Southland urea plant could get carbon subsidy

A lignite-to-urea fertiliser plant which Government coal miner Solid Energy is considering for Southland would qualify for millions of dollars a year in taxpayer-subsidies of its carbon debt, according to a Wellington think tank.

The $1.4 billion plant -- being investigated as a potential venture with farmer-owned fertiliser company Ravensdown -- could become the nation's second-biggest emitter of greenhouse gases behind the coal-fired Huntly power station. But it would still qualify for subsidies worth more than $500 million over the first 20 years of the plant's life, the Sustainability Council said today.

The state miner's proposed conversion of 2m tonnes of lignite a year to nitrogen-rich urea fertiliser, would qualify for a subsidy on the cost of emissions under planned changes to the emissions trading scheme (ETS), said the council's executive director, Simon Terry.

The Government has signalled moves to expand subsidies of greenhouse gas emissions to include emissions from new carbon-intensive operations. Environmental lobbyists have argued this effectively underwrites major new polluters.

Solid Energy said last week the plant could create 500 new jobs and produce enough urea to supply a $1 to $2 billion export industry in five years.

The company's chief executive Don Elder said the urea plant would not be built until after 2014 and would have to be fully carbon compliant with whatever legislation New Zealand had at that time.

The initial investigation into whether the plant was economically viable was expected to be completed early next year, at which point the two companies would decide whether to proceed to the next stage of a feasibility study.

Mr Terry said the urea manufactured would also attract subsidies for farmers, even though it caused the release of nitrous oxide -- a greenhouse gas more than 300 times more potent than carbon dioxide in global warming effects. Farmers would be exempted from responsibility for nearly 90 percent of the initial nitrous oxide emissions.

Mr Terry said nitrous oxide emissions were now recognised as most important ozone-depleting gas damaging the ozone layer.

"About 70 percent of urea sales now go to dairy farms," he said.

Additional urea could lift farmer profits but communities would have to pay the financial subsidies and accept increased environmental damage.

If the full costs of the environmental damage were met by the fertiliser companies and their farmer customers, less would be spread on farms. and the nation could probably make do with the urea already produced by a rival fertiliser company, Ballance, from the Kapuni gas flows.

"A new plant with a huge carbon footprint, to make a product that delivers a triple hit on the environment, would be a backwards step," Mr Terry said in a statement. A more sustainable strategy would be for farmers to reduce their emissions so that their meat and milk are less vulnerable to planned taxes overseas on the carbon content of imported goods.

NZPA