SAN FRANCISCO - Even a $3 billion industrial development bond allocation won't be enough to make it financially viable to build a coal-gasification facility at an Alaska fertilizer plant, the plant's owner says.

Calgary, Alberta-based Agrium Inc. announced Thursday that it will not proceed with planning for the project, adding that it will completely mothball its fertilizer plant at Nikiski, which had ceased production in 2007.

The plant, about 170 miles from Anchorage by road, produced nitrogen-based urea and anhydrous ammonia, which have fertilizer and industrial applications.

Natural gas is a key ingredient in the production process, and the plant was located in Nikiski for its proximity to natural gas production fields on the Cook Inlet.

Those fields are in decline, which is why Agrium had contemplated a coal-gasification plant that would have used Alaskan coal.

State lawmakers, eager to keep the plant operating, approved a bill in 2007 authorizing the Alaska Railroad Corp. to issue almost $3 billion of industrial development bonds to help finance the coal-gasification facility.

Such a massive authorization was possible because the state-owned railroad corporation was exempted from private-activity bond restrictions when the Tax Reform Act of 1986 was passed.

The railroad corporation has yet to take advantage of its private-activity bond capabilities, though it has issued tax-exempt debt for its own purposes.

Sen. Lisa Murkowski, R-Alaska, issued a statement expressing her disappointment at the news despite her efforts over the years that resulted in a variety of federal grants and tax breaks to study and finance the project.

"It is disheartening to not only the more than 200 former workers of the plant, or to the citizens of the Kenai area, but also to the entire state, that an opportunity to develop 21st century technology that would have converted the state's abundant coal resources into value-added products has slipped away," she said.

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