Possible closing of fertilizer plant stirs resentment
adn.com
By TOM KIZZIA
Anchorage Daily News
Published: June 19th, 2005
Last Modified: June 19th, 2005 at 03:59 AM
NIKISKI -- When Union Oil opened the huge Collier Carbon plant on the Cook Inlet bluff here in 1969, Kenai was still a town of gravel roads, without streetlights or fast food. The company built its own subdivision to ensure employees decent housing -- but sold many of the lots to others in the community to avoid the trappings of a frontier "company town."
"Company towns had gone out of style by that time and had a bad name," recalled George Ford, who came to Kenai in 1975 as plant manager and retired 10 years later.
For nearly four decades, the Nikiski nitrogen fertilizer plant has maintained that generous-uncle relationship with the oil-friendly town. The Union Oil (later Unocal) plant, sold to the Canadian manufacturer Agrium in 2000, has not only been a huge industrial employer and the biggest property-tax payer to the local borough; it's also been a steady source of philanthropic funds and volunteer labor, helping establish little leagues and senior centers and in later years sponsoring the high school environmental-ideas contest, "Caring for the Kenai."
"If the schools needed anything, the first person you would call would be Unocal," said former Kenai Borough Assemblyman Jack Brown.
These days, local feelings are decidedly different toward the fertilizer plant, which Agrium has announced will probably close Oct. 31 for lack of a long-term supply of cheap natural gas.
Disappointment, suspicion, resentment and resignation all lie just beneath a surface of guarded optimism around Kenai as community leaders and plant managers discuss last-minute efforts to keep the Agrium plant open.
"The company bought a business in our community and slowly dismantled it in front of us, and there was nothing the community could do about it," said Karen Kester, the director of Nikiski's recreation service area.
PULLING UP STAKES
The trouble started a little more than a year after Agrium and Unocal signed a reported $325 million deal that included facilities in Washington. The two companies went to court over how much gas Unocal, which was still in the gas business, was supposed to deliver to keep the plant running. Agrium announced last December it had settled with Unocal for cash rather than more cheap gas -- and that it was going to pocket $86 million and close the Kenai plant while considering a new plant in Egypt. The settlement continued delivery of cheap gas from Unocal only through Oct. 31.
This brought uncharacteristic griping from local politicians who had been trying to help the company.
Agrium soon changed tack and sought new bids for gas contracts, offering to pay more -- up to $3 per thousand cubic feet. In the current tight gas market, that's still much less than Unocal is getting from Anchorage consumers.
The bids are in, though still secret. Agrium said it is evaluating them and expects to make an announcement before the end of June.
"We're very hopeful that they can come up with gas contracts to get them through the next two winters," said Bill Popp, the Kenai Peninsula Borough's oil and gas liaison.
But the atmosphere was considerably less optimistic among longtime employees during a recent visit to a control room deep inside the 170-acre complex of winding pipes and steaming towers.
"We think there's more gas. We have a pretty hard time believing Agrium wants to keep us open," said Tamara Bronner, a plant operator for 20 years. She said her co-workers think closing the Kenai plant is part of a long-range business plan for the company, which owns 13 other plants in Canada, the United States and Argentina.
An "Agrium Wall of Shame" was decorated with recent newspaper clippings and cartoons, highlighted and annotated for gallows-humor effect. In the middle of the clippings was a digital timer -- the "Doomsday Clock" -- counting down to Nov. 15, the date employees expect to finish closing down the plant.
"The problem was, with the settlement money, they didn't reinvest it in gas," Bronner said. Employees also were unhappy when Agrium said it wouldn't consider selling if another company would keep the plant open.
"Agrium's philosophy is 'We don't want to sell it to someone in direct competition with us,' " local Agrium spokeswoman Lisa Parker said.
Management officials say the company is sincere in wanting to keep the plant running. But a lot of their energy these days goes to helping ease the transition for laid-off midcareer workers. More than a dozen of the roughly 200 employees have left for new jobs, giving up an incentive package designed to keep experienced workers around, Parker said. In some cases, retired employees have been brought back to work until October, she said.
