Iowa will get a second huge new fertilizer plant, with each one hitting a new record for capital investment. The latest announcement came on November 1 when CF Industries said it will build a $1.7 billion fertilizer manufacturing facility near Sioux City in northwest Iowa, making it the single largest capital investment ever in Iowa.
In September, Orascom Construction announced its Iowa Fertilizer Company will build a plant in Lee County in the southeast corner of the state. When the Iowa Fertilizer Company plant was announced, it was declared to be the largest capital investment ever in the state. State officials say the plants will replace imported fertilizer and meet increasing demand from corn farmers.
"It seems like yesterday when we were saying something similar and welcoming a $1.4 billion project in Lee County," said Iowa Gov. Terry Branstad, announcing the CF Industries project at a press conference in Sioux City. Branstad and Lt. Gov. Kim Reynolds were on hand, along with CF's CEO Stephen Wilson and other state and local leaders.
CF Industries project will receive economic incentive package from state of Iowa
The CF Industries project is expected to receive a much smaller incentive package from the state of Iowa than that awarded to Iowa Fertilizer Co., which attracted a firestorm of criticism for the tax breaks and other economic incentives it was awarded by the state to get Orascom to build it in Iowa. Still, the Sioux City project is drawing criticism. "These deals were going to happen in Iowa," says state Sen. Joe Bolkcom, D-Iowa City. "The question is, what level of incentive is needed? In both cases, I think the state of Iowa has spent tens of millions of dollars more than we needed to."
The Iowa Economic Development Authority or IEDA board held a special meeting to take action to award direct financial assistance and tax credits to CF Industries for an expansion of its existing fertilizer manufacturing operation in Woodbury County, just south of Sioux City along the Missouri River at Port Neal.
$1.7 billion project now the single largest capital investment in Iowa history
The Port Neal project will add new state-of-the-art ammonia and granular urea production units to meet customer demand. The project will supplement existing production of ammonia and urea ammonia nitrate or UAN. The CF Industries project will have a total capital investment of $1.7 billion and will create 100 new jobs with a qualifying wage of $20.12 per hour, say company officials.~~~PAGE_BREAK_HERE~~~
"This is another great announcement for Iowa, and we are proud that CF Industries has chosen Iowa for its $1.7 billion expansion," said Branstad. "Our state is clearly well-positioned to take advantage of the growing domestic fertilizer industry. Not only does that mean significant investment that will continue to grow our economy, but also the creation of high-paying jobs for Iowans."
The IEDA board on November 1 awarded the project $1.5 million in direct assistance and tax credits in the total amount of $22 million. The tax credit award is made up of $13 million in sales tax refunds paid during construction and $9 million in investment tax credits or ITC. The board will also consider future amendments to the award to allocate an additional $12 million in ITC in each of the next four fiscal years (FY13-FY16) for a potential total ITC award of $57 million. That potentially pushes Iowa's total incentives for the project to $71.5 million.
CF Industries is a global leader in fertilizer manufacturing and distribution
"It is rewarding to watch existing companies continue to make investments in Iowa. With today's announcement that a company with current operations in Iowa will make a capital investment of nearly $2 billion, it is obvious that we are on the right track to reaching our goals of creating jobs and increasing wealth for Iowans," said Lt. Gov. Kim Reynolds. "Since January 2011, the IEDA has projects under contract that will result in $5.23 billion of capital investment in our state."
CF Industries is a global leader in fertilizer manufacturing and distribution, the second largest nitrogen fertilizer producer in the world and the third largest phosphate fertilizer producer among public companies. CF Industries owns and operates world-scale nitrogen and phosphate plants and serves agricultural and industrial customers through its best-in-class distribution system. The company headquarters is in Deerfield, Ill.
"CF Industries is proud of its long history of serving Iowa farmers and we are pleased to increase our manufacturing presence in Iowa in a major way," said Wilson, who is chairman and chief executive officer of CF Industries Holdings, Inc. In 2010, CF Industries acquired Terra Industries Inc., positioning the company as a nitrogen bellwether in the global fertilizer industry and the premier nitrogen and phosphate manufacturer in North America. In addition to its Port Neal facility, the company operates terminals at Spencer in northwest Iowa and Garner in north-central Iowa.
CEO says CF Industries asked for state economic incentives that are fair and reasonable
Wilson, CF Industries' chief executive, said they asked for state economic incentives that the company thought were fair and available under the law. "No more, no less than that," he said.~~~PAGE_BREAK_HERE~~~
In September, Iowa Gov. Branstad and other state leaders boosted incentives for Orascom to nearly $200 million and agreed the company could come back to the state for $25 million in tax credits annually over the next two years. That pushed the total package for the Iowa Fertilizer Company's Lee County project up to $250 million. The state said the incentives were necessary as Iowa bid against Illinois to get the project.
Debbie Durham, director of the Iowa Department of Economic Development, says the CF project's incentives were less than the Iowa Fertilizer Company's incentives because CF is already in the state and its markets may be different than Orascom's. Altogether, CF Industries can come back to the state to collect nearly $100 million in tax credits over the next four years.
Branstad and Durham both defended offering future tax credits, saying they hope Iowa leaders reduce corporate taxes and lessen the amount the companies will seek in the future. "We normally don't get projects of this size in Iowa," said Durham. She said CF Industries has agreed to reduce its request for additional tax credits if state leaders reduce corporate income tax rates for all companies. Branstad cites these projects to push for corporate and property tax reform to make Iowa more competitive in attracting new jobs and investment.
Tight domestic supplies of nitrogen are driving investment in plants in the U.S.
Tight supplies of nitrogen produced in the U.S. are the reason companies want to expand nitrogen manufacturing facilities here, says Durham. About 50% of the nitrogen fertilizer used in the U.S. is imported. Low natural gas prices (natural gas makes up about 70% of the cost of producing nitrogen) are boosting the earnings of nitrogen producers.
Wilson says projects like CF Industries and Orascom's will displace that imported product. "We're in the heart of the best fertilizer market in the world here in the U.S. Corn Belt," he says. CF Industries, the world's second-largest producer of nitrogen, announced in August it would invest $2 billion through 2016 to increase nitrogen production. Most of that production is expected to come online in 2016.
The Iowa Farm Bureau estimates the Orascom project will save farmers in Iowa an estimated $740 million annually, primarily because of lower transportation costs and added competition as more of the fertilizer nitrogen is manufactured in the state.