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State at work on China timber deal

By Jack Weatherly

This article was published February 8, 2013 at 12:14 a.m.

— The state Forestry Commission and the University of Arkansas at Monticello have furnished data to the Arkansas Economic Development Commission on the feasibility of a major timber facility in south Arkansas.

The Arkansas Economic Development Commission has been working on a large project “for quite some time that resulted from the governor’s trip to China last year,” agency spokesman Joe Holmes said in an e-mail on Tuesday.

Holmes declined to go further in describing the project.

In April, after the China trip, Gov. Mike Beebe said he talked with two companies. One was “more in line” with timber interests in south Arkansas while the other was aligned with retail interests in western Arkansas.

Matthew Pelkki, a forestry professor at UAM, said Wednesday that he believes the timber project is “likely to happen.”

“I’ve done several supply studies for the [AEDC] looking at various cities. Arkansas has a fairly strong surplus ... in timber,” Pelkki said.

State Forester Joe Fox likewise said the Forestry Commission has been providing figures on the timber supply in south Arkansas to the economic development agency. The timber industry in Arkansas and across the South has been depressed since the collapse of the housing market across the United States.

As a result, the South’s wood fiber “is very price competitive,” Pelkki said.

However, the state wants to be sure that such an expansion would be sustainable and not hurt the existing industry, Pelkki said.

“We don’t want to be stripping our forests bare just for the sake of some economic development,” he said. “There’s room for several major players to come in at several locations.”

Within a 100-mile radius of Camden and Arkadelphia there is an excess of 3 million to 7 million tons of wood fiber each year, Pelkki said. “Our forests are growing faster than they’re being harvested.”

China carried out an aggressive reforestation program between 2000 and 2010, adding 7 million acres, Pelkki said.

But the world’s most populous nation and largest consumer of paper (the United States is a close second) needs the rest of its land for food production, he said.

Most likely, if the Chinese company builds a plant it would be to produce pulp, which would be shipped to that country and turned into paper, Pelkki said.

A major pulp mill could cost between $250 million and $500 million to build and equip, he said. Even a “small” paper mill would cost at least $1 billion, Pelkki added.

The state offers incentives for such projects, including issuance of general obligation bonds and tax breaks.

If the project were to cost $500 million and employ 500 or more, it could qualify as a super project under the provisions of Amendment 82 to the Arkansas Constitution.

The Legislature currently is debating whether to issue $125 million in general obligation bonds for the proposed $1.1 billion Big River Steel mill at Osceola.

The amendment allows the state to issue bonds equal to up to 5 percent of state revenue as it stood at the end of the most-recent fiscal year. As of June 30, the end of the last fiscal year, the state had revenue totaling about $5 billion, said Richard Weiss, director of the Arkansas Department of Finance and Administration.

Five percent of that is about $250 million. So while theoretically the state could manage a second superproject in the current fiscal year, such a move would call into question the state’s stewardship, Weiss said.

A second superproject might not qualify in all respects, and even if it did, the state would have to consider whether such a commitment would result in the state fiscally overextending itself.

“I have to certify that it would not do any harm,” Weiss said.

Arkansas Business reported this week that a Chinese company named Shandong Sun Paper “plans to invest about $1 billion in building a plant employing 350 in one of those two south Arkansas towns ... [to produce] paper pulp to be exported back to China.” The article did not cite any source for that information.

Pelkki said one option would be to send pulp by rail to the Mississippi River or by rail to Los Angeles.

Arkadelphia and Camden are both on the Ouachita River, one of five navigable waterways in Arkansas, though Arkadelphia has the advantage of also being on Interstate 30.

Shipping by water might be the best choice, he said.

Because pulp is light it might not create a problem when shipped by barge on the Ouachita-Black River Navigation System to the Mississippi River and then to New Orleans before its journey to the Panama Canal, crossing the Pacific to China.

Until 2001, International Paper Co. operated a pulp plant at Camden. Subsequently, the Memphis-based company “divested our Camden mill site several years ago, to the Camden Area Industrial Development Corp.,” spokesman Thomas Ryan said in an e-mail on Wednesday. It has been idle since then.

