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Nitrogen is now the focus for proposed Idaho coal gas facility
Southeast Idaho Energy (SIE), a unit of Refined Energy Holdings, Mount Kisco, N.Y., has indicated that any new coal gasification facility in American Falls, west of Pocatello, Idaho (GM Dec. 10, 2007), would focus on nitrogen fertilizers, and not diesel fuel and electricity generation. SIE revealed this information in filing an amended air permit application with the Idaho Department of Environmental Quality to substantially reduce air emissions from its previous estimates at the coal gas plant.
SIE originally announced the project would cost $2 billion – $1 billion for each of its two phases. “SIE has not secured funding for Phase II,” the amended application stated, noting if SIE decides to proceed with the second phase, a separate application would be filed. Ground for the first phase is expected to be broken during the second quarter of 2009, with permitting completed by the fourth quarter of 2008. The first phase is scheduled to be completed by June 2012.
An SIE source told Green Markets that phase I has equity funding, but no debt financing at this point. SIE said transportation fuel is currently being eyed as a product for phase II. SIE also decided earlier this year to purchase electricity rather than generate its own.
Phase I plans call for the plant to produce up to 500 st/d of anhydrous ammonia, up to 1,800 st/d of granular urea, up to 1,600 st/d of UAN, and up to 500 st/d of sulfuric acid.
According to the application, during regular operations the plant would annually emit 67 tons of particulates, down 30 percent from 96 tons in the original application; five tons of compounds that could create ozone, down 92 percent from 63 tons; 32 tons of sulfur oxides, down 55 percent from 72 tons; 203 tons of carbon monoxide, a 6 percent increase from 192 tons; and 127 tons of nitrogen oxides, down 3 percent from 131 tons.
The U.S. Environmental Protection Agency has designated Power County an attainment area for nitrogen oxides, carbon monoxide, particulate matter smaller than 10 micrometers in diameter (PM10), sulfur dioxide, ozone, and lead. The application states the project will not cause or contribute to a violation of national or state ambient air quality standards. SIE is investigating alternatives to venting carbon dioxide, such as piping it to Wyoming for use in oil fields.
Gasification of coal and petroleum coke used as feedstock involves carbon, hydrogen, and water reacting with oxygen in a large, high pressure vessel to form synthesis gas (syngas). The project is designed to gasify between 2,000 and 2,300 st/d of coal and coal/petcoke blends, assuming 100 percent of the coal originates in Utah and Colorado.
Syngas would be used to manufacture 1,900 st/d of ammonia (100-500 st/d for direct sale); up to 2,400 st/d of urea (up to 1,800 st/d for direct sale in granular form); and up to 1,600 st/d of UAN. Sulfur in the syngas would be captured to form sulfuric acid for direct sale. Ash from the coal would be used for vitrified slag for road beds and aggregate for concrete. SIE believes mercury removal efficiency will be greater than 99 percent because there are no direct pathways for it into the environment.
A rail system is designed to accommodate up to 150 100-ton train cars. The feed rate to the gasifier will range from 2,000 to 2,300 st/d, or between 20 and 23 rail cars per day, depending on fuel blend. One silo will be dedicated to coal, another to petcoke. Each silo will have a capacity of about 35,000 tons, giving the project about 30 days of fuel. The coal must be pulverized and combined with water for slurry pumped to the gasifier.
SIE has purchased senior industrial water rights from FMC Corp., allowing it to pump about five million gallons of groundwater per day. FMC used the water to support operations at its Pocatello elemental phosphorus plant, which was shut down in December 2001. It is estimated SIE will need to buy up to 150 megawatts of electricity for the project.
The SIE project would employ 750-1,350 employees during the three years of construction, and 150 when operations begin.
Three similar coal gasification plants are operated in Florida, Kansas, and Tennessee to produce electricity, fertilizer, and chemicals, respectively.
BHP bids C$284 M for Anglo Potash
Anglo Potash Ltd. and BHP Billiton Diamonds Inc. said May 12 that they have entered into a definitive agreement whereby BHP Billiton will offer to acquire all of the issued and outstanding common shares of Anglo Potash at a price of C$8.15 cash per common share. The total equity value of the transaction is approximately C$284 million on a fully-diluted basis.
While several potash and phosphate startups have been in the news lately, mining giant BHP has the resources to actually put a new mine on the map, even though such an endeavor could take over $2.5 billion and five-to-seven years, according to BHP’s potential competitors. Some have speculated that BHP might buy an existing potash producer rather than going to the trouble of developing its own greenfield project. However, with today’s pricey potash market, buying an existing player would not come cheap.
