Ammonia build-out: Recipe for risks
Why government agencies should reconsider granting public financial incentives to increase private sector ammonia production
Key Takeaways:
The U.S. ammonia industry faces multiple challenges and risks in building out ammonia production intended for export to a global energy market that will likely be limited.
Ammonia build-out would likely have only a limited impact on local jobs, as the ratio of jobs per unit of ammonia production has plummeted—from 2001-2024, production rose by 53.3% while the number of direct jobs dropped by 6.1%.
Rising construction costs and operational expenses, together with market uncertainty, pose financial risks—and have even led to cancellation of some large ammonia projects.
Domestic agriculture is not driving ammonia expansion in the United States—demand is relatively flat, and the United States already produces most of the ammonia for current domestic purposes.
Federal, state, and local agencies awarding financial incentives for construction of ammonia plants may not achieve the robust economic benefits promised for the local communities taking on these facilities. The latest report from the Institute for Energy Economics and Financial Analysis (IEEFA) shows that ammonia production is not a significant job engine; energy markets for ammonia are not likely to be robust; rising construction costs and operational expenses pose financial risks; and ammonia production and transport pose safety issues.
This report shows the scale of the proposed ammonia production buildout in the United States far exceeds the existing domestic demand currently served by imports. Ammonia facility project plans hinge on hopes for a greatly expanded ammonia market, which may not fully appear. Although many governmental leaders involved in efforts to encourage ammonia plant development may hope to boost employment, IEEFA research indicates actual job benefits are likely to be limited.
“The ammonia market faces a host of issues that decision makers should heed as they decide how to allocate business incentives in their communities,” said Todd Leahy, IEEFA Regional Director for North America, and co-author of the report. “Not only is the ammonia market unlikely to expand as producers predict, but governments and communities should scrutinize the jobs predictions and consider the full extent of the safety issues associated with these plants.”
Taken together, the risks identified in this report raise cause for concern about directing public subsidies to new ammonia production projects. Any plan to gamble public monies or grant tax incentives for a project that has a significant risk of not delivering on its promises—or poses environmental safety or health risks to the host community—should be subject to rigorous scrutiny and robust public discussion.
