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North Dakota Fertilizer Project Dropped; New Gas Infrastructure Doubtful

A multi-billion-dollar St. Paul, MN-based agricultural cooperative conglomerate said Wednesday it is dropping long-standing plans to develop a major natural gas-based fertilizer plant in North Dakota, causing energy officials there to raise doubts of plans to add badly needed gas infrastructure and power generation.

CHS Inc. announced a $2.8 billion investment in an existing nitrogen fertilizer manufacturer and at the same time said it is dropping plans to development of 640 acres northeast of Jamestown, ND, into a fertilizer plant (see Shale Daily, Sept. 9, 2014).

Most of the nitrogen products from the now-abandoned plant would have served farmer-owned cooperatives and independent farm supply retailers within a 200-mile radius of the plant in the Dakotas and parts of Minnesota, Montana and Canada, according to CHS's plans.

Lynn Helms, director of  North Dakota’s Department of Mineral Resources (DMR), said Friday that the CHS move throws a shroud of uncertainty over North Dakota's future natural gas projects.

"Obviously, this decision is not going to be good in terms of natural gas capture, processing and transportation in and out of the state," Helms said. "It's a pretty serious blow."

In addressing the continuing statewide effort to cut down on wellhead flaring of gas produced in conjunction with the state's still-robust crude oil production, Helms and other state energy officials were looking at developing gas-fired generation in the eastern part of North Dakota. That depended on getting transmission pipelines built into Spiritwood, ND.* "So [the fertilizer plant cancellation] has ramifications in several areas," Helms said.

"This obviously is not good news, but we have not fully analyzed the impacts yet.  I can tell you there are negatives, though."

Helms said new electric generation proposals under the U.S. Environmental Protection Agency's (EPA) Clean Power Plan requirement can create new opportunities for Bakken Shale gas. "As we shift away from coal, that should create more opportunities for processed gas [from oil production] to find a utility use, and maybe that can lessen some of the negative impact from now not building the fertilizer plant," he said.

"We're just starting to evaluate [the gas questions] and it will be part of what Justin Kringstad [director of the North Dakota Pipeline Authority] is going to do between now and the end of the year, updating the past study on gas production and creating opportunities.

Other impacts on future gas gathering infrastructure and the state's ability to use gas volumes now being flared come from the proposed federal Waters of the United States (WOTUS) rules (see Shale Daily, Nov. 18, 2014).

Helms talked about the "federal firehose" of new regulations that threaten to greatly extend permitting time periods. While North Dakota intervened in a lawsuit against the federal Bureau of Land Management’s (BLM) hydraulic fracturing (fracking) rules that is set for a ruling next month, Helms railed against a new BLM rulemaking requiring federal permitting for essentially all wells drilled in North Dakota, even those on state or private lands.

That could have a much bigger impact on the state's future oil/gas operations than the BLM fracking rule, said Helms, contending that the federal permitting process is about six times as long as the state's. "There are some real concerns about this," he said. He indicated the state Industrial Commission may decide to challenge this, as it also is considering on the new federal water rules.

*(In the original story, Spiritwood, ND, was mislabeled as Spearwood, ND.  NGI regrets the error.)

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