Not long ago Girard Mayor James Melfi got a call from a constituent complaining of a traffic jam on the south side of town. It was a good traffic jam, he assured her, the byproduct of a construction project that, with its half dozen high-rise cranes, hundreds of workers and acres of delivery trucks, heralds a return of steel-making that few saw coming.
V&M Star is building a 1-million-square-foot steel mill — by most accounts the largest ongoing industrial project in the country. It will churn out small-diameter pipe for North America’s booming oil and gas drilling business.
“This is a construction site we’ve never seen in our lifetime,” says Melfi, whose father, grandfather and uncle made careers in Youngstown steel-making before the business bolted and left that section of the Rust Belt to wither. “It takes your breath away.”
Large swaths of North America, including eastern Ohio and Pennsylvania, sit atop deeply buried energy-bearing rock formations, called shales. Those formations have long been known to hold oil and natural gas. But only recently have oil companies figured out how to unleash their vast reserves by pairing a rock-cracking process called hydraulic fracturing with complex horizontal drilling, which consumes miles of pipe.
V&M Star’s Youngstown mill and melt shop were already supplying pipe to the oil patch when the so-called shale gale swept North America. But the new drilling jobs often called for a smaller diameter pipe than traditional wells did. The company, a unit of French conglomerate Vallourec SA, could make a 5-inch pipe in Youngstown but not the 4 1/2-inch drillers now want, says Roger Lindgren, who was V&M Star’s chief executive throughout the expansion process.
In 2007, V&M Star officials started thinking about how they might meet the demand. Late the next year, they decided to proceed with design of a new mill. Other locations were considered, but Youngstown “was our favorite site from the start,” Lindgren says.
Lindgren’s team approached local leaders, the Ohio Department of Development and the office of U.S. Rep. Tim Ryan and outlined their plans. At stake was a $650 million investment that, beyond bringing 350 permanent jobs, could position Youngstown as a center for oil patch manufacturing.
“This was too big an opportunity for us to fail,” says Walt Good, vice president of economic development, retention and expansion for the Youngstown/Warren Regional Chamber. “It would have been bad if it didn’t happen. It would have been worse if it happened somewhere else.”
State regulators agreed to expedite an environmental review. Elected officials arranged for $20 million in federal stimulus money to relocate a railway at the site.
One issue threatened to derail the project. The existing mill is in Youngstown, in Mahoning County. The expansion site sat in Trumbull County’s Girard. Lindgren insisted that the new operations not straddle taxing districts. “I didn’t want an employee to be working in Youngstown in the morning and Girard in the afternoon,” Lindgren says. “It was a very strong point for me.”
Exhaustive negotiations ensued, yielding a pact in which Girard ceded 191 acres to Youngstown in exchange for more than half of the tax dollars generated at the mill. Melfi says Girard was reluctant to give up what amounts to 5 percent of the town’s total area, but the city knew the project was important. In February 2010, Vallourec announced it would build the mill, under a joint venture with Sumitamo Corp., dubbed V&M Two.
“It was a historic day,” Good says. “There were many people who thought they’d never see a project of that size and that magnitude ever happen here again.”
Construction began in January and is expected to last 18 months, employing 400 people. The first pipe is expected to roll out next year. Full production is slated for late 2012 and early 2013.
Lindgren says V&M Star is already thinking about adding another melt shop at its site — a $350 million investment that local officials believe is just the first ripple in a wave of development prompted by the pipe mill.
“The complementary businesses will be coming,” Melfi says. “The companies that bring 50 jobs, 100 jobs that are related, those are the ones that are going to be purchasing and destroying tired old homes and commercial buildings and revitalizing neighborhoods.”
Finalists
Lorain County Growth Partnership, Lorain County Board of Commissioners, Lorain County Port Authority and Team Lorain County
Project: U.S. Steel Corp. expansion
U.S. Steel Corp.’s decision to expand its Lorain Tubular Operations plant in Lorain was prompted by Ohio’s burgeoning oil and natural gas exploration business, as well as new tariffs on Chinese-made pipe.
But the cooperation of a pair of port authorities, the Lorain County Commission and the Ohio Department of Development was necessary to cobble together the financial assistance package that ensured the steel giant’s $93 million expansion and 90 new jobs on the shores of Lake Erie.
Key was lining up $70 million in tax-free, low-interest bonds from a federal stimulus program. State development officials also came up with nearly $560,000 in tax breaks, granted in exchange for U.S. Steel’s guarantee to run the new mill for at least 10 years, as well as $300,000 in grants.
City of Orrville, Orrville Economic Development Agency, Wayne County Economic Development Council, Orville Area Chamber of Commerce and Orville Utilities
Project: J.M. Smucker Co. expansion
When J.M. Smucker Co. bought Folgers in 2008, the deal doubled the jam-maker’s size. Clearly Smucker — parent company of Pillsbury, Hungry Jack and Jif — would need more room at its Orrville spread.
A team of local agencies spearheaded by economic development officials from Wayne County and Orrville secured state and local job creation tax credits, utility incentives and federal funding for roads into the site.
The result is a $200 million expansion that includes a 120,000-square-foot building to accommodate Folgers and a 300,000-square-foot facility where ice cream toppings, fruit spread and pancake syrup will be made. And it all comes with 100 new jobs with an annual payroll of $7.2 million.