Anglo Potash is a mineral exploration and development company that has been focused on developing a potash mine in Saskatchewan. Anglo entered into a joint venture with BHP Billiton pursuant to which Anglo Potash holds a 25 percent interest (through its wholly-owned subsidiary, Prairie Potash Corp.), and BHP Billiton holds a 75 percent interest in the JV, with BHP Billiton being the operator of the JV. The JV holds 32 potash permits, some of which are pending, covering over 1.8 million acres.
BHP Billiton Diamonds Inc. is a subsidiary of the BHP Billiton Group. BHP Billiton is the world’s largest diversified natural resources company, with some 39,000 employees across 100 operations in approximately 25 countries. Its operations encompass a broad range of commodities, including aluminum, energy coal, metallurgical coal, copper, manganese, iron ore, uranium, nickel, diamonds, silver and titanium minerals, oil, gas, and liquefied natural gas.
In 2007, BHP Billiton generated turnover of US$47.5 billion and attributable profit (excluding exceptional items) of US$13.7 billion. BHP Billiton is dual listed on both the Australian and London stock exchanges, with its headquarters in Melbourne, Australia.
The $8.15 per share cash consideration represents a 34 percent premium over the closing price of the common shares on the TSX Venture Exchange on May 9, 2008, and a 36 percent premium based on the volume weighted average price of the common shares over the 60 trading days prior to May 12, 2008. Anglo’s board of directors has unanimously approved the acquisition and recommends that shareholders vote their shares in favor of the deal, following receipt of a fairness opinion from its financial advisor.
The transaction is to be completed by way of a statutory plan of arrangement. It will be subject to the approval of 66 2/3 percent of the votes cast by Anglo Potash’s security holders and a simple majority of the votes cast by the shareholders (other than BHP Billiton and its related parties) at a special meeting, which is currently anticipated to take place in July 2008. The acquisition will also require court approval. If Anglo’s security holders approve the acquisition and the requisite court approval is obtained, the closing is expected to take place in July, 2008. The information circular for the acquisition is expected to be mailed to Anglo’s security holders later in this month.
Todd Montgomery, Anglo’s President and CEO and a director, and the other directors of Anglo – Brent Walter, Randal Ludwar, Corey Giasson, and Joseph Montgomery – have entered into a lock-up agreement with BHP Billiton under which they will irrevocably vote approximately 26 percent of Anglo’s outstanding common shares (including shares to be issued upon exercise of outstanding vested options) in favor of the transaction. The directors have agreed to exercise their vested options to vote the underlying shares in favor of the transaction. The lock-up agreement also provides BHP Billiton with an option to acquire, for $8.15 per share, an aggregate of 5,300,000 shares of Anglo, representing approximately 16.7 percent of the outstanding shares from the directors of Anglo Potash if the definitive agreement is terminated in certain circumstances. These shares, together with the 1,039,093 previously-owned shares (or approximately 3.2 percent), represent approximately 19.9 percent of the outstanding shares of Anglo Potash.
Anglo has agreed not to solicit or initiate any discussion regarding any other business combination or sale of material assets. Anglo has also granted BHP Billiton a right to match any superior proposal and a termination fee of $10 million, payable to BHP Billiton by Anglo if the definitive agreement is terminated as a result of Anglo recommending or approving an acquisition proposal or entering into an agreement with respect to a superior proposal or similar circumstances.
“We are pleased to take this step with BHP Billiton and believe the acquisition will benefit the shareholders of Anglo Potash,” said Todd Montgomery. “We have been joint venture partners with BHP Billiton for two years of exploration and development, the success of which is underscored by today’s excellent offer from BHP Billiton.”
BHP Billiton’s President of Diamonds & Specialty Products, Graham Kerr, added that “I wish to thank Todd and his team for their continual support as our JV partner; we look forward to the next chapter in the potash exploration and development program and building upon our successful history of investment and growth in Canada.”
Congress passes veto-proof farm bill; includes Chemicals Security Credit
Congress last week passed a five-year, $307 billion farm bill that includes the industry-supported Agricultural Chemicals Security Credit, and also provides additional funding for tank locks and additives to reduce the production of methamphetamine from anhydrous ammonia. Other hallmarks include a $10.3 billion increase (for a total of $209 billion) in spending on nutrition programs including food stamps, and increases for rural development and land conservation programs.
The bill, known as the Food, Conservation & Energy Act of 2008 Conference Report (H.R. 2419), was approved by a 318 to 106 vote in the House on May 14, and an 81 to 15 vote in the Senate on May 15. The margins are well above the two-thirds majority needed to override a threatened veto from President Bush, who criticized the bill as being too expensive and for failing to reform farm subsidy programs.
