Future of ammonia tax credit bill uncertain

A bill offering a tax credit to producers of ammonia and urea was passed by the State House of Representatives on April 13. It was referred to the Senate Resources Committee but has not been heard as of the committee’s most recent meeting on April 16.

Urea and ammonia are fertilizer products created by combining atmospheric nitrogen with hydrogen extracted from natural gas. The only ammonia and urea producer presently in Alaska is Agrium Inc., whose production plant in Nikiski has been closed since 2007, due to what Agrium has said is an inadequate natural gas supply in the region.

Introduced in early February by Rep. Mike Chenault (R-Nikiski), the bill gives ammonia and urea producers a tax credit equal to the royalty paid by the producer’s natural gas suppliers on their land leased from the state. During the seven years it would be in effect, the tax credit is estimated to equal $4 million in deferred state revenue.

Supporters of the bill have cited a study prepared for Agrium by research consulting firm McDowell Group, which stated that rehabilitation of the Nikiski plant would create 815 jobs, as well as 140 jobs while the plant runs at half-capacity — as it is expected to do following re-opening — and 240 jobs if it reaches full capacity. Supporters have also claimed the credit would create an indirect incentive for increased gas extraction in the Cook Inlet by expanding the market for gas.

Opponents have questioned if the tax credit would be an essential or decisive factor in Agrium’s decision whether to reopen the Nikiski plant.

“Agrium presented no evidence that they needed $4 million a year in state tax subsidies for it (the Nikiski plant),” said Rep. Les Gara (D-Anchorage), who voted against the bill. “In fact, their testimony was that they may move ahead without any state tax subsidies.”

Gara also opposed the subsidy because of an interaction between Agrium and the state financing body Alaska Industrial Development and Export Authority (AIDEA), which Gara characterized as a misleading attempt by Agrium to secure state money before the credit bill was introduced.

According to a letter from AIDEA Chief Infrastructure Development Officer Mark Davis to Gara, Agrium approached AIDEA seeking project financing. Although Agrium signed a cost reimbursement agreement in January 2014, opening the possibility of $60 million in financing, Agrium left the agreement and ended its interaction with AIDEA in September 2014.

Gara said he was in support of the Nikiski plant reopening, but said that he had “to be protective of the public first.”

As well as altering the market for natural gas in the Cook Inlet, the reopening of Agrium would change the local market for ammonia products.

Kenai Airport Manager Mary Bondurant said the Kenai Airport uses urea pellets to de-ice its runways every winter. During the operation of the Nikiski Agrium plant, Bondurant said the airport purchased the pellets from Agrium for around $200 per ton. The airport now buys urea from Anchorage at around $1,100 per ton.

 

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

More in News

Nate Rochon cleans fish after dipnetting in the Kasilof River, on June 25, 2019, in Kasilof, Alaska. (Photo by Victoria Petersen/Peninsula Clarion)
King closures continue; Kasilof dipnet opens Saturday

The early-run Kenai River king sport fishery remains closed, and fishing for kings of any size is prohibited

An "Al Gross for Congress" sign sits near the driveway to Gross’ home in Anchorage, Alaska, on Tuesday, June 21, 2022, after he announced plans to withdraw from the U.S. House race. Gross has given little explanation in two statements for why he is ending his campaign, and a woman who answered the door at the Gross home asked a reporter to leave the property. (AP Photo/Mark Thiessen)
Alaska judge rules Sweeney won’t advance to special election

JUNEAU — A state court judge ruled Friday that Alaska elections officials… Continue reading

Ashlyn O’Hara/Peninsula Clarion 
Soldotna City Manager Stephanie Queen listens to a presentation from Alaska Communications during a meeting of the Soldotna City Council on Wednesday, March 9, 2022 in Soldotna, Alaska.
ACS pilots fiber program in certain peninsula neighborhoods

The fiber to the home service will make available the fastest internet home speeds on the peninsula

Nurse Tracy Silta draws a dose of the Moderna COVID-19 vaccine at the walk-in clinic at the intersection of the Kenai Spur and Sterling Highways in Soldotna, Alaska on Wednesday, June 9, 2021. COVID-19 vaccines for kids younger than 5 years old are now approved by both the Food and Drug Administration and the Centers for Disease Control and Prevention. (Camille Botello / Peninsula Clarion)
COVID shots for kids under 5 available at public health

Roughly 18 million kids nationwide will now be eligible to get their COVID vaccines.

Megan Mitchell, left, and Nick McCoy protest the U.S. Supreme Court’s decision overturning of Roe v. Wade at the intersection of the Kenai Spur and Sterling highways on Friday, June 24, 2022 in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
‘Heartbroken’, ‘Betrayed’: Alaskans react to Roe decision

Supreme Court decision ends nearly 50 years of legally protected access to abortion

Demonstrators gather outside the Supreme Court in Washington, Friday, June 24, 2022. The Supreme Court has ended constitutional protections for abortion that had been in place nearly 50 years, a decision by its conservative majority to overturn the court’s landmark abortion cases. (AP Photo / Jose Luis Magana)
Alaskans react to Supreme Court overturn of Roe v. Wade

The Supreme Court has ended constitutional protections for abortion.

Tara Sweeney, a Republican seeking the sole U.S. House seat in Alaska, speaks during a forum for candidates, May 12, 2022, in Anchorage, Alaska. (AP Photo/ Mark Thiessen)
Lawsuit says Sweeney should advance in Alaska US House race

The lawsuit says the fifth-place finisher in the special primary, Republican Tara Sweeney, should be put on the August special election ballot

Gubernatorial candidate Bill Walker stands in the Peninsula Clarion office on Friday, May 6, 2022, in Kenai, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Alaska AFL-CIO endorses Walker, Murkowski, Peltola

The AFL-CIO is Alaska’s largest labor organization and has historically been one of its most powerful political groups

A portion of a draft letter from Jeffrey Clark is displayed as the House select committee investigating the Jan. 6 attack on the U.S. Capitol continues to reveal its findings of a year-long investigation, at the Capitol in Washington, Thursday, June 23, 2022. (AP Photo/Jacquelyn Martin)
Federal agents search Trump-era official’s home, subpoena GOP leaders

Authorities on Wednesday searched the Virginia home of Jeffrey Clark

Most Read