Proposed Big River Steel Mill Gives Community ‘Reason to Exist'

Anyone seeking a site for a steel mill has to answer three main questions, said John Correnti, the Blytheville-based steel mill impresario:

One, where’s the market — that is, who’s going to buy the product and where are those customers located? (“If your customers are all in Asia, you certainly wouldn’t be putting a mill in Arkansas.”) Two, what’s the cost of the input, the raw material that feeds the mill? Three — and this is a big one — how reliable and cheap is the electricity available to operate the mill?

The answers led Correnti and the investors in his Big River Steel LLC to 1,140 acres in Mississippi County. It is the “largest available industrial site on the lower Mississippi River,” as Clif Chitwood, the county’s economic developer, touts on, the website devoted to luring industrial prospects to the region.

It took Correnti and Arkansas economic development officials about a year to put together the deal for a $1.1 billion “mini-mill” to be built near Osceola, a plant that would employ 525 people earning an average yearly compensation of $75,000 apiece. It’s a deal that Gov. Mike Beebe called the “largest economic development deal in the state’s history.” It’s a deal that hinges on legislative approval of $125 million in state-backed bonds to pay for incentives the developers call essential to locating the project in Arkansas — no financing, no plant.

What follows is a narrative not so much of how the agreement came together over the course of a year, but why it came together, gleaned from interviews with state economic development officials, Correnti and representatives of Entergy Arkansas, which would provide the power to run the mill.

The takeaway? Entergy’s cooperation in the deal was crucial, and if rural communities in Arkansas don’t attract industries like steel mills, their reason to even exist eventually crumbles to dust.

Give Santa Claus a Break

“You have to have a philosophical turn of mind that allows you to accept that the normal thing that happens at the end of a project is that it goes somewhere else,” Chitwood told Arkansas Business.

“Success is hard won and certainly not something someone should ever feel entitled to,” he added by way of criticism of complaints from economic development officials in Mississippi angered by Big River’s decision to reject that state in favor of Arkansas.

Chitwood has that turn of mind, which is fortunate because he — and Arkansas — has experienced a fair amount of rejection in the pursuit of industrial prospects and “super projects”.

And he has no patience with his counterparts in other states who complain about being “jilted” by Correnti. Among Correnti’s “empty promises,” as the Jan. 5 issue of the Dispatch of Columbus, Miss., termed them:

• A silicon metals facility that Correnti planned for Lowndes County, Miss., and which would have employed more than 900 workers. The silicon plant would have produced material for solar power panels.

• A $175 million rebar plant in Amory, Miss. Ground was broken for the plant in 2008, but Correnti and partners never came up with the necessary funding.

Events largely out of Correnti’s control doomed those projects, Chitwood said, citing the housing bust, the subsequent recession and the failure by the federal government to support the alternative energy industry. And disappointed Mississippians have short memories, neglecting to credit Correnti for the $650 million steel mill he started in Lowndes County, Chitwood said. That Severstal plant now employs about 700.

“He brought them one great steel mill down there. That’s what I cannot understand. A success like he brought them with Severstal, those are once-in-a-lifetime things,” Chitwood said. “If Santa Claus brings you a bag of toys but forgets the licorice stick, maybe you could cut him a break,” he said, laughing.

Grant Tennille and his team at the Arkansas Economic Development Commission said they had read the stories about Correnti’s failures but decided to focus on his track record starting the kind of businesses he’s proposing for Arkansas: steel mills.

Regarding the silicon and rebar projects, “in neither case were any deals struck for state incentives. No state money was ever paid to anybody. No deals ever closed,” said Tennille, executive director of the AEDC. The economic downturn scuttled those projects, he said.

“We looked at those things and we understood what had happened and obviously it made us cautious,” Tennille said. “But one of the things we kept falling back on is that every time this guy has built a steel mill, he’s built the steel mill and it’s operated. And in every case, they’re still operating.”

