Officials with Wanhua Chemical have told St. James Parish officials that the construction costs for their $1.25 billion plastics facility planned for Convent had risen by 60% over initial estimates, putting the project in serious doubt, a top parish official said.
"In our sit-down with them, they actually said it rose to $2 billion," St. James Parish President Timmy Roussel said in an interview Thursday.
The dramatically higher cost figure sheds more light on the "significant increase in the capital expenditure budget" that the Chinese chemical manufacturer cited late last month as the reason it was reevaluating plans for the polyurethanes complex on the east bank of the parish.
On Wednesday, Wanhua further confirmed its change in direction when it informed the parish in an email that the company is withdrawing a pending parish land use application for 250 acres the company had been eyeing off La. 3214.
"As you are aware, the project scope has changed and a new project location is under review," William Day, a Wanhua Chemical U.S. Operations official, says in the email. "Given these two changes to the project, Wanhua respectfully withdraws the application."
Parish officials announced that Wanhua withdrew its land use application during a Parish Council meeting Wednesday night in Convent. The Advocate obtained the Wanhua email Thursday afternoon following a public records request.
Roussel said that during his meeting with Wanhua officials he wasn't told what caused the construction costs to rise. The email to the parish on Wednesday also doesn't say so.
On Friday morning, Day declined to tell The Advocate what caused the increase in construction costs.
Wanhua officials have previously aired concerns about the effect a trade fight between the United States and China would have on the project's cost. The company is in the process of seeking relief on tariffs that President Donald Trump has already placed on Chinese products.
In November 2018, Wanhua requested from the U.S. Trade Representative's office more than 60 exclusions from those tariffs. As of Friday, 11 of those requests were granted, 16 denied and most of the rest remain under administrative review.
Wanhua also has been trying to have the Convent property declared a Foreign Trade Zone. Being part of a Foreign Trade subzone would enable the company not to pay tariffs for goods produced in Louisiana before export.
“If you’re a chemical company and have to face import tariffs, you would be hurt,” said Linda Lim, professor emerita of corporate strategy and international business at the University of Michigan. “Tariffs change the cost benefit analysis, if you are not already committed then you will be discouraged and we see that Chinese foreign investment in the U.S. plummeted in 2018. I would find it much more interesting if a company decided to continue investing if it wasn’t already legally bound.”
The Louisiana Bucket Brigade and other community and environmental groups that had fought the project trumpeted Wanhua's decision to withdraw its land use request as a victory, calling it "David Beats Goliath."
In a joint statement, they claimed Wanhua capitulated to the pressure and that litigation from the groups had slowed the project's approval enough to allow it to be subject to more thorough scrutiny and become more vulnerable to economic variables.
The groups also promised to continue fighting other projects planned near the largely lower income, black communities in the parish's northern end.
"My great-great-great-great grandmother came out of slavery and bought my family's land," said Barbara Washington, a Convent resident who is part of the community group Rise St. James. "Our hard work has paid off. We will not stop 'til all those industries who want to come in here change their plans. We are tired of being sick. We refuse to be sick anymore."
Before Wanhua's withdrawal Wednesday, the company's land use application had been sent back to the parish Planning Commission for further review by the Parish Council. That move was prompted by an administrative appeal from the Tulane Environmental Law Clinic.
The shift back to the Planning Commission also came amid new questions about the potential local tax impact of Wanhua's Foreign Trade Zone request. Company officials had promised they would not seek local tax exemptions - that they were focused on tariff relief - but parish officials said they wanted to work out a binding agreement first.
Day had said previously that the company remains committed to locating in the United States. In his Wednesday email to the parish, Day held out the possibility the company could find another site in St. James.
"Wanhua will initiate a new application should a St. James Parish site be selected for the revised project," Day wrote. "We appreciate the relationship we have with the St. James Parish leadership and wish you the best."
Paul Aucoin, executive director of the Port of South Louisiana, which backed Wanhua's attempt to seek a Foreign Trade Zone, said the company had not yet formally applied for the status, so the change in plans wouldn't require much retooling, unless the company leaves the port's three-parish area.
Parish President Roussel on Thursday offered new details about how the increase in construction costs also affected the availability of Wanhua's planned site.
The original plant would have made methylene diphenyl isocyanate, or MDI, from scratch. The material is often used to make polyurethane foam for bedding, furniture, automotive interiors and the cushiony material placed under carpet.
Wanhua recently scaled those plans down, Roussel said, so that a crude version of MDI would have been created at facilities in China and then exported to the smaller St. James facility to refine further. The less ambitious plans also meant the company needed a plant only one-third the size of what it had originally proposed, at least initially.
The down-scaling would have cut capital investment significantly but would have avoided the use of potent chemicals that had drawn opposition from community and environmental groups. The shift, however, also meant the company would no longer need a supply of chlorine, which Wanhua had planned to get from future neighbor, Occidental Chemical Corporation.
OxyChem was also offering Wanhua the land for the proposed complex and that offer dried up after Wanhua's change in scale and the loss of potential chlorine sales, Roussel said.
OxyChem has declined comment on the matter.
Kristen Mosbrucker contributed to this story.