Higher cost estimates put CHS nitrogen plant on hold
JAMESTOWN — An anticipated announcement on the proposed CHS nitrogen fertilizer plant at Spiritwood was delayed by the company Tuesday.
Annette Degnan, marketing communications director for CHS, said “significantly higher than expected construction and labor cost estimates” were prompting further review of the project.
Local officials remain confident the plant can be built.
“I’m very optimistic CHS will move forward,” said Connie Ova, Jamestown/Stutsman Development Corp. CEO. “I know they have concerns about water and being over budget.”
Ova said she and CHS officials had met last week with engineers from the North Dakota Water Commission. Testing of water supplies is ongoing.
The proposed plant would convert natural gas from western North Dakota into nitrogen fertilizer for farm use. When originally announced in September 2012, the project had a $1.2 billion cost estimate. Subsequent cost estimates ranged from $1.5 billion to $2 billion.
Those costs made it the largest construction project ever planned by CHS and the largest in North Dakota history.
“Further study revealed additional project infrastructure and labor costs,” Degnan said in a news release. “At the current cost estimate, the project will not generate the targeted returns on capital and would not be viable.”
Degnan would not comment on the current cost estimates.
CHS sent a letter to the Stutsman County Commission that halted the county’s work on purchasing road easements and bidding road improvement projects for the proposed plant.
“At this time, CHS must withdraw from the process in order to align with the CHS Senior Leadership Team and its Board of Directors ongoing evaluation of the project,” David Christofore, vice president business development for CHS, wrote in a letter addressed to Casey Bradley, Stutsman County auditor and chief operating officer.
Bradley said Stutsman County had incurred some preliminary engineering costs for the road project at the proposed project location, which would be billed to CHS whether the nitrogen fertilizer plant is built or not.
Degnan said CHS needed more time to evaluate options for reducing overall construction costs and to look at ways to improve profitability.
“CHS leaders recently met with the state of North Dakota on financial considerations to improve project returns,” Degnan wrote.
The release does not provide information on what state agencies are involved or what incentive programs CHS may be pursuing. The release notes that the plant could be expected to contribute $23 billion to the local and state economy over a 20-year period.
“As a result, more time is needed for further review before a final decision can be made on the potential Spiritwood project,” Degnan wrote.
No timeline for the review was provided.