The New York Times reported that President Bush had sought an adjusted gross income limit of $200,000, above which farmers could not qualify for any subsidy payments, and had urged Congress to pass a one-year extension of the current farm bill instead of adopting costly new legislation. The bill approved by the House and Senate, however, states that individual farmers who get direct payments cannot earn more than $750,000 and have non-farm income of more than $500,000. For married couples, those figures double.
A White House spokesman last week reiterated President Bush’s promise to veto the bill, but House Agriculture Committee Chairman Collin Peterson (D-Minn.) said he expected the legislation to reach the president by May 20 and a veto override to be approved before Congress adjourns for a Memorial Day recess.
On the campaign trail, presumptive Republican nominee John McCain said he opposed the bill, calling it a “bloated piece of legislation” and favoring instead a program that offers “a reasonable level of assistance and risk management to farmers when they need America’s help.” Democratic candidate Barack Obama said he supported the bill on balance even though it was flawed, saying he favored stricter limits on payments to wealthy farmers and had previously backed a proposal that would have capped farm payments at $250,000 per year. Democrat Hillary Clinton has supported the farm bill without reservation.
The Agricultural Retailers Association issued a statement applauding the House and Senate for passing the bill, saying the legislation will continue to provide a safety net for America’s farmers while promoting bio-energy, conservation programs, and nutrition programs. “ARA is pleased that the bill includes many key policy priorities, including the ARA-initiated Agricultural Chemicals Security Credit that will provide a tax credit to agricultural retailers, distributors and other eligible agricultural businesses that improve security at their fertilizer and pesticide storage facilities,” said Jack Eberspacher, ARA president and CEO.
Specifically, the security tax credit provision will allow eligible agricultural business a tax credit equivalent to 30 percent of the total amount paid or incurred for implementing qualified security measures at their fertilizer and pesticide storage facilities. The provision provides for up to $100,000 in security tax credits per facility, with an overall company cap of $2 million per year. The tax credit will apply to security measures paid or incurred after the date of the enactment of the 2008 Farm Bill.
The legislation also includes measures to increase federal oversight authority to detect and prevent manipulation and limit speculation in U.S. electronic energy markets by increasing reporting requirements.
Innophos 1Q net income up; Geismar outage expected; EPA/DOJ eye penalties
Innophos Holdings Inc., the Cranbury, N.J.-based specialty phosphate producer, reported income of $9.2 million ($.43 per diluted share) on sales of $162.5 million for the first quarter ending March 31, 2008, versus the year-ago loss of $2.1 million ($.10 per share) and $136.7 million, respectively. They were the best results Innophos has had as a public company.
The company said volumes were lower primarily due to a GTSP export shipment delayed into April because of a customer’s ocean shipping logistics issues and lower GTSP production for the quarter due to rock supply interruptions because of port congestion and other logistics issues in Morocco.
Innophos reported that its Geismar, La., PWA plant will have a planned three-to-four week outage in the coming quarter. The company is expecting a $5-$6 million impact on gross margin from the outage, primarily from lost production that the company expects to recover during the remainder of the year. Due to current tight supplies, Innophos said there was no purified phosphoric acid available for spot purchases to replace the production lost during the outage.
Innophos noted that it has been increasing prices to customers in order to cover higher raw material costs, most notably rock and sulfur. It estimates that these costs will increase by an amount equivalent to approximately 50-60 percent of 2007 annual sales by the second quarter of 2009, with half of this increase occurring in the second half of 2008 and the balance in the first quarter of 2009.
Innophos told analysts that it has benefited from China’s recent decision to increase duties to keep phosphates in China. “And the Chinese were one of the major sellers of specialty phosphates into North America and Europe and they have pretty well vanished from the scene, and as long as the Chinese government maintains that kind of policy stance, you know, we would expect to get a long-term benefit just from industry structure,” said Richard Heyse, Innophos vice president and CFO.
Heyse also commented on long-term fertilizer prices. “Most experts would say this is a multi-year trend, it’s going to take multiple years to rebuild food stockpiles and on top of that you got the pressure from biofuels that as grain prices start to drop, people would take those grains and convert them to liquid fuel.” He said due to the current, unprecedented environment, it is hard to call the market two-to-three years out.
