Members of the House Finance Committee are set to consider a $105 million supplemental appropriation to support Form Energy, which is on deck to build a cutting-edge battery plant in the northern panhandle.
The House Finance Committee’s agenda for Monday includes House Bill 2882, which calls for a directed transfer to the state Economic Development Project Fund.
That’s a key piece of the financial structure for the Form Energy deal announced by Gov. Jim Justice just before Christmas. Form Energy is putting up at least $350 million of private dollars to get the project off the ground at the site of the old Weirton Steel in Hancock County.
The total public support by the State of West Virginia for the project is $290 million, including the piece under consideration Monday. Lawmakers are beginning their discussion about whether that is a good investment by the state in a project promising at least 750 well-paying jobs with an energy-transition manufacturer.
Delegate Pat McGeehan, a Republican whose district borders the proposed location of the plant, has been questioning the project for weeks. He plans to continue doing so as the state’s portion of funding now goes before committee.
“That’s a substantial amount of money from the taxpayers, and I think we really need to hit the pause button because there’s some concerning questions that really need to be answered before we commit the public treasury toward this enterprise,” McGeehan said.
Many of his questions are focused on a study modeling the potential economic impact of the plant. The study used data provided by the state Development Office and estimated direct and indirect economic effects.
By 2025, the report suggests, 178 workers could be making combined earnings of $33 million, which would be about $185,000 per job.
By 2029, with the 750 jobs promised, total employee compensation is forecast to be $451 million. That’s $601,000 per job.
At that stage, the plant and its suppliers are expected to generate about $57.2 million in state and local tax revenue.
McGeehan wants to know more about those conclusions, their underlying assumptions and whether the findings are at all realistic.
Development Secretary Mitch Carmichael outlined each piece of the state’s support on Friday before a different Finance Committee, this one in the state Senate.
During a long Senate Finance budget hearing about a variety of government spending issues, Senator Mike Oliverio, R-Monongalia, asked for a breakdown of that money.
“So it’s a three-step process where $75 million has already gone out the door. Then $105 million and then if all the goals are met at the end, another $110 million?” Oliverio asked.
Carmichael acknowledged that’s the case.
The West Virginia Economic Development Authority voted to allocate $75 million toward the purchase of land and the construction of buildings in Weirton. Another $215 million in allocations by the Legislature are also anticipated for the project.
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.
Form Energy, the developer, would spend at least $350 million of its own money.
West Virginia lawmakers still have to make decisions about the supplemental and surplus spending measures that would account for the bulk of the state dollars going toward the project.
“For contextualization,” Carmichael told senators, “we did $315 million for Nucor (Steel) with no collateral, we did $75 million for Commercial Metals with no collateral, we’ve done Berkshire Hathaway with no collateral.
“I just want to make sure we’re all understanding this transaction because it’s getting a lot of shade thrown at it, and it shouldn’t because it’s performance-based and we require the performance before the asset is transferred. And until then, they’re paying us market-based lease rates.”
Carmichael compared the deal to the state considering a tenant wanting to lease a 900,000 square feet and creating 750 jobs. “Do we want to do it?” he asked, pausing and shrugging his shoulders for effect.
Senator Randy Smith asked if the jobs goal is the main promise by the company. “They have to reach the benchmark of just 750 employees. Is that all?” asked Smith, R-Tucker.
No, Carmichael said, citing the additional requirement for Form Energy to spend $350 million itself. “And they have to have sold their product in the marketplace. In other words, we require them to show us valid customer contracts for their products.”
Form Energy expects to start construction of its Weirton factory in 2023 and begin manufacturing iron-air battery systems in 2024 for broad commercialization.
The company’s battery technology operates through a “reversible rusting” process. The battery breathes in oxygen from the air and converts iron metal to rust. When the battery charges, the reverse happens. An electrical current converts the rust back to iron, and the battery breathes out oxygen.
“It fits a new need in the market, an emergent need in the market,” chief executive Mateo Jaramillo said on MetroNews’ “Talkline.”
“We’re really in the middle of a very broad transition in the energy sector and we’re providing a brand new solution to that.”
Jaramillo, in the “Talkline” interview, addressed the use of public dollars to support the project.
“The monies that would come from the State of West Virginia are really for the site itself. That site, the historic steel works in Weirton, as we know it’s been decades since it’s been an actively used industrial facility, and as a result it does take a considerable amount of money to make it shine again. It’s kind of a diamond in the rough right now.
“The state has been extremely diligent with us and put us through a very rigorous process, and I think we’ve come to a deal that makes a lot of sense for all parties involved to really protect the state. If we deliver the jobs, the 750 well-paying jobs that we’ve committed to then we get the money. If we don’t then we don’t get the money, it’s as simple as that.”
.@FormEnergyInc is coming to West Virginia, and the company will be on-site at the old Weirton Still Mill. @mateojaramill joins @DaveWilsonMN to answer certain questions about the company coming to WV. WATCH: https://t.co/yCFQ3nDJuy pic.twitter.com/gLuPHuihMJ
— MetroNews (@WVMetroNews) February 3, 2023