would be routed from the mine site at Healy to Port MacKenzie or the Port of Anchorage. “It’s one of the options we are looking at,” Parker explained. “We are also in discussions with potential equity partners (regarding) the capital costs.” She declined to disclose any names. Parker reported that Agrium is hoping to bring the gasification project on line in 2011 or 2012, and is progressing toward its next “go or no go date” later this year. In the meantime, she added, “we want to keep the plant operating until we can bring along gasification.” She conceded that this depends on additional natural gas supplies, and discussions are continuing with Cook Inlet suppliers to increase deliveries, particularly during the winter months when Nikiski has had to shut down on several occasions. Some observers point out the financing plan depends on the Alaska Railroad exercising a unique – and legally untested – power to issue tax-free bonds. Rail President Pat Gamble was quoted in the local press as explaining that the authority, granted by Congress in the act transferring the railroad to the state, has never been used. “We look at this opportunity with Agrium as a first time to really put this to work for the state,” Gamble advised legislators.
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