The Utah Legislature has renewed hope for 1,100 Geneva Steel workers, idled since the Utah County steel company shut down in November.
Lawmakers meeting in special session Wednesday approved a bill that will make it easier to provide electricity to Geneva's new electrical arc furnace, which in turn is key to a $250 million plant modernization that will allow the old steel mill to reopen and make money, steel executives said.
But before lawmakers approved the bill in the late-night session, opponents in public hearings earlier in the day complained the state shouldn't give an economic advantage to Geneva and perhaps harm northern Utah's Nucor Steel in the process.
The bill, titled the Industrial Electric Infrastructure Act, removes the risk Utah Power would face in building a $20 million substation that would power Geneva's new operations. The bill allows a utility to recover, through base rates, the costs of providing power infrastructure to industrial companies that build a project with capital costs of at least $50 million and have that new operation create or retain at least 500 jobs.
While the bill's sponsor, Sen. Curt Bramble, R-Provo, said the bill applies to more companies than just Geneva Steel, the steelmaker needs the electricity from a new substation to power an electric arc furnace needed to allow the company to use scrap metal for making steel, in addition to Geneva's steel production from raw materials.
At stake are about 1,100 jobs that could be in place by September, he said. But the matter needed immediate consideration because Geneva faces a June 17 deadline to file for a federally backed $250 million loan for the plant conversion.
Geneva chairman Joe Cannon, who is also state GOP chairman, told lawmakers the modernization will allow the company to compete in a new way — making steel from scrap iron. Nucor also makes steel from scrap iron. Currently, Geneva can only make steel from scratch, using iron ore, coal and other basic ingredients. Such "integrated" mills are going bankrupt across the nation, and Geneva filed bankruptcy earlier this year.
If Geneva can get the $250 million financing package, Cannon said the mill would reopen in September making steel from scratch and have the arc furnace operating by the fall of 2003, making steel from scrap iron.
Geneva would pay Utah Power back the costs of the plant allocated to the steelmaker's electrical use — about $8 million — over a seven-year period. If the company defaults, the costs would then be spread out among all Utah Power ratepayers — something that caused some lawmakers and consumer advocates concern.
Dee Jay Hammon, chairman of the state Committee of Consumer Services, earlier said the bill could set a "bothersome precedent."
"If a person is going to use my personal credit to buy something, I think I should get something out of it," he said, adding that customers essentially would be underwriting but getting no direct benefits from the substation's construction.
"The ratepayers of PacifiCorp will bear the risk," said Jeff Fox, a utility analyst for the Crossroads Urban Center. "A number of municipally owned systems in Utah County would have absolutely no risk."
Rep. Ben Ferry, R-Corrine, whose parents, well-known lobbyists Sue and Cap Ferry, have at times lobbied for Nucor Steel, tried to amend the bill, to say only Geneva's $8 million part of the $20-million substation would be guaranteed by ratepayers, not the whole plant.
Several Geneva supporters in the House called that amendment a "poison pill" that would kill the whole project. Nucor executives complained to a committee hearing on the bill earlier Wednesday that Geneva's entrance into the scrap iron market would raise the price of the ingredient used in arc furnaces and harm Nucor's profitability.
"So, from a public policy, are you going to have a good, healthy steel mill or two that are unhealthy?" asked Jay Bowcutt, vice president of Nucor Corp. and general manager of Nucor Steel in Plymouth, Box Elder County
Ferry's amendment failed, as did several other attempts by northern Utah legislators to broaden the bill to help out other large users of electrical power. And in the end the measure passed as Bramble originally envisioned.
Lawmakers on both sides of the aisle, already facing budget deficits and declining statewide employment, were sympathetic with Geneva's plight and those directly and indirectly affected by the shutdown.
Getting workers with annual compensation packages of $60,000 a year back on the job again would boost the statewide economy, they said.
But there was plenty of concern that Geneva would not survive the tumultuous economic times, and even with the new market for scrap steel, that ratepayers would be stuck with the substation's bill. "There is risk to ratepayers," said Rep. Greg Curtis, R-Sandy. "But it is acceptable risk."
"What you are really saying is this is a whole new company in a whole new market," said Sen. Michael Waddoups, R-Taylorsville. "It seems to me you are switching from a buggy whip company to an automobile company."
Company supporters disagreed with that assessment, saying Geneva has constantly modernized. Only the old blast furnaces remain of the antiquated steel production system, and those blast furnaces would be augmented with the new electrical furnace, giving Geneva the ability to make steel from scratch and from scrap _ a competitive edge.
Waddoups voted against the bill on behalf of all the "little guys" who had not been informed about the bill and what it means. "The small guy has not had a voice here, and I'm not sure all the big guys have had a voice," he said.
E-MAIL: spang@desnews.com ; bbjr@desnews.com;bwallace@desnews.com