West Virginia lawmakers have significant decisions ahead about millions of dollars in public support for a cutting-edge battery factory on the site of the old Weirton Steel mill.
A delegate whose district is right up on the edge of that Hancock County property, Pat McGeehan, is sounding alarms about whether the public investment is wise and whether the project’s private investors are a match with West Virginia. McGeehan was preparing letters pushing back on the project to send to Form Energy and to federal officials.
The delegate whose district encompasses the property, Mark Zatezalo, sees a historic opportunity. He was working on an op-ed for his local newspaper sharing a vision of the new battery plant as an anchor that could draw additional development and, when combined with the potential of natural gas development in the region, could bring on a new era of prosperity for the traditional steel community.
The divergent views signify the questions lawmakers will have to ask themselves when they consider the millions of dollars of allocation for Form Energy. What is the role of public dollars for private investors in a state long hungry for development?
Such decisions are not always slam dunks. In Virginia, Gov. Glenn Youngkin blocked a proposed battery plant, a joint venture between the Ford Motor Company and a Chinese company. Youngkin has expressed concern about the Chinese involvement and said his decision was best for taxpayers. The number of jobs was 2,500.
In West Virginia, the Form Energy company that develops long-storage, iron-air batteries, is backed by Breakthrough Energy Ventures, which includes billionaire investors like Bill Gates, Jeff Bezos and Richard Branson. The Weirton project is characterized as a $760 million endeavor.
When Gates visited West Virginia earlier this month with Senator Joe Manchin, the joint appearance made clear that Form Energy will benefit significantly from incentives under the federal Inflation Reduction Act, which lays out tax credits for battery storage and renewables for a decade.
There will also be plenty of state dollars.
In the splashy announcement for the battery plant and its 750 promised jobs, Gov. Jim Justice alluded to additional state funding necessary to firm up the project.
The governor described structuring a unique financial incentive package worth up to $290 million in “asset-based, performance financing to support their decision to locate in Weirton.”
The West Virginia Economic Development Authority voted to allocate $75 million toward the purchase of land and the construction of buildings in Weirton. And, Justice said, “I plan on working with the West Virginia Legislature and our federal partners to obtain an additional $215 million needed to finalize our agreement.”
The state Department of Economic Development specified to MetroNews that the state dollars will be in the form of a $105 million supplemental budget measure this year and a budget surplus item of $110 million next year. Budget surplus allocations may go into effect when the state’s general fund ends the fiscal year with revenue beyond what had been estimated.
The deal means West Virginia will own the building and land, and Form Energy will lease it back. The property would transfer to Form no sooner than five years and only if the company employs 750 workers. The deal calls for workers making at least $63,000 a year in average salary.
The Finance Committee chairs in the state Senate and House of Delegates seem receptive so far. A major factor is that West Virginia has millions of dollars in federal American Rescue Plan Act funds for investment. No allocation bill has run yet this legislative session to support the Form Energy deal.
West Virginia Development Secretary Mitch Carmichael says the Form Energy terms are tight and that the deal will pay off.
“It’s probably the most structurally sound, secure, collateralized investment that the state of West Virginia could possibly hope for in this transaction,” Carmichael said. “We will own the land and the buildings, and Form Energy will lease them back from us at market-based rates. It’s really a model for how transactions should be structured.
“It’s really a great transaction in the way it’s structured, the governor was thrilled with it, and I think the Legislature will be as well.”
The safety net, Carmichael said, is that however Form Energy winds up performing the state has possession of prime property. “In this transaction, we have it all. We have the security, the land, the buildings and the absolute commitment that unless they create 750 jobs they don’t get anything.”
Carmichael said he is excited about the project’s potential. “Not only does it revitalize an old steel mill, it transforms it into the next generation of products that America and the world need,” he said.
As lawmakers consider whether the public funds are worthwhile, they should push for clarity on what’s expected, said Kelly Allen, executive director for the West Virginia Center on Budget & Policy think tank.
“As lawmakers consider any corporate subsidy packages, they should ensure there are strong local hiring provisions and robust reporting requirements,” Allen said.
“West Virginia officials have been handing out a lot of taxpayer dollars to big corporations in recent years, and after the ribbon cuttings there isn’t much in the way of accountability. Taxpayers deserve to know if the promised jobs and economic growth materializes before footing more of these bills.”
Delegate McGeehan, R-Hancock, is wary of the deal.
“We’ve seen these kind of promises made by politicians in Charleston in the past, the not too distant past. They don’t have the best track record. I just want to express caution,” said McGeehan, vice-chairman of the House Government Organization Committee and a former Air Force intelligence officer.
One of his concerns is the structure of Breakthrough Energy Ventures, a group of investors aiming to accelerate innovation in sustainable energy and other technologies to reduce greenhouse gas emissions. One of those is Prince Alwaleed bin Talal of Saudi Arabia, a billionaire who is the second largest investor in Twitter.
McGeehan sent a letter to the U.S. Department of Justice’s Foreign Investment Review Section asking for help with due diligence.
“Because of the Saudi regime’s reputation for support of transnational terrorism and its dismal record of persistent human rights abuses, this apparent financial backing ought to provide pause,” he wrote.
“At minimum, such revelations entail a more comprehensive understanding of Form Energy’s financial investors, especially in connection with any other foreign regimes that may have substantial financial interests within Form Energy’s portfolio.”
McGeehan also wants to know whether any investors are associated with the Chinese government.
More broadly, McGeehan isn’t sure the enterprise is a match for Hancock County.
“This is quite different from a traditional, longstanding steel mill,” he said. “This is not only a startup, but it’s financed by foreign investors. That risk, along with the ideology this startup company seems to be imposing through its corporate values is a red flag.
“We need to be very cautious about this. We need to understand who their investors are, what their agenda is. I’m just urging a little bit of caution.”
Delegate Zatezalo, also R-Hancock, sees enormous potential. He wrote an op-ed for his hometown newspaper headlined, “Weirton should be lining up at the starting blocks.”
“I’ve never been a person prone to hyperbole, and I don’t think I’m exaggerating in any way to say everything’s coming up Weirton,” wrote Zatezalo, vice chairman of the House Energy and Manufacturing Committee and a trained hydrogeologist.
Form Energy’s development of 55 acres on the old Weirton Steel mill site will likely encourage development on the full 1,300-acre property strategically situated near river transportation, Zatezalo suggested. That combined with the region’s potential for natural gas development could bring on a new wave of opportunity, he said.
“There is no question a benefit coming to the state of West Virginia for this type of economic activity,” Zatezalo said from his office at the Capitol. “I see it as the tip of the iceberg because it is a plant that is looking at green energy, but we also have more natural gas than most people would ever expect.
“The potential for manufacturing using energy that we have sitting in our backyard is immense. We’re going to use 55 acres, get this started and see. That leaves over 1,200 acres of ground that is pretty much ready for development. There are flexible things you can do because have the natural gas. It is worthy of funding without question because the payoff down the road is liable to be rather large.”