Sunday, May 19, 2013

Governor Pence Rightfully Reverses States' Support of Feritizer and Coal Gasification Plants

Gov. Mieke Pence
The construction industry in Southwest Indiana is apparently up in arms over the State reversing direction on the construction of Mount Vernon fertilizer and the Rockport coal gasification plants.

Eric Bradner of the Evansville Courier Press reports:
The news for workers in Southwestern Indiana’s construction trades couldn’t get much worse.

The last month has seen state policymakers move — for very different reasons — to scuttle two projects that each promised more than 2,000 construction jobs, plus hundreds more once they were up and running.

The Indiana General Assembly approved a tough, new regulatory measure that left developers of the proposed $2.6 billion Rockport coal-to-gas plant say that, save a Hail Mary pass in the state Supreme Court, leaves them no way to go forward.

And Gov. Mike Pence on Friday announced he has pulled the plug on state incentives intended to finance the construction of a $1.8 billion fertilizer plant at the Ports of Indiana in Mount Vernon.

Now, local economic development officials who badly wanted the jobs those projects promised to bring are left scratching their heads.

“It’s just kind of an interesting place we find ourselves in, where we’re turning down business,” said Greg Wathen, the president and chief executive officer of the Economic Development Coalition of Southwest Indiana.

The Rockport and Mount Vernon projects — both conceived under former Gov. Mitch Daniels and negotiated through his Indiana Finance Authority — fell under sharp criticism, for widely differing reasons.

The Rockport deal involved a 30-year guaranteed-purchase contract. The state government would buy the plant’s synthetic natural gas at a pre-negotiated rate, and then resell it on the open market, with 17 percent of all residential and commercial ratepayers’ bills bet on the deal earning them savings over its full term.

That prompted consumer advocates and utilities to complain. They pointed to a shale gas boom that they claim will provide abundant natural gas at prices that are lower and more stable than the nation has seen in recent decades.

The criticism of that Rockport deal was all about economics. The Mount Vernon fertilizer plant, meanwhile, is about national security.

Fatima Group, the Pakistani company that was financing the plant, came under criticism in December by a Pentagon official who said the company needed to do more to keep its product manufactured in Pakistan out of the hands of insurgents who were using it to develop improvised explosive devices in Afghanistan.

Pence froze that deal when he took office, and ultimately decided he wanted nothing to do with the company until the changes it pledged to make to its product and that product’s delivery have been tested by the United States.
While the Rockport coal gasification plant would undoubtedly create jobs, the question is at what cost would those jobs have been created?  The result of following through with the deal would have been that Hoosiers consumers of the energy produced would have been paying substantially higher than market rates for natural gas. Further, an examination of the deal certainly made it look like an insider deal that unfortunately became all too common in the Daniels administration.

With regard to the fertilizer plan, Gov. Daniels chose not to act on the very serious national security concerns about the company and its operations.  Not only was Fatima Group building the plant in Mt. Vernon, they were using Hoosier tax dollars to do it.  Gov. Pence rightfully pulled the plug on that deal.

While no doubt Gov. Pence strongly supports creation of construction job, he demonstrated in these two cases that he's not about to forget Hoosier taxpayers and national security in weighing the decision of whether to move forward with projects.


Bob Cardwell said...

Sounds like he done the right thing. It is good that Gov. Pence works once in a while. I thought all he did was go around with a flannel shirt, cowboy hat, or a straw in his mouth and sit in a rocker at some country store.

Nicolas Martin said...

Right things but wrong reasons.

This is relevant:

Renewable energy projects cost US taxpayers $26 billion for only 2,300 permanent jobs, which is $11.5 million per job

Paul K. Ogden said...

Nic, I think we're talking the same reason. The jobs created are not worth the cost to taxpayers.

Nicolas Martin said...

That was my point. The inefficiency of job creation is the wrong reason. The right reason is that government has no proper role in funding private industry. (Maybe I confused the issue by providing the link that I did, but it is also bad economics.)

Another article says that Pence killed the fertilizer subsidy for national security reasons.

At least Pence is shining a light on improper actions of Daniels, if inadvertently. If Pence turns out to be a genuine supporter of free markets, which I very much doubt, Republicans will be howling as much as Democrats.

Nicolas Martin said...

Indiana withdraws support of Pakistani-owned fertilizer plant on US bomb concerns

Indiana has canceled subsidies for a planned $1.8 billion fertilizer plant in the state because of concerns that a Pakistani company involved in the project makes products used in improvised explosives that kill and injure U.S. troops in Afghanistan.

Unigov said...

Stark evidence that we've nearly abandoned constitutional government.

Tax breaks granted to favored corporations violate the state constitution mandate that laws be uniform. Breaks violate the 14th amendment that all citizens (corporations) be treated equally.

The coal-gas plant deal would have seen Indiana acting as a marketer of gas products. This violates the state constitution, which says state government has those powers *necessary* to operate. It's not necessary to be a gas marketer. (Or to own/operate sports or transit facilities.)

Those who ignore constitutional basics do so out of greed. Or rather, greed masked as some type of benefit, like job creation. In reality politicians are often paid massive amounts of money to cut these deals. Remember that local politicos received enormous bribes from cable TV companies to influence the franchise decisions.