LITTLE ROCK 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
Print Headline: State at work on China timber deal