Agrium credit passes legislature

If Nikiski’s Agrium ammonia plant were to re-start in the future, the company could be eligible for a corporate income tax credit when it begins operation.

The bill creating the credit was passed by the Legislature on Sunday and now awaits Gov. Bill Walker’s signature to become law.

Introduced by Rep. Mike Chenault, R-Nikiski, in February 2015, the credit was passed by the House of Representatives in April of that year. It will be available to urea and ammonia manufacturers, who use methane from natural gas to create fertilizers and other products.

Agrium, a Calgary, Alberta-based agricultural chemical company, operated Alaska’s only such manufacturing plant in Nikiski. Agrium closed the facility in 2007 due to a decline in Cook Inlet’s gas supply, and its officials have since speculated about reopening it.

The credit is designed to entice Agrium into reopening the plant while remaining budget neutral by balancing the deferred tax revenue from the credit with income from royalty payments made by Agrium’s potential gas supplier. The credit is equal to the royalty paid by the supplier under its state lease.

Agrium has estimated $15 million to be the royalty value of the gas a reopened Nikiski plant would consume annually, giving it a potential $15 million credit. However, Agrium has estimated its annual corporate income tax liability between $3 million and $4 million. The credit does not allow a tax liability less than zero.

In addition to paying royalties to balance the credit, potential gas suppliers would also be the key to make an Agrium reopening possible in the first place. Prior to its closure, the Nikiski Agrium plant used gas supplied by Unocal, which in 2004 announced it would raise the price of its gas. Agrium and Unocal failed to renegotiate a supply agreement.

Agrium Manager of Government Affairs Adam Diamond said the company is now “absolutely talking to all the suppliers in the Inlet” about potential deals to fuel the Nikiski plant.

“We continue to work with all of the suppliers,” he said.

Diamond has previously stated that the decision of whether or not to reopen the Nikiski Agrium plant would be discussed by Agrium’s board of directors, which he said have yet to take up the question. Diamond said the tax credit “will go into the decision, but there hasn’t been a decision at this point.”

“The decision on re-opening the facility is going to be based on the availability and cost of gas and the overall project economics,” Diamond said. “This incentive absolutely factors into that overall economics decision. But we still are looking at the availability of gas, we still are looking at the overall project economics.”

The credit will take effect July 1, 2017, and will remain available until 2024. Diamond said this time limit was not likely to be a factor in deciding whether to reopen the plant.

“By itself, I don’t think that’s an incentive to make a decision more quickly,” Diamond said. “It’s a huge investment, and we have to make sure there’s enough gas. We don’t want to be caught in a position where there’s no gas availability. We want to make sure there’s enough gas not only for us, but for utilities and all the other users. Because we recognize that utilities will always come first in terms of gas supply. So we’re going to do our due diligence before we make a decision.”

 

Reach Ben Boettger at ben.boettger@peninsulaclarion.com.

More in News

Sen. Shelley Hughes, R-Palmer; Senate President Peter Micciche, R-Soldotna; Sen. Gary Stevens, R-Kodiak and Sen. Click Bishop, R-Fairbanks, spoke to reporters Tuesday, Jan. 25, 2022, immediately following Gov. Mike Dunleavy’s State of the State address. Members of the Senate Republican leadership said they appreciated the governor’s optimism, and hoped it signaled a better relationship between the administration and the Legislature. (Peter Segall / Juneau Empire)
Lawmakers welcome tone change in governor’s address

With caveats on financials, legislators optimistic about working together

COVID-19. (Image courtesy CDC)
COVID deaths, hospitalizations climb statewide

The total number of statewide COVID deaths is nearly equivalent to the population of Funny River.

A fisher holds a reel on the Kenai River near Soldotna on June 30, 2021. (Photo by Ashlyn O’Hara/Peninsula Clarion)
Restrictions on sport fishing announced

The Alaska Department of Fish and Game announced summer sport fishing regulations Wednesday

Community agencies administer social services to those in need during the Project Homeless Connect event Soldotna Regional Sports Complex in Soldotna on Wednesday, Jan. 26, 2022. (Camille Botello/Peninsula Clarion)
‘It’s nice to be able to help folks’

Project Homeless Connect offers services, supplies to those experiencing housing instability

Kenai Peninsula Borough Mayor Charlie Pierce attends the March 2, 2021, borough assembly meeting at the Betty J. Glick Assembly Chambers at the Borough Administration Building in Soldotna, Alaska. (Photo by Ashlyn O’Hara/Peninsula Clarion)
Former talk-show host to manage Pierce gubernatorial campaign

Jake Thompson is a former host of KSRM’s Tall, Dark and Handsome Show and Sound-off talk-show

Deborah Moody, an administrative clerk at the Alaska Division of Elections office in Anchorage, Alaska, looks at an oversized booklet explaining election changes in the state on Jan. 21, 2022. Alaska elections will be held for the first time this year under a voter-backed system that scraps party primaries and sends the top four vote-getters regardless of party to the general election, where ranked choice voting will be used to determine a winner. No other state conducts its elections with that same combination. (AP Photo/Mark Thiessen)
How Alaska’s new ranked choice election system works

The Alaska Supreme Court last week upheld the system, narrowly approved by voters in 2020.

Gov. Mike Dunleavy speaks to a joint meeting of the Alaska State Legislature at the Alaska State Capitol on Tuesday, Jan. 25, 2022, for his fourth State of the State address of his administration. Dunleavy painted a positive picture for the state despite the challenges Alaska has faced during the COVID-19 pandemic and its effects on the economy. (Peter Segall / Juneau Empire)
Gov points ‘North to the Future’

Dunleavy paints optimistic picture in State of the State address

A COVID-19 test administrator discusses the testing process with a patient during the pop-up rapid testing clinic at Homer Public Health Center on Tuesday, Jan. 25, 2022. (Photo by Sarah Knapp/Homer News)
Free rapid COVID-19 testing available in Homer through Friday

A drive-up COVID-19 testing clinic will be held at Homer Public Health Center this week.

In this Sept. 21, 2017, file photo, former vice presidential candidate Sarah Palin speaks at a rally in Montgomery, Ala. Palin is on the verge of making new headlines in a legal battle with The New York Times. A defamation lawsuit against the Times, brought by the brash former Alaska governor in 2017, is set to go to trial starting Monday, Jan. 24, 2022 in federal court in Manhattan. (AP Photo/Brynn Anderson, File)
Palin COVID-19 tests delay libel trial against NY Times

Palin claims the Times damaged her reputation with an opinion piece penned by its editorial board

Most Read