“International Paper has had a joint venture in China with Shandong Sun Paper since 2006, in which we jointly manufacture and sell Coated Paperboard. The referenced investment in Arkansas is unrelated to International Paper or the joint venture,” Ryan said in another e-mail.

Both Fox and Pelkki agree that the ongoing widening of the Panama Canal - which will double its capacity and is expected to be completed by 2014 - could be advantageous in the Arkansas-to-China route.

Business, Pages 27 on 02/08/2013

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DontDrinkDatKoolAid says... February 8, 2013 at 3:35 a.m.

Dig that Canal wide.

( | suggest removal )

HotSpringsLawyer says... February 8, 2013 at 7:23 a.m.

Arkansas possibly to pay incentive money to Communist China? What could go wrong?

( | suggest removal )

Jackabbott says... February 8, 2013 at 8:06 a.m.

Under no circumstances should the taxpayers' of Arkansas be subsidizing and financing projects by China or any other foreign country to "strip" our natural resources.
It is one thing to "assist' a domestic company in financing it is quite another with an alien country.
China owns a huge chunk of our national debt, they have taken millions of our jobs and send us billions of dollars worth of cheap products but financing our own demise is absurd. if this what Beebe wasted taxpayers' money on then he needs to be impeached. If the new GOP majority is going to preside over hogs gettting money at the trough at taxpayers's expense, then throw the whole bunch out in the next election.
Gosh aren't there some honest, decent folks available for government in Arkansas??

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NONSHEEPLE says... February 8, 2013 at 8:45 a.m.

That mill has been sitting empty for several years in Camden but still should be cheaper to open it back up and renovate than to build a new one somewhere else. The people of Camden could sure use the boost. It would be better for China to sign a LONG term contract to buy our products outright and let a US based company reopen the mill.

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Populist says... February 8, 2013 at 9:19 a.m.

I trust the Chinese more than the Kochs. Trees will grow back. Just make sure that they don't dump too much formaldehyde in the river. ( I guess this is plan B to the steel mill. The Little rock bond lawyers and bond salesmen must need work. Those country club dues are expensive.)

( | suggest removal )

HalALouyah says... February 8, 2013 at 9:27 a.m.

It would be awesome if this happens and they can compete with the steel mill to see who pollutes more! Just make sure it is only Republicans making money on the deals; we would sure hate for Populist to be a hypocrite. Wait, it's too late for that

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Populist says... February 8, 2013 at 11:37 a.m.

AintNobodyGotTimeForThat,

The difference is that we know that there is a market for paper. Steel mills have been closing down. There is a tremendous market for people with computer skills and medical training. Why don't we improve the schools so that more of our young people can get jobs, and we do not have to import computer techs and nurses from other countries?

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ladyLiberty says... February 8, 2013 at 12:25 p.m.

so we are not selling our trees to the china owned company, but giving them free and give them tax and shipping free, so this will benefit arkansas how? it creates 300 jobs, but wait there is no guarantee those jobs will be filled with local arkansans, but may
be that 300 chinese folks will get work visas to come here? it would be nice to see how this benefits anyone other than the chinese.

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HalALouyah says... February 8, 2013 at 1:36 p.m.

You are so right Populist, there is no market for steel. Let's shut it down in the US and see what happens.
Check this out, why don't you please explain how steel mill closings and paper mill plant closings are different? Don't pull your change the subject to education crap either, answer this question.
August was a tough month for Minnesota's timber industry. The Verso paper mill in Sartell and the Georgia-Pacific hardboard plant in Duluth both shut down permanently, putting 400 people out of work.

The plant closings were among the latest blows to an industry that's been on the ropes since the last recession began. In all, six mills have closed over the past five years. That's about a third of the industry.

( | suggest removal )

ladyLiberty says... February 8, 2013 at 6:34 p.m.

you make a good point Populist. i think the biggest import we have is also doctors
from countries like India. why don't we expand our medical schools to educate more americans? well, i think it may be cheaper to import doctors than to educate them.
same with engineers.

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