Innophos also reported that on March 20, 2008, it received a letter from the U.S. Department of Justice indicating that the Environmental Protection Agency had referred Innophos’s case to the DOJ for civil enforcement, contending that the Geismar facility does not qualify for exemptions claim, and alleging the facility violates RCRA by failing to manage two materials appropriately, as well as related administrative violations. This relates back to inspections and questions going back to 2004-2006 regarding hazardous waste regulations. DOJ/EPA seeks unspecified penalties and corrective action, but proposes to discuss the matter to explore a resolution. At this time Innophos plans to meet with DOJ/EPA, but does not know if the discussions will resolve the matter. Innophos has yet to establish a liability on its balance sheet for the matter as of March 31, 2008. If it is liable, it doubts it will have a claim for indemnity against former owner Rhodia Inc.
Innophos has also not established a liability on its balance sheet regarding a DOJ potential antitrust violation relating to sodium tripolyphosphate (STPP). The company does anticipate that it can seek indemnity against Rhodia in this case. The company spent some $2.1 million in the first quarter due to DOJ subpoena requests in this matter.
In another legal matter, Sudamos S.A., an Argentine phosphate producer, has filed a request of arbitration before the ICC International Court of Arbitration in Paris saying Innophos Mexicana agreed to sell Sudamos certain quantities of phosphoric acid for delivery in 2007 and 2008, and seeks an order requiring the company to sell and deliver approximately 12,500 mt during 2008. Innophos claims it has no binding obligation to Sudamos and in turn says it is owed $1.2 million, which Sudamos has refused to pay.
Idaho DEQ extends comment period on Simplot permit
The Idaho Department of Environmental Quality has extended until Tuesday, June 10, the period for public comment about the J.R. Simplot Co.’s draft modified air quality permit that would remove production limits at a sulfuric acid plant at Simplot’s industrial phosphate fertilizer complex west of Pocatello. IDEQ also has scheduled a public informational meeting and a public hearing to discuss Simplot’s proposed permit modification for Wednesday night, May 21, at Pocatello City Hall.
Although it’s anticipated that sulfur dioxide, nitrous oxide, sulfuric acid mist, and particulate emissions would increase, the IDEQ has proposed to issue the permit after determining the modifications will not result in violations of air quality standards or have an unreasonable impact on humans, animals, or vegetation. Actual emissions of PM10 are now estimated at 8.17 pounds per hour. Simplot estimates if output limits are removed, emissions would not exceed 11.25 pounds per hour – or 49 tons per year of PM10, up from 36 TPY. Simplot says the nitrous oxide emission rate would be reduced from an estimated 64 tons per year to 58 tons per year.
Simplot’s Don Plant operates two sulfuric acid plants – the No. 300 and No. 400 plants, which have been subject to a standard of sulfur dioxide emissions at four pounds per ton of 100 percent sulfuric acid produced, with excess emissions defined on a three-hour rolling average basis. In June 2006, Simplot submitted a permit to construct modification application requesting removal of a 1,750-tons-per-day production limit for the No. 300 sulfuric acid plant. It estimates it would produce 2,000 tons per day without the restriction.
Simplot received a draft permit to construct in October 2006, but objected to requirements pertaining to continuous emissions monitoring, which it says produce biased results 7 to 10 percent higher and represent a significant departure from current monitoring requirements, which rely upon periodic source testing and production rate monitoring. Simplot said it was not aware of any other sulfuric acid plants required to monitor mass emissions using a continuous emission rate monitoring approach. It contracted with RTP Environmental Associates to assist in a further review of the draft permit to construct.
The Don Plant manufactures two concentrations of sulfuric acid – 93 percent during the winter and 98 percent during the summer. Increased production of sulfuric acid would be used in other processes at the Don Plant. In 1998, Simplot bought about 42,185 tons of sulfuric acid off site to compensate for shortfalls. It purchased 50,489 tons in 1999 and 2,643 tons in 2004 for use in other plant processes. Increasing the No. 300 plant’s production will reduce the amount of sulfuric acid Simplot acquires from other sources, but will not affect production rates of other processes at the plant, IDEQ said.
Tiger-Sul Products upgrades Alabama facility
Atmore, Ala.-H.J. Baker & Bro. Inc. announced several upgrades to its Tiger-Sul Products sulfur pastille fertilizer facility in Atmore, Ala., including relocating the manufacturing processes for Tiger 90 CR® sulfur and Tiger Micronutrient® fertilizers to a climate-controlled environment to minimize potential variants and increase stability. “The modifications and design features that we are implementing will allow us to continue to produce the high quality Tiger-Sul line of products,” said Drew Taylor, Tiger-Sul Products Atmore general manager. “The modifications will also allow for future expansion of the facility once production capacity is outgrown.” The Atmore production facility offers international access for the company’s sulfur fertilizer products through the Mobile, Ala., port. In the last year, the company has begun construction of a new facility at its existing Stockton, Calif., location; upgraded the blending system at its Calgary, Alberta, facility; and licensed its technology to Chemical Initiatives in Johannesburg, South Africa, for production of the Tiger-Sul line of products for the African continent. “We are pleased that global demand for Tiger 90 CR® sulfur and Tiger Micronutrients® fertilizers continues to grow,” said H.J. Baker & Bro. CEO Chris Smith.
