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Fertilizer Project Moves Forward

With concerns over Pakistani investor allayed, Indiana reopens talks to support nitrogen plant

by Glenn Hess
May 12, 2014 | A version of this story appeared in Volume 92, Issue 19

Indiana officials have renewed talks with a Pakistani-led consortium that wants to build a fertilizer plant in the state. The move comes a year after Gov. Michael R. Pence (R) withdrew his support for the project over national security concerns.

Proposed Plant At A Glance


◾ Location: Mount Vernon, Ind.
◾ Production capacity (per day)a:
  2,400-metric-ton ammonia plant
  2,640-metric-ton urea synthesis plant
  1,440-metric-ton urea granulation unit
  5,160-metric-ton urea ammonium nitrate plant
  1,840-metric-ton nitric acid plant

◾ Incentives: Indiana isn’t disclosing details, but state-level incentives may include transportation infrastructure upgrades. Posey County approved $1.3 billion in tax-exempt bonds to support the project.

◾ Jobs created: 2,500 during construction, 200 permanent

◾ Key drivers:
1. The U.S. has historically been the world’s largest importer of nitrogen fertilizer. The Indiana project would be the first nitrogenous fertilizer plant built in the U.S. since the 1980s.
2. U.S. supplies of natural gas, the primary raw material in the manufacture of nitrogen fertilizer, have become more abundant and affordable in recent years because of the shale gas boom.

a Facility capacities as specified in the draft air permit for the project, issued January 2014.

Last month, Pence said the state would reopen discussions regarding economic incentives for Midwest Fertilizer Corp. to build a $2.4 billion nitrogen-based fertilizer plant in Mount Vernon. The city of 6,600 is located in Posey County in the southwest corner of Indiana.

The governor pulled back an offer of state assistance last year over concerns that calcium ammonium nitrate produced in Pakistan by the lead investor in the project was ending up in improvised explosive devices (IEDs) intended to kill and injure U.S. troops in Afghanistan. Fatima Group, a Lahore, Pakistan-based fertilizer company, owns 48% of Midwest Fertilizer and is the firm’s managing partner.

Army Lt. Gen. Michael D. Barbero sharply criticized Fatima Group in testimony before a Senate committee in December 2012 for failing to keep its product out of the hands of the Taliban and other Islamist militants (C&EN, Feb. 25, 2013, page 24). Barbero said the company had been “less than cooperative” with U.S. military efforts to stop the flow of explosive materials across the Pakistan-Afghanistan border.

More than 60% of U.S. casualties in Afghanistan have been caused by IEDs, most of which are made with homemade explosives that contain ammonium nitrate derived from calcium ammonium nitrate produced in Pakistan, according to the Pentagon.

After taking office in January 2013, Pence put the Posey County project on hold pending a review of Fatima Group’s ownership interest in Midwest Fertilizer. Two months earlier, the state had offered an incentive package that included $1.3 billion in tax-exempt bonds to help finance construction. The governor then decided last May to withdraw the state’s support.

Posey County officials, on the other hand, have continued to pursue the project on their own. The county quickly stepped in and approved a similar bond issue for the plant last June through a federal disaster relief fund.

Meanwhile, Fatima Group has taken steps over the past year to tighten its supply chain. These steps include halting the sale of calcium ammonium nitrate fertilizer products in two Pakistani border provinces, according to the Pentagon.

After being briefed by Defense Department officials, Pence says the Fatima Group and the government of Pakistan have provided “an unprecedented level of cooperation and transparency in addressing the concerns that precipitated the withdrawal of our support” for the fertilizer plant project.

The governor also notes that Pentagon officials have confirmed that an experimental fertilizer formula is being developed by Fatima Group to be more inert and less detonable and thus not suitable for use in IEDs. The U.S. military has participated in joint testing of the reformulated product.

“The State of Indiana was informed that our defense experts completed the second series of tests on the experimental formula and described Fatima Group’s efforts to improve the safety of its fertilizer as commendable,” Pence says. Testing took place in Pakistan last November and in Nevada in March.

As a result of this progress, the governor has authorized Indiana’s lead economic development agency to reopen negotiations with Midwest Fertilizer.

“We remain hopeful that the state will be able to renew our support for this important economic development project with the confidence that we have done so in a manner that put the interests of our soldiers and their families first,” Pence says.

Negotiations between the company and the state are confidential. But Posey County officials say those state-level incentives could come in the form of transportation infrastructure upgrades at the plant site.

Midwest Fertilizer Chief Executive Officer Michael Chorlton says the state’s support would help advance the project. “We look forward to continuing to work with the State of Indiana to make this significant economic development project a reality,” he tells C&EN.

The Mount Vernon plant, he says, would produce homegrown fertilizer for thousands of Midwest farmers who now depend on imported product.

The new facility is expected to create 2,500 jobs during the three-year construction period and 200 permanent jobs once the facility is fully operational, according to Chorlton. He says the company hopes to break ground later this year, likely in the third quarter.  



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