Correnti is a deal maker, Tennille said, and some of those deals have been better than others. “But if we’re going to be partners with somebody who’s going to build a steel mill, he may be the best one in the whole world.”

Tennille has also emphasized the safeguards the state has sought to build into the deal, which calls for Arkansas to issue general obligation bonds to fund a $50 million loan to Big River, $70 million to prepare the site and $5 million for bond insurance.

And he emphasized the deep pockets of the investors, particularly the Koch brothers, whose Koch Industries of Wichita, Kan., has annual revenue of about $115 billion, making it one of the largest private companies in the United States.

In addition, Correnti is a known quantity in Arkansas. He maintains a home in Blytheville and once led Nucor Inc., which has two steel facilities in Mississippi County. “I’ve got a lot of comfort with Osceola because of my history there,” Correnti said.

‘Steel Mill Heaven’

Correnti has called the site of the proposed mill “steel mill heaven” because of its proximity to methods of transportation: the Mississippi River, the Burlington Northern Santa Fe railroad and Interstate 55.

The site is also near a 500-kilovolt Entergy Arkansas transmission line. And while Correnti placed the availability of electricity in his top tier of must-haves for a steel mill, Chitwood went further.

Entergy’s role “was absolutely crucial because in this type of steel mill, it’s like real estate: location, location, location,” he said. “At the end of the day: the price of electricity, the price of electricity, the price of electricity.”

Tennille echoed Chitwood’s assessment of the importance of Entergy’s cooperation. He noted that because Mississippi had bested Arkansas in 2005 in its competition for what became the Severstal mill, getting Entergy on board was vital.

“Because of that, the very first thing [the Big River developers] said to us when they called was ‘We want to try it again, but we’ve got to be able to reach agreement with Entergy or we can’t go any further.’”

Mississippi state Sen. Terry Brown told one news outlet this month: “I want to congratulate Arkansas for being able to get the big steel mill. Our incentive package was as good or maybe a little better than Arkansas’. The only problem was that we couldn’t get a [competitive] power rate through TVA [Tennessee Valley Authority]. Entergy Arkansas did a better power rate.”

Hugh McDonald, CEO of Entergy Arkansas, told Arkansas Business that a confidentiality agreement prevented him from disclosing how much energy the Big River mill would use once it’s fully operational, as well as the rates Entergy will charge the enterprise.

He said that Entergy had plenty of capacity to serve the plant, and, when asked whether Arkansas ratepayers might end up subsidizing the cost of the steel plant’s electricity, McDonald said: “This will be a special rate contract. We’ve had many special rate contracts historically. Our goal is to make sure that while commercial customers have affordable rates, the other ratepayers aren’t impacted.”

Entergy will be required to file a special rate contract with the Arkansas Public Service Commission, which McDonald said would likely occur in early March.

‘A Transformative Event’

Chitwood said the Big River plant was great news for Mississippi County just as Nucor’s decision to locate plants there had been. “Nucor was a transformative event when they came to Mississippi County in the late ‘80s and early ‘90s,” he said.

“At that time we were just about to lose the Air Force base at Blytheville. Our textile industry, which had kept thousands of our lower skilled workers gainfully employed, was just about to all vanish to the Far East. …

“I can’t imagine what this county would be like if Nucor hadn’t come. I mean, yes, we have lost population, but most rural counties have. I think without Nucor we would have been looking at devastatingly dramatic losses of population, because we would have had no reason to exist.

“That’s one of the things that I have said for years in talks to civic clubs is that every community in Arkansas — except Little Rock, which was founded as the seat of government — was founded for a reason that is now obsolete. Cotton towns, river towns, lumber towns, coal towns, market centers — none of that counts anymore. You can buy everything you want over the Internet. You don’t have to come down out of the hills to Harrison or Mountain Home. Everything is different.”

Communities like those in Mississippi County that demonstrate a willingness to fund economic development and reinvent themselves — “those communities have a chance to survive.”