Subsidies for mystery Iron Range siding plant advance in Legislature

A package of subsidies designed to lure a still-unnamed wood siding manufacturer to the Iron Range was included in bills that passed the Legislature over the weekend.

Supporters say the incentive plan, which ultimately could total in the tens of millions of dollars, would create 250 jobs in northeastern Minnesota.

Developers have scouted space in an industrial park in Hoyt Lakes, Minn., on the far eastern end of the Range, a region still struggling from the closure of a major taconite mine 15 years ago.

But the bills are still awaiting Gov. Mark Dayton's signature, said Iron Range Resources and Rehabilitation Board Commissioner Mark Phillips.

"We're optimistic if they are signed that we would have some tools in place that would allow us to possibly attract a major wood products company," Phillips said.

The subsidies would include:

• A $10 million appropriation from the General Fund to the 21st Century Fund, which would be modified to allow it to fund projects outside the mining industry.

• A production incentive of up to $3 million annually for up to 10 years, based on the square footage of siding produced starting in 2017. It's a structure similar to early support for Minnesota ethanol producers.

• A sales tax exemption for materials used in building the plant.

Any disbursement of funds from the 21st Century Fund would require a match from the IRRRB, which could bring the total public support for the plant to more than $50 million.

"I'm not big on incentives," said Phillips. "But we're not that unique as far as wood resources. So if you want to compete with other states and other countries you're going to probably play in this game."

Some kind of "clawback" mechanism would likely also be included in the event the company didn't complete the project or reach employment projections Phillips said.

Iron Range lawmakers have said that Canada and Michigan are also competing for the plant. State officials signed a non-disclosure agreement with the company keeping negotiations private.

Assuming Dayton signs the bills including the incentives and the project moves forward, Phillips estimated an announcement of the company could occur by Aug. 1.

Phillips declined to speculate on the total cost of the plant, saying only it would likely cost several hundred million dollars to build.

The 250 jobs at the plant would pay an estimated $27 per hour, said state Rep. Jason Metsa, DFL-Virginia.

"We also know it would require roughly about 130 semi-loads everyday of local timber," he added, providing spin-off jobs for loggers and truckers.

And unlike mining projects like the proposed PolyMet mine, which has undergone more than 10 years of environmental review, a wood siding plant could be up and running in a couple years, Metsa said. "This is something that requires very little permitting."

But despite the promised jobs for a region struggling with hundreds of layoffs in the mining industry, the Minnesota Timber Producers Association is concerned about the subsidy provisions, fearing there isn't enough wood on the auction market to meet the demand for forest products.

Aspen stumpage prices have doubled in the past three years, according to the association's executive vice president Wayne Brandt.

"When we saw these kinds of prices 10-12 years ago, Minnesota lost one third of the forest products industry," he said in a statement. "None of us want that to happen again."

To try to address those concerns, state lawmakers set aside $2 million in the budget moving forward for private forest management assistance. Gary Michael, Private Forest Management Program Supervisor for the DNR, estimates that will allow the agency to hire seven to 11 new foresters to make more timber available for sale.

"That should increase the available wood supply in the coming years," Brandt said.