Illinois, Iowa wait for decision on $1.2 billion fertilizer plant

CHAMPAIGN – The company that wants to build a $1.2 billion fertilizer plant in either northern Iowa or eastern Illinois has offers of incentives from both states and plans to choose a site in 30 to 60 days.

Gov. Pat Quinn signed economic legislation Thursday that includes incentives to try to convince Cronus Chemical LLC to build in the state.

Now, all there is left to do is wait.

“That’s exactly what we’re doing,” Brian Moody, executive director of Tuscola Economic Development Inc., said after Quinn signed the legislation. “This was the last major box that we had to check locally.”

Cronus plans to choose between a site just outside Tuscola and one in Mitchell County, Iowa, to build a nitrogen fertilizer plant that would employ about 150 people and create more than 1,500 short-term construction jobs.

The proposal is one of at least 20 similar plans to either build massive fertilizer plants or expand existing facilities across North America, driven by newly abundant and cheap supplies of natural gas being turned up by hydraulic fracturing. Natural gas is a key component in many fertilizers and high prices drove a lot of fertilizer production out of North America a decade or more ago.

David Lundy, a spokesman for Cronus Chemical, said the company is now trying to figure out which site makes sense.

“We’re trying to establish costs and work through some questions with contractors,” he said. “That’s a fairly time-intensive, laborious process.”

The details of Illinois’ offer haven’t been made public, but the Champaign News-Gazette reported it’s worth about $30 million. Moody wouldn’t discuss details, but says the offer includes things like road and highway improvements around the plant, as well as more traditional tax breaks.

The dollar figure on Iowa’s, while also not made public, has been estimated at about $35 million in news reports. Economic development officials in Mitchell County didn’t return calls on Friday, and in the past have declined to discuss details.

Iowa was chosen over Illinois last year for the construction of a $1.8 billion fertilizer plant. Gov. Terry Branstad has been criticized for about $82.5 million in state tax credits promised to Egypt-based Orascom for the plant in far southeast Iowa.

Illinois has found itself offering large tax-break packages in the past years to companies who have threatened to leave the state. Those tax breaks were defensive moves, often seen as products of the state’s poor fiscal condition and competition from other states that sensed Illinois companies might be lured away.

But incentives are, unfortunately, just part of doing business, University of Illinois economist Fred Giertz said.

“In an ideal situation, you’d hope it wasn’t necessary to do this, that the states would just compete on the advantages of their location,” he said.

Giertz added that money for things such as highway improvements might benefit more than just one company, and make more sense than pure tax cuts.

There are no guarantees that each of the country’s planned fertilizer plants will be built. One by Canadian firm Agrium Inc., was put on hold in June.

Sometimes, Moody said, big industrial projects often run into hurdles they can’t clear. Tuscola was tantalizingly close to drawing a major energy production facility just a few years ago, which was killed by the economic downturn.

“We had basically scheduled the announcement, and the project didn’t happen,” he said.

But Lundy says Cronus hasn’t run into any obstacles yet, and Moody says he believes it will happen – whether in Illinois or Iowa.

“My sense is, this time, just with working with Cronus, they absolutely intend to drive through on this project,” Moody said.

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