The Surprising Connection Between Food and Fracking
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In a recent Nation piece, the wonderful Elizabeth Royte teased out the direct links between hydraulic fracturing, or fracking, and the food supply. In short, extracting natural gas from rock formations by bombarding them with chemical-spiked fluid leaves behind fouled water—and that fouled water can make it into the crops and animals we eat.
But there's another, emerging food/fracking connection that few are aware of. US agriculture is highly reliant on synthetic nitrogen fertilizer, and nitrogen fertilizer is synthesized in a process fueled by natural gas. As more and more of the US natural gas supply comes from fracking, more and more of the nitrogen fertilizer farmers use will come from fracked natural gas. If Big Ag becomes hooked on cheap fracked gas to meet its fertilizer needs, then the fossil fuel industry will have gained a powerful ally in its effort to steamroll regulation and fight back opposition to fracking projects.
It was the N of the era: In the 2000s, nitrogen production moved offshore as US natural gas prices rose. Source: USDA
Today, Trinidad and Tobago, an island nation off the coast of Venezuela and our leading source of imported N, is in the same position the US found itself in the early 2000s: Its supply of conventional, easy-to-harvest natural gas is wearing thin. In 2012, the International Monetary Fund estimated (PDF) that at current rates of extraction, the nation had sufficient natural gas reserves to last until just 2019.
Meanwhile, the fracking boom has made US natural gas suddenly abundant—and driven prices into the ground. A Btu of US natural gas now now costs 75 percent less than it did in 2008, the New York Times recently reported. Meanwhile, nitrogen fertilizer prices remain stubbornly high, propped up by strong demand driven by high crop prices. Those conditions—low input prices plus elevated prices for the final product—mean a potential profit bonanza for companies that use cheap US natural gas to make pricy N fertilizer for the booming US market.
Not surprisingly, as Kay McDonald of the excellent blog Big Picture Agriculture shows, the industry is starting to move back to the United States to take advantage of the fracking boom. McDonald points to a $1.4 billion project announced in September by the Egyptian company Orascom Construction Industries to build a large new nitrogen fertilizer plant in Iowa close to a natural gas pipeline. According to the Wall Street Journal, "cheap U.S. natural-gas supplies and the nation's role as the world's most important food exporter" drew the Egyptian giant into the US market.
That same month, US-owned agribusiness cooperative CHS announced it was investing $1.2 billion to build a nitrogen plant in North Dakota. An Associated Press article gave a taste of the potential profits in such an operation: "Natural gas prices are now at about $2.50 per thousand cubic feet. At those prices, it takes about $82 worth of natural gas to make a ton of anhydrous ammonia, which is selling for about $800 per ton."
And then there's US fertilizer giant CF Industries, which in November announced a $3.8 billion expansion of existing nitrogen fertilizer plants in Louisiana and Iowa, a move designed to "take advantage of low natural gas costs and high grain prices," MarketWatch reported.
Now, it should be noted that it isn't just the promise of windfall profits that are driving these investments. Energy prices are highly volatile, and the industry is wary of the risk involved with plunking down billions in hopes of future gain. Enter the taxpayer: These projects are being underwritten by public money at the national, state, and local levels. As a reward for expanding its Iowa plant, CF Industries won more than $70 million in tax incentives from the the state, and $161 million in property taxes over 20 years from Woodbury County, which houses the plant, the Sioux City Journal reports. Louisiana will chip in several million dollars in tax breaks for the company's expansion there, too.