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Governor: $3 billion steel mill could help Arkansas attract automaker

2022-01-12-Mike_Preston-Asa_Hutchinson-1254.JPG
Michael Hibblen
/
KUAR News
Arkansas Commerce Secretary Mike Preston and Gov. Asa Hutchinson speak to reporters during a press conference Wednesday.

The announcement by U.S. Steel that it will build a $3 billion plant in Osceola will make Mississippi County the nation’s leading steel-producing county and sets the stage for Arkansas to attract an elusive auto manufacturing plant, Gov. Asa Hutchinson said Wednesday.

Speaking to reporters at the Governor’s Mansion, the governor said the plant will be the country’s most advanced steel facility with a goal of zero carbon production by 2050.

It will process recycled steel into the kind of advanced steel used by the auto industry, which increases the state’s chance to attract a long-awaited major car or truck manufacturing plant. Arkansas has been chasing a major auto factory for nearly two decades.

“This puts us in a better position to say to the automobile industry, ‘Locate in Arkansas. Put your next manufacturing facility here. Look at the steel that we’re producing, how close you would be to this production of steel in our state,’” he said.

The governor said an auto manufacturer would potentially locate anywhere in Arkansas. It would want to have access to markets in Texas and both coasts and would need 1,000 acres or more.

The governor said the additional 900 jobs with an average salary of $100,000 will move Mississippi County into that position once the plant is in operation. The plant initially will have a $95 million payroll.

The plant expansion is the largest economic development project in the state’s history.

“Those are extraordinary numbers in terms of the size of the project, in terms of the economic impact, in terms of the opportunity to change so many lives with greater economic opportunities,” he said.

In addition to the 900 jobs directly created by the plant, the governor said 2.83 additional jobs per direct job will be created in the supply chain and in other ancillary jobs.

Arkansas Secretary of Commerce Mike Preston, who accompanied the governor at his press conference, said the company would like to start construction in the first quarter of 2022 and expects a two-year buildout. Incentive and clawback agreements still must be finalized, and the Public Service Commission still must review the company’s agreement with Entergy. The air permit is still in process.

The process began with a phone call from U.S. Steel President and CEO David Burritt in September involving the governor and U.S. Steel’s consultants. The governor learned the state had won the project during a Zoom conversation with Burritt last week.

Hutchinson said Mississippi County lost 9,000 jobs after Eaker Air Force Base was closed in 1992. He complimented former governors Bill Clinton for recruiting the county’s first steel plant owned by Nucor, and Mike Beebe for recruiting the Big River Steel plant in 2014. That $1.3 billion plant initially promised 525 jobs with an average wage of $75,000, but it since has grown past both numbers.

The Big River Steel plant was the first Arkansas manufacturing plant attracted by using incentives made available through Amendment 82, the state’s super project amendment. Voters passed that constitutional amendment in 2004 to authorize the state to issue general obligation bonds for major economic development projects approved by lawmakers.

U.S. Steel completed its acquisition of Big River Steel in January 2021.

Hutchinson praised Mississippi County for passing a one-cent economic development tax after the Air Force base’s closing. Those funds helped the county have the money it needed to support the state’s economic development efforts. The county has recovered 5,000 jobs through the steel industry and other areas. Twenty steel-related businesses in the county employ more than 3,600 workers. That’s about 1 in every 5 jobs in the county.

In an effort to ensure employees locate there, Hutchinson said the county is offering new U.S. Steel employees up to 10% of the cost of a new home, up to $50,000. He said the taxes paid by employees will go to the state of Arkansas wherever they live.

Arkansas won the plant expansion after a competitive process where the company applied for air permits in five states. It came down to Arkansas, Alabama and Mississippi. Hutchinson said that in one phone call involving Burritt, a partner who was with him said they physically were in Alabama.

Hutchinson and Preston said the county’s steel industry experience, workforce, access to the Mississippi River, interstate access, and partnership with Arkansas Northeastern College were all factors in the state’s landing of the plant. The college’s Steel Tech program prepares workers for a career in the industry.

But Hutchinson noted that Mississippi and Alabama also boast many of those features. The state’s incentive packages were a factor.

In a special session last year, the legislature approved the transfer of $50 million to the governor’s Quick Action Closing Fund for site infrastructure. Lawmakers also had to adapt recycling tax credits for the steel industry during the session. Those recycling tax credits will cost the state an average of $11 million a year for 14 years and $8.8 million a year if the state buys back the tax credits at a 20% discount.

There are a number of qualifiers for the tax credits to be utilized. The steel mill project must be located on the site of or adjacent to an existing qualified steel manufacturer; have a total investment of at least $2 billion; create 700 new direct positions with an average annual wage of $120,000; and create 200 new independent direct positions with an average annual wage of $60,000, according to the Arkansas Department of Finance and Administration.

The governor said the state “could never win this project” without those incentives.

“The fact is that Big River Steel would never have been there to begin with had we not had the incentive package and the legislature’s support of the Amendment 82 project,” Hutchinson said.

Preston said that according to some of the agency’s modeling, the state’s payback on its investments will come within the first five years, thanks in large part to the 2,000 construction jobs that will be created.

Most of the raw material used in the plant’s production will come from scrap, such as cars, Preston said. When the old Broadway Bridge connecting Little Rock and North Little Rock was demolished, the scrap metal was transported by barge to Big River Steel.

Hutchinson said it would be impossible to measure intangible benefits associated with landing the plant, such as the positive effects on the economy. He said Big River Steel repaid the state’s loan many years early. He said the state will contribute to national security by producing steel domestically.

“The fact that Arkansas is going to play such an integral role in American-produced steel is pretty exciting for the state,” he said.