The Inputs Monitor is pleased to feature Northern Plains Nitrogen CEO Don Pottinger in his own words in this week's blog. Northern Plains Nitrogen is a grassroots greenfield nitrogen project in Grand Forks, North Dakota. Mr. Pottinger discusses U.S. nitrogen demand and the impacts of theirs and other N projects on fertilizer imports. To learn more about Northern Plains Nitrogen, visit their website here...
The Realities of Domestic Nitrogen Production
by Don Pottinger
Of the twenty million tons of nitrogen fertilizer that are applied to U.S. farmland, almost 60% is imported. This is a rather disturbing number since a look at historical numbers reveals that as recently as 1980 the USA was a net exporter, with imports accounting for only 15% of total usage. By the turn of the century, imports grew to 30%. By the year 2020, considering anticipated increases in nitrogen consumption and in the absence of increased domestic production, imports have no way to go but up.
North America went from being an exporter of N to an importer when natural gas, the feedstock for anhydrous production (not to overlook all downstream products) increased significantly in price domestically as compared to large off-shore reserves, many of them significant in volume... but thousands of miles away.
As for planted acres, North Dakota has more than 20 million with South Dakota and Minnesota nearing 17 and 21 million respectively. Of these 58 million total acres, 17 million were planted to corn and 11 million to wheat in 2012. Corn acres are predicted to increase, along with the need for nitrogen the crop brings. This usage requirement is currently being served by producers from afar.
Now there is hope to reverse this nitrogen import trend: the reason... fracking technology.
Using this intriguing and modern science, monstrous oil reserves like the Bakken of western North Dakota are being developed at break-neck speed. While the drilling activity is in search of oil, natural gas is the inevitable by-product, or should we call it waste. In July of 2013, the Fargo Forum reported that natural gas in North Dakota alone was being flared to the tune of $3.6 million a day!! Regardless, the fact that all this natural gas is being discovered is having significant and, according to experts, long term impact on domestic supply, and price.
Back to the nitrogen import situation. Of the tons delivered to the USA by ocean-going vessel mostly into New Orleans, then up the Mississippi by barge and then to the upper Midwest by the final destination, the lion’s share of this product ends up in the Dakotas, Minnesota, Montana and surrounding states. As a result, not only do growers closest to the Canadian border generally pay the highest price for nitrogen products, they rely on local retailers to make commitments months in advance to assure timely delivery of this essential nutrient to nearby storage, all aimed at the shrinking spring season.
But these realities may well change. Cenex Harvest States has announced it is well along toward finalizing the decision to construct a world-scale (2,400 tons NH3/day) plant near Spiritwood ND. Prior to the CHS release, Northern Plains Nitrogen announced plans to build a similar sized plant near the city of Grand Forks, ND, alongside the Red River, a major consideration for site selection as plants of this size require about 4,000 gallons of water per minute to function. This water requirement eliminates many otherwise ideal locations for site consideration.
What might transpire as plans for these two plants progresses? Hard to tell as costs of this sort of production facility is north of $1.5 billion, and the business is volatile. However, the reality is that it would take three plants (not two) this size to offset current imported nitrogen, without any regard for predicted increasing demand.
As for growers, they should likely hope that both CHS and NPN plants are built. That way they get the opportunity to hedge their nitrogen bets by investing directly in the NPN plant and also assure nearby supply from world-scale production sites.
Whatever ultimately comes to pass as it pertains to rumored and confirmed greenfield and brownfield nitrogen plant construction, in the minds of experts the USA is likely to be reliant upon imported nitrogen for years to come.
Don Pottinger, CEO Northern Plains Nitrogen -- December 7, 2013