Yara, Burrup to build TAN plant
Oslo-Yara International ASA and Burrup Holdings Pty Ltd (BHPL) said May 13 that they have signed a Memorandum of Understanding to build a 350,000 mt/y technical ammonium nitrate (TAN) plant through the proposed 50/50 joint venture company Burrup Nitrates (BNPL). The TAN plant would primarily supply the fast-growing iron ore mining operations in the Pilbara region of Australia. The plant will be built adjacent to the Burrup Fertiliser (BFPL) ammonia facility, which has been operating successfully since its commissioning in April 2006. The location of the new TAN plant will enable it to maximize synergies from competitive feedstock and utilities supplies. Yara will market the entire output from the plant. The plant’s close proximity to the Pilbara region, together with adjacent ammonia supply, gives it a distinct advantage over other Australian ammonium nitrate players. “Strong global demand for energy and minerals has created a tight supply-demand balance for technical ammonium nitrate. The combination of the competitive and well-located Burrup ammonia facility and Yara’s experience in ammonium nitrate production and marketing creates an attractive expansion opportunity,” says Thorleif Enger, Yara president and CEO. BHPL is owned by Yara (30 percent) and Mr. Pankaj Oswal (70 percent), and owns the world’s largest single train merchant ammonia plant, located at the Burrup Peninsula in North Western Australia.
CVR Energy reports $26 M in 1Q fertilizer income
Sugar Land, Texas-CVR Energy Inc.’s nitrogen fertilizer division reported first quarter 2008 operating income of $26.0 million on net sales of $62.6 million, compared with operating income of $9.3 million on net sales of $38.6 million during the year-ago quarter. Higher prices for ammonia and UAN were the most significant contributors to the increase in operating income, and were partially offset by lower production and higher operating expenses. For the first quarter ending March 31, 2008, average plant sale prices for ammonia and UAN were $494/st and $262/st, respectively, compared with $347/st and $169/st, respectively, for the year-ago period. CVR produced 83,700 st of ammonia and 150,100 st of UAN during the first quarter of 2008, compared with the year-ago 86,200 st of ammonia and 165,700 st, respectively. Company-wide, CVR reported net income of $22.2 million ($.26 per diluted share) on sales of $1.22 billion, versus the year-ago loss of $154.4 million ($1.79 pro forma per share) on sales of $390.5 million. The year-ago quarter reflected a full refinery maintenance turnaround and downtime associated with an expansion project. First-quarter petroleum operating income was $63.6 million on sales of $1.17 billion, versus the year-ago loss of $63.5 million on sales of $352.5 million.
Synfuel development keeps Rentech in loss column
Los Angeles-Rentech Inc. reported a net loss from continuing operations of $22.8 million ($.138 per diluted share) on sales of $28.5 million for the second quarter ending March 31, 2008, compared to a year-ago loss of $17.2 million ($.121 per share) and $16.9 million, respectively. Six-month losses were $46.2 million ($.280 per share) on sales of $76.0 million, versus the year-ago loss of $28.8 million ($.182 per share) and $52.3 million, respectively. The company’s Rentech Energy Midwest Corp., (REMC) which runs the East Dubuque, Ill., nitrogen plant, reported net income from continuing operations of $7.3 million on sales of $28.5 million, versus the year-ago $601,000 and $16.9 million. Six-month REMC income was $16.4 million on sales of $75.4 million, versus the year-ago $3.7 million and $52.2 million. “REMC continues to perform well, driven by strong demand for biofuels,” said President and CEO Hunt Ramsbottom. “As a result, we are evaluating opportunities to increase the efficiency of the facility. In addition, we are currently engaged in a company-wide cost review and reduction program that will take corporate spending to a level that can be supported by the free cash flow at REMC.” Ramsbottom touted REMC’s inland location in light of high demand and fuel prices, as its geographic location enhances its value versus other domestic producers and importers. Rentech has also made two major synfuel announcements. In Mississippi, Governor Haley Barbour has approved $175 million in tax-exempt Go Zone bonds for Rentech’s proposed synthetic fuels and chemicals facility near Natchez. In addition, Rentech’s product demonstration unit in Commerce City, Colo., is expected to start producing at the end of June. It can produce 420 gallons of synthetic fuels and chemicals, and will initially use natural gas. Other feedstocks, such as biomass and other fossil products, will be included when gasification is added.