WHITHER THE VOLUNTEERS?
A mile up the North Road from the Agrium plant, Nikiski recreation director Kester predicted the Kenai jobs will disappear overseas. Closing the plant will mean a big hit to the tax base that supports her swimming and ice skating programs. But the bigger loss will be in the well-paid plant employees who volunteered in company time or spare time to help.
"The Unocal-Agrium guys were my coaches. They always seemed to get time off to go to the tournaments," Kester said. "Those are the things I'm going to miss more than the money. Because you can't find people like that anymore. Now people are younger and they're so busy working just to get by."
The plant, at its peak, employed 300 workers at an average salary of around $84,000, according to Agrium. In 2003, the company said it paid $29.5 million in salaries and benefits, and another $77 million in purchase of Alaska goods and services. The borough's assessed value for the plant was well over $200 million at the peak of production in the late 1990s. The figure is less than one-third of that today, with the plant having operated at reduced volumes for several years.
The plant produces fertilizer -- liquid ammonia and granulated urea -- mostly for export. Its feedstock is natural gas, which was sitting unused in the ground during the 1960s Cook Inlet oil boom. Unocal sold the plant in 2000, saying it wanted to focus more on its core oil and gas holdings.
For Calgary-based Agrium, the fifth-largest fertilizer company in the world, the Kenai plant represented a foray into the competitive Pacific Rim export market. Fertilizer prices are lower in markets such as South Korea than in the American Midwest, so Kenai gas prices have to be lower than the prices paid by its other plants, Parker said.
Shutting down the Kenai plant would put a dent of more than $200 million in the record U.S. trade deficit. On the home front, loss of the wages and payments to contractors would be "devastating," said Bob Favretto, owner of two Kenai-Soldotna car dealerships and co-chairman of a task force appointed by Gov. Frank Murkowski to search for ways to help Agrium stay in Alaska. The general downturn in oil field employment is already hurting the local economy, he said.
"This is real blue-collar down here. Oil and gas really drives what we do," he said.
Favretto said his optimism has increased in recent months as Agrium has shown more flexibility. But Agrium's uncertain fate raises the specter of broader decline in the local industrial base. Some leaders say they worry the Conoco Phillips liquefied natural gas plant next door to Agrium may close next, when its gas supply contract expires in 2009.
Loss of those two plants -- which eat the lion's share of Cook Inlet gas -- would reduce chances for a "bullet line" pipeline feeding North Slope gas to Southcentral Alaska. And without the industrial base to pay two-thirds of the cost of the Inlet's pipeline network, those costs will fall on consumers, borough industry liaison Popp said.
"So it's misery on top of woe," he said.
HOLDING OUT HOPE
But Popp and other leaders are finding reasons to be upbeat. They say that the Kenai Peninsula's economy is the most diverse for its size in Alaska -- a point backed by state Department of Labor economist Neal Fried -- and can survive a big hit in one sector. There is also hope that the plant's highly skilled, midcareer workers can find jobs elsewhere -- in an oil industry whose work force is nearing retirement age or in a growing mining sector. Such jobs would allow workers to commute and continue living on the Kenai Peninsula, they say.
"I think most of the employees are going to find work. It may not be at the same scale," said John Coston, a safety specialist who represents employees on the state's Agrium task force.
Several government ideas for aiding the plant -- such as selling cut-rate state royalty gas or allowing a shipping exemption to the federal Jones Act -- quickly fell flat. State regulators are looking at opening up access to Cook Inlet pipelines as a way to help. A small royalty reduction was passed by the Legislature for Agrium in 2003, but further subsidies have been unpopular.
Meanwhile, Agrium and Unocal, co-sponsors of this year's high school environmental contest, have signed on to sponsor at least one more year of "Caring for the Kenai."
Reporter Tom Kizzia can be reached at tkizzia@adn.com. |
