LITTLE ROCK — Officials with established steel operations in northeastern Arkansas told lawmakers Monday that a proposed new $1.1 billion new mill in their back yard built with million of dollars in state incentives would be bad for business for a company already pressed by subsidized steel from China.
Representatives from Nucor Steel Arkansas urged lawmakers to oppose incentives for the proposed Big River Steel, which wants the Legislature to approve a $125 million bond issue to close a deal that officials say would bring 2,000 during construction and more than 500 permanent jobs with salaries averaging $75,000 annually.
"We’ve shared our concerns with many of you that the global steel market is over saturated," Nucor Vice President Sam Commella told a joint meeting of the Senate and House agriculture and economic development committees.
Another steel mill could reduce the labor force pool in northeastern Arkansas and his company might be forced to drop production and move employees to mills in other states, Commella said, adding that this company may have to scrap a planned $138 million upgrade if the Bill River Steel project is approved.
Nucor has about 1,600 employees at operations near where the new steel mill would be built.
"This is not at all intended to be a threat, it’s just a statement of the circumstances," he said.
Commella’s comments occurred near the end of a five-hour meeting called for lawmakers to discuss two independent reports on the economic benefits of the proposed Big River Steel plant, which is contingent upon adopted the bond issue under provisions of Amendment 82, the so-called superproject amendment.
Representatives from the two firms that conducted the studies — IHS Global Insights and Regional Economic Models Inc. — told lawmakers Monday that the project is risky and those risks are based on a number of economic variables, including the possibility that there might be another downturn in the economy.
Scott Nystrom, an economist with REMI, and Phil Hopkins, director with IHS, both predicted growth in the nation’s economy and said they expect the demand for steel to increase.
"Even if the worst scenario comes out of this," Nystrom said, "there is a net positive effect for the state."
Hopkins told lawmakers he didn’t like being vague, but there were too many variable to know for sure.
"It’s no slam dunk and it’s no guarantee," he said. "It could be a little positive, it could be a little negative."
Both consulting firms questioned the cost of a corporate tax credit the new steel mill would receive for recycling materials. The credit, which would cover 30 percent of the cost of the equipment and installation, would amount to about $216 million over 14 years.
Without the incentive, the benefits to the state would be much higher, they said.
Arkansas Economic Development Director Grant Tennille told lawmakers that if the state does pay the $216 million to Big River Steel over 14 years it means that the plant "has been wildly successful, is employing a lot of people, is selling a lot of steel and it’s got large corporate income liabilities in the state of Arkansas."
Nystrom told lawmakers that while the state might not re-coop all of its investment, the Arkansas economy would benefit from the additional jobs, additional industries related to the steel mill and additional general revenue."
Donna Reams, a contractor coordinator with Nucor, spoke against the project, saying she did not think it was fair for the state to use tax dollars to help another steel mill get a foot hold.
"Think … about the long-term consequences it will have on Mississippi County and Arkansas if our hard earned tax dollars are used to fund Big River Steele," she said.
During the meeting, Commella also said that China’s steel production, which is state-supported, has grown from about 100 million tons in 2000 to more than 600 million tons a year and steel mills continue to be built there.
"The oversupply situation is here for the long haul," Commella said "As we’ve said before, we’re not afraid to compete against another private company. Unfortunately, everyday we’re competing against Chinese-owned state enterprises, and quite honestly we’re not interested in competing against the state of Arkansas."
Officials with Big River Steel also attended the meeting and spoke positively about their project and how successful it would be to the state’s economy.
CEO John Correnti and Dave Stickler, who is part of project’s development team, urged lawmakers to support the deal, saying the steel produced by Big River Steel would not compete against Nucor steel because it would be geared for automobiles and the gas and oil industry.
Sen. David Burnett, D-Osceola, asked Correnti if Big River Steel and Nucor could get along together in Mississippi County.
"I can live with them, but I don’t know if they can live with me," he said.
Lawmakers were told they should be receiving a copy of the proposal in bill form this week.