Louisiana missed out on the nearly $4.2 billion prize that was the ThyssenKrupp steel mill, but regional economists say coming in second could help land another big employer.
It’s not like losing the Super Bowl one season and being expected to win the next season, says Rick Harper, director of the University of West Florida’s Haas Center for Business Research & Economic Development.
Harper says the state raised the profile of the industrial site in St. James Parish near Convent. “This is an ongoing process,” he says. “And the number of sites in existence in the Southeast that can support this kind of project is limited.”
Because the industrial site was a finalist for the steel mill, industrial developers know it must meet a number of criteria, such as zoning, proximity to a good workforce and rail access. “Sites that are well-prepared eventually get used,” Harper says.
One promising sign is that the Mobile County, Ala., site where Thyssen-Krupp plans to build was a bridesmaid for several major projects, including a steel mill now under construction in Mississippi and a Kia Motors plant that will be built in Georgia.
At a news conference to talk about ThyssenKrupp’s decision, Gov. Kathleen Blanco said at least five companies have inquired about the site since it was announced that Convent was a finalist for the project. “We haven’t lost, we have gained opportunity,” Louisiana Economic Development Director Mike Olivier says.
Blanco says making the final round of the ThyssenKrupp sweepstakes shows that Louisiana has moved from a “marginal player to a worldwide economic development player.”
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LSU economist Loren Scott says the state has been getting a number of economic development projects, such as the Union Tank Car plant now open near Alexandria, the Steelscape manufacturing plant at the Port of Shreveport-Bossier and the Shintech plant under construction south of Plaquemine.
“It’s not like we’re striking out,” says Scott, who was not involved in the effort to recruit ThyssenKrupp. “We’re doing better than Arkansas, which is hardly winning anything.”
Scott says companies are still looking at Louisiana, and there’s the possibility of a new oil refinery. Blanco met with Kuwaiti officials in the fall to discuss building the $8 billion to $10 billion project, which would be the first new refinery built in the United States since Marathon Oil opened its Garyville facility in 1975. Energy analysts say the new refinery is a long shot because of the tremendous costs involved and the length of time it takes to get a permit.
“There are a lot of balls in the air right now,” Scott says. “There may not be another thing as large as this development (ThyssenKrupp) because they don’t come along very often.”
Getting ThyssenKrupp was another coup for Alabama economic development officials who have had a lot of success in bringing in major employers. The Alabama Development Office has been named the nation’s top economic development agency twice in the past three years by Site Selection magazine. And the state is home to a number of manufacturing plants operated by a who’s who of international businesses: Mercedes Benz, Hyundai, Honda, Toyota and EADS.
Mark Arend, editor of Site Selection, says while each attempt at industrial recruitment is unique, having major companies in place helps attract more businesses. That’s because the companies see that suppliers are in place and the labor force exists.
By all accounts, the main factor that drove ThyssenKrupp to Alabama was the utility costs. An official with the Public Service Commission says electricity costs for the steel mill would have been $5 million more a month in Louisiana than in Alabama. “In a sense, the biggest factor was that they generate electricity in Alabama from burning coal, and we generate it in Louisiana from natural gas,” Scott says. “That steel mill is such a prodigious user of electricity and our costs are so much higher, it was too much to overcome.”
If electricity costs were truly the deciding factor in the site selection, it seems Louisiana will continue to face problems. Any new project would likely consider power costs at some point in site selection. While Blanco and Olivier lauded Entergy for its help in trying to land ThyssenKrupp, Public Service Commissioner Foster Campbell had far less flattering things to say. “We have to fix it,” he says. “You might not worry about the next project. What about the companies here you’re going to lose?”
Campbell contends that he and fellow commissioner Jimmy Field are the only two PSC members willing to pressure Entergy into lowering rates, a move the company is unwilling to make. “It’s hurting the state,” Campbell says. “What it’s doing is making us uncompetitive.”
There is some relief expected. In 2001 the PSC brought a case against Entergy before the Federal Energy Regulatory Commission. The Federal Commission ruled in 2005 that Entergy had to bring the production costs portion of its rates in Louisiana more in line with what it was charging in Arkansas.
Entergy successfully had the implementation delayed for two years. The equalized payments begin in June. “It should be real substantial relief for industrial customers,” says Michael Fontham, a New Orleans attorney who led the case for the PSC.
Business Report staff writer Seth Fox contributed to this report.
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