Sept 16 (Reuters) - The U.S. Department of Energy has

made a conditional loan guarantee of up to $1.56 billion to

Wabash Valley Resources to help build a low-emissions ammonia

production facility in Indiana, the government body said on

Monday.

The project would repurpose a power plant to produce 500,000

metric tons of ammonia annually by utilizing petcoke, a waste

product generated during the oil-refining process, and

permanently store carbon dioxide underground, it said.

The company must satisfy certain technical, legal,

environmental, and financial conditions before the DOE can fund

the loan guarantee, the statement said.

WHY IT'S IMPORTANT

Global production of ammonia, used widely to produce

fertilizers, contributes to 1% to 2% of global carbon dioxide

emissions. Direct emissions from the U.S. agricultural sector

contribute to nearly 10% of total U.S. emissions.

The project will be the first to domestically produce

low-emissions ammonia for local farmers in the corn belt region

of the U.S., primarily comprising Midwestern states, according

to the Energy Department.

KEY CONTEXT

Fertilizer prices have remained volatile over the past few

years after Russia's invasion of Ukraine upended global

supplies.

Several fertilizer companies are setting up ammonia plants

in the U.S. to tap into subsidies from the Inflation Reduction

Act.

Major oil companies such as Exxon Mobil ( XOM ) have signed

agreements with fertilizer producers to store CO2 generated from

industrial activities inside deep injection wells as part of

their endeavor to curb emissions.

QUOTE

"This low-carbon ammonia would be cost-competitive compared

to existing ammonia imports, helping to drive down costs for

local businesses and consumers," the energy department said in a

letter.

NUMBERS

The conditional commitment would be part of the $2.4 billion

investment that Wabash Valley aims to secure for the project,

expected to be completed in 2026.

The facility would store 1.6 million metric tonnes of CO2

annually once it becomes fully operational.