DowDuPont plant’s closure felt around the region

Source: By Dan Mika Staff, Ames Tribune • Posted: Tuesday, November 28, 2017

DowDuPont’s $225 million cellulosic ethanol plant remains mostly empty weeks after the chemicals giant shut down the plant. The company’s departure from the region was sudden and swift, but the long-term implications reach across the region, from the bottom lines of farmers hoping to diversify their income to the Nevada city budget.

Stover contracts

The Tribune previously reported DowDuPont had contracted with about 500 farmers in the region to provide 275,000 tons of stover, the crop material left over from a harvest that is used to produce cellulosic ethanol.

However, the company halted collection in 2016 after reaching full capacity in its storage.

Andy Moser, the owner of a baling company in Nevada, had a contract with DowDuPont to run a baling crew. He said his net pay was around $12,000 per baler crew for three months of work per year.

One year, he had about 15 employees working part-time and was able to pay them about $5,000 each per year.

“That was awesome for them, because that’s money for Christmas,” he said. “They can spend all that money on Christmas. It worked out slick.”

Moser said he has other revenue streams to keep him afloat, but he knows of other local balers and out-of-state crews that focused solely on getting bales to the plant and now must figure out another way to make money.

“The timing was not very good,” he said. “Either before harvest or after harvest would have been okay, but not right in the middle of it… if they would have pulled the pin beforehand, they could have planned better.”

Brian Sampson, a Nevada farmer, also had a contract to provide stover for the plant. He estimated the stover contract was worth about 10 to 15 percent of his revenue two years ago, the last time the plant collected stover.

Initially, Sampson was hopeful on selling his stover to the plant, viewing it as another revenue stream for his operation.

“I was very confident, optimistic, looked forward to it,” he said. “We weren’t going to get rich off of selling stover, but it was just another added little thing we were going to take advantage of.”

Sampson said he’s diversified his production between corn, soybeans and cattle, so he isn’t suddenly rushing to find a new buyer for his stover.

But without the plant’s demand for stover, local farmers had less of an incentive to farm corn in back-to-back seasons, a process that reduces farmer tilling time, keeps more nutrients in the ground and reduces soil erosion.

“Adding money in my pocket, that wasn’t a big thing,” Sampson said. “But I thought it was a good value-added thing in our area, and I’m disappointed in it not working.”

Tax abatements

State and local officials pledged a total of nearly $15 million to the project in 2010, according to documents from the Iowa Economic Development Authority. The state agency granted DowDuPont a $5 million forgivable loan and $586,000 in job training funds back when Dow and DuPont hadn’t begun merger discussions.

The city offered $8.6 million in tax abatements over 10 years as a match to state support, with a 75 percent abatement in the first year, 60 percent in the second and 50 percent abatement until the tenth year of operation.

According to property records, the plant’s net tax bill before local abatements is just over $1.3 million a year since the assessor started levying taxes in 2014.

Nevada mayor-elect Brett Barker, who was on the Nevada City Council when it approved the abatements, said the deal was written so DowDuPont would pay the full property tax bill and receive the abatement as a payment from the city.

He said the city is consulting with its lawyers to determine if DowDuPont’s closure violates a job creation clause or another agreement that would make the company ineligible for ongoing abatements.

“It was structured in that way for the city to avoid potential risk, and that’s a good thing now we’re looking back at it, too,” he said.

Displaced workforce

It’s unclear exactly how many DowDuPont employees lived in Nevada or surrounding towns, but about 90 people lost their jobs when the plant closed. A skeleton crew was retained to maintain the plant while the company searches for a buyer.

LaVon Schiltz, executive director of the Nevada Economic Development Council, said affected employees are being paid through the rest of the year. She said her group and the Ames Chamber of Commerce intend to host a job fair to help those employees find work in the region’s existing industry, along with a Nevada-specific job fair.

“Everyone’s looking for help, of course now, and there just aren’t enough people to go around,” she said.

Schiltz said those job fairs will be hosted sometime after the holiday season.

Economic development approach

ISU economist David Swenson said the state and local financial support offered to the plant was outsized compared to the natural advantages Story County has for an ethanol plant.

The area has thousands of farm acreage producing stover each year, and the intersection of U.S. Highway 30 and Interstate 35 gave DowDuPont and its contractors easier access in getting stover from the farm to the plant.

That raises questions for Swenson, as economic development is more often used as a tool to entice companies into an area that has a disadvantage relative to other areas.

“If the place where cellulosic ethanol on paper made the most sense to be, to be the most profitable, is Iowa, then why would you underwrite its development?” he said. “Why would you underwrite its risk if you had to be there?”

While Nevada is somewhat protected from a revenue hit, Swenson said the city and the region at large lose the short-term benefits from the secondary economic activity generated by employees spending money in the area. The long-term effects depend on whether DowDuPont finds a buyer for the plant. If not, Swenson said Nevada will have to deal with a white elephant investment sitting at the edge of town.

Schiltz said she is still confident someone will come forward to buy the plant in the coming months and rehire some of the DowDuPont employees.

But the plant’s closure hasn’t made her reconsider her approach towards economic development projects for the city.

“Nothing is guaranteed in life,” she said. “The United States wouldn’t be the country it is if everyone that did everything was guaranteed to be successful on the first time around.”