Fertilizer Plants Spring Up to Take Advantage of U.S. s Cheap Natural Gas

The devastating explosion at a fertilizer-blending facility in West, Texas, on April 17 called attention to the risks of ammonia-based fertilizer production and storage. Between 1984 and 2006, the U.S. Occupational Safety and Health Administration reported 224 accidents, resulting in 50 fatalities, at ammonia plants around the U.S., and ammonia-based fertilizers and explosives were involved in a variety of intentional attacks, including the 1995 Oklahoma City bombing. Now, a different kind of boom in the fertilizer business—no explosives required—could also spell trouble.

No ammonia plants—which produce 90 percent of the fertilizer used worldwide—have broken ground in the U.S. in more than 20 years. But in the next three to five years, that’s changing. Today there are as many as 14 ammonia plants proposed in the U.S., with nearly 12 million tons of new capacity and $10 billion of expected investment. Several older plants are also being recommissioned and upgraded. Louisiana, Iowa, North Dakota, Texas and Indiana are among the proposed sites. This boom, driven by low prices for natural gas—the main ingredient in ammonia production—will drive a corresponding surge in the industry’s already substantial carbon footprint.

Hot market, hot climate?

Demand for fertilizer is escalating worldwide. China, India and developing nations around the world are stepping up their agricultural output of both grains and livestock, and commodity crop prices are at record highs, encouraging farmers to fertilize heavily in search of higher yields. As fertilizer demand grows, supply is ramping up to meet it, and the U.S. is poised to capture most of that growth—in no small part because of rapid expansion of the nation’s natural gas sector over the past four years.

But unlike many of the industries capitalizing on the low price of natural gas, ammonia producers don’t use it primarily as a fuel source. They use it as an ingredient—a source of abundant, accessible hydrogen.

Ammonia production is, relatively speaking, fairly simple. The inputs are nitrogen, hydrogen and energy used to stimulate a reaction understood by all chemistry students:

N2 + 3H2 => 2NH3

The nitrogen used in the process is taken from the air, but hydrogen sources vary depending on when and where ammonia production is happening. When ammonia plants first came online in the 1940s, most used water as their source of hydrogen; energy-intensive electrolysis decoupled the hydrogen and oxygen. Add a catalyst, a little pressure, a blast of air, then cool it down, and you’ve got ammonia, with a little extra oxygen. But electrolysis is an expensive proposition, and ammonia plants today have a far cheaper source of hydrogen: hydrocarbons.

In China most ammonia is made from gasified coal, but elsewhere in the world that mostly means natural gas. Lots of it: ammonia plants consume about 1 percent of global energy. Most of that, however, is used as feed, not fuel.

Process technology has improved steadily in the past 60 years, and since the 1970s, when most existing facilities were built, the amount of energy used per ton of ammonia (as both feed and fuel) has decreased about 30 percent. Most U.S. plants have kept up with technology, upgrading and retrofitting as more efficient technologies have become available, but the improvements are diminishing; the International Fertilizer Industry Association reports that new designs are reaching the theoretical minimum for energy consumption. The problem isn’t energy efficiency; it’s feedstock.

When coal- and natural gas–fed plants produce ammonia, they generate two main by-products: heat and carbon dioxide (CO2).

The amount of heat released depends on which specific processes are used; most of it is captured and reused in the conversion process, reducing the amount of energy required by the plants for fuel. But even high-efficiency ammonia plants are heavy CO2 emitters: two tons are released for every ton of ammonia produced. A portion of the carbon dioxide is captured and used to produce urea (CH4N2O), the most widely used nitrogen fertilizer worldwide. But ammonia plants also produce anhydrous ammonia, ammonium nitrate (the compound that caused last week’s explosion in Texas), ammonium sulfate, UAN (urea ammonium nitrate solution) and other forms of ammonia used in agricultural and industrial applications—none of which use the leftover CO2. The rest is simply vented to the atmosphere.

Greenhouse impact

In 2011 U.S. ammonia-producing facilities released 25 million tons of greenhouse gases (nearly all of it CO2)—just under 14 percent of the chemical-manufacturing sector’s total carbon footprint (and about 0.1 percent of total U.S. emissions). Globally, ammonia production represents as much as 3 to 5 percent of carbon emissions, according to some industry sources. And that doesn’t take into account the supply chain of natural gas production, energy-related emissions in the production process, fertilizer application (and misapplication) or industrial use of urea and other ammonia products.

This larger footprint is something many are concerned about, particularly as the industry expands. Glen Buckley, an industry consultant at NPK Fertilizer Advisory Services (and former chief economist at U.S. fertilizer giant CF Industries), estimates that only about six million tons of the proposed U.S. capacity will actually get funding and get built—still, that’s a more than 50 percent increase in total ammonia capacity nationwide. Whereas the U.S. accounts for just 6 percent of global ammonia production, currently, the majority of new plants are coming online here, or in Canada, which has also benefited from the natural gas boom.

This growth will be accompanied by a directly proportional rise in greenhouse gas. With six million tons of new ammonia production, U.S.-based emissions would increase to a minimum of 37 million tons. If more of the proposed plants get built, the total could reach as high as 50 million tons. Globally, ammonia production already accounts for 3-5 percent of total carbon emissions, according to some sources. Again, that’s not accounting for emissions upstream or downstream in the supply chain.

And it’s those concerns that have some watchers looking to the future.

On the upstream side, emissions concerns could slow supply or drive up costs through increased regulation—especially if the U.S. Environmental Protection Agency cries foul on the enormous amounts of gas flared from the production fields. “The EPA is a major wild card,” Buckley says.

But the downstream side could play a role as well. Jack Oswald, chairman and CEO of California-based SynGest, says there’s growing concern among consumer products companies about carbon in their supply chains. Instead of natural gas, SynGest is proposing to use a biomass gasification process in its ammonia production plants.

Among Oswald’s backers are forest product and packaged food companies starting to take a look at their products’ carbon footprints. He provides the example of orange juice manufacturers he’s spoken with in the southern U.S.: “Transportation turns out to be a small piece. Approximately 30 to 33 percent of their carbon emissions is associated entirely with the nitrogen fertilizer.”

A shift to domestically produced, natural gas-fed fertilizer will wring some carbon out of such supply chains—much of the fertilizer used today comes from Chinese coal-fed plants. But SynGest aims to go further. Due to its use of new biomass, rather than long-buried hydrocarbons, Oswald says SynGest’s process has a net-zero carbon footprint, because “we’re not putting new carbon into the air.” Although the company hasn’t broken ground on a facility yet, Oswald notes that it is on track to have a commercial-scale plant operating in the U.S. Southeast within the next three years producing 87,000 tons of ammonia annually.

Although SynGest’s price isn’t yet competitive with natural gas ammonia, Oswald believes there’s substantial demand for a lower-carbon source of ammonia-based fertilizer: “Cheap natural gas won’t fix that.”

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