House Speaker Reattempts Agrium Tax Credit

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The Alaska Department of Revenue expects a proposed tax credit for the Agrium fertilizer plant in Nikiski to cost the state between $3 million and $4 million in foregone revenue annually.

The credit legislation would allow ammonia and urea plants to reduce their corporate income tax liability if they use Alaska natural gas in the production process. While the bill does not mention Agrium by name, the purpose is to encourage the plant to resume operations after it shut down in 2007 because of a decline in the natural gas supply. With the supply situation improved, Agrium is now considering spending $200 million to reopen the plant.

House Speaker Mike Chenault is sponsoring the incentive bill, and the plant is in his district. The Nikiski Republican says the bill would bring hundreds of jobs to the Kenai Peninsula. He adds that credit would have a statewide benefit because it would reduce fertilizer costs for farmers along the Railbelt.

“This is about putting more Alaskans to work at good, high-paying jobs that’ll last a long time,” says Chenault. “So, if you want to call it pork, then go ahead, but I’m more interested in putting Alaskans to work.”

The bill received its first hearing on Wednesday, and it is structured in such a way that Agrium could only reduce their tax liability — not receive a direct subsidy payment from the state. The credit also could not be applied until the plant is fully operational, and the incentive would sunset in a decade. The Department of Revenue projects the maximum benefit available to Agrium is $15 million annually, but that a credit of $3 million or $4 million is more likely.

Chenault attempted to establish the tax credit last year as part of a refinery bill, but the language was removed out of concern that the legislation was turning into a “Christmas tree” with too many amendments. But now the tax credit bill comes as the state faces a major deficit.

Anchorage Democrat Les Gara says offering low interest loans might be a more appropriate incentive given the budget climate.

“I’m going to have to be convinced at a time of a $3.5 billion budget deficit, that the state needs to engage in more corporate subsidies,” says Gara.

Chenault says he recognizes the bill comes at a time of budget cutting. Even so, the state will be collecting zero tax revenue from Agrium if the plant does not repoen.

“While I might have wished it happened last year, or might happen five years from now, right now is the opportunity that we have that they’re looking at bringing this facility back online,” says Chenault. “So now’s the time we need to look at it.”

At the time it was operating, the Nikiski Agrium facility was the second largest producer of ammonia and urea in the country.