Washington (Platts)--29Aug2007

Alaska Governor Sarah Palin has approved legislation that allows the Alaska
Railroad to issue $2.9 billion in tax-exempt bonds for the construction of a
proposed coal-gasification facility on the Kenai Peninsula. 

Palin signed H.B. 229, sponsored by state Representative Mike Chenault,
authorizing the railroad to issue bonds to help finance some portion of the
project, to be built by Agrium, a Canadian producer of agricultural
fertilizers. In 2005, the company announced that it would conduct a
feasibility study on the potential use of coal gasification as a feedstock for
its Kenai Nitrogen facility.

"If the project goes through ... it's still under consideration by Agrium ...
we will issue the tax-exempt bonds to help finance the project," Tim Thompson,
manager of external affairs at Alaska Railroad, told Platts Tuesday. "Not all
of the $2.9 billion will go to the facility; the rest would be used for
facilities and equipment for the transportation of coal from Healy to the
plant and a possible rail link from Willow to Port MacKenzie."

Specifically, the legislation stipulates that the plant would be built on land
adjacent to its existing urea and ammonia plants and authorizes a new rail
link. Feedstock for the plant would come from the Usibelli Coal Mines in
Healy.

Equity partners sought 

Agrium is nearing the end of a front-end engineering and design study on the
proposal, company spokeswoman Lisa Parker told Platts. The company hired the
environmental firm ENSR to help with the FEED study and to complete a "coal
diligence" review to see if the Healy area can provide the coal needed for the
project. Though she wouldn't elaborate, Parker said the company is in talks
with equity partners about the facility. A report and cost estimate on the
project should be ready after Labor Day and the FEED study in early October,
she said. 

While the company is still analyzing the proposal and hasn't made a final
decision to build, Palin's signing the bill was a boost, according to Richard
Downey, director of investor relations at Agrium.

--Regina Johnson, regina_johnson@platts.com

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