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Iron Range agency approves $36M subsidy for wood siding plant

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An Iron Range state economic development agency unanimously approved a $36 million package of subsidies Tuesday to lure a wood siding plant to the Iron Range. 

The Iron Range Resources and Rehabilitation Board for the first time publicly identified the prospective siding manufacturer as Nashville-based Louisiana Pacific. State lawmakers negotiating a deal with the "mystery" company had signed a non-disclosure agreement with Louisiana Pacific, which has also been considering sites in Canada and Michigan. 

The company has proposed a $440 million project that's expected to create 250 jobs in Hoyt Lakes on the eastern end of the Iron Range, an area hard hit by job losses in recent years. In addition, the agency predicts another 500 to 600 jobs will be created in logging, trucking, forestry and retail. 

"It's going to be a great project for our region," said Steve Peterson, executive director of development for the Iron Range Resources and Rehabilitation Board, or IRRRB. "It's anticipated to put a lot of people back to work. It's involving our forest products which have been greatly underutilized."

The incentives passed by the IRRRB include $30 million to build infrastructure at the proposed plant site, including sewer and water, gas, electric and a new railroad extension and spur.  

"The money that we are talking about today is not going to Louisiana Pacific, as some of our friends in the media have led you to believe," said Peterson. "This is for site work."  

Louisiana Pacific Executive Vice President Brian Luoma said the company's board will vote next month whether to proceed with planning to build a facility in Minnesota, and will make its final decision early next year. 

"It is our intention to build a mill because of the growth strategy," he said. "The question is where? I hope it is here." 

The IRRRB says if the project doesn't proceed, any money spent to make the site ready would be repaid.

The board also approved a $6 million sales tax rebate for building materials during construction. 

That's in addition to a $3 million annual production incentive passed by the state legislature for up to 10 years, which could equal $30 million.

The combined public investment in the project totals $66 million. That breaks down to $264,000 for each of the 250 jobs expected to be created at the plant. 

IRRRB Board Member and state Rep. Carly Melin, DFL-Hibbing, acknowledged that seems like a lot. 

"But it's nothing compared to what the private investment is here per job,' she said. "And that's just the direct employees that will be there, not even counting the indirect workers that will be benefiting from this potential site."

Louisiana Pacific is expected to spend $400 million to build the facility. 

The company employs 3,900 people at 24 mills it operates worldwide, including 139 workers at its plant in Two Harbors, Minn. Last year it reported sales of $1.9 billion. 

The company manufactures an engineered wood siding product designed to look like natural wood siding. It's made by mixing wood chips with wax, resin, and other ingredients and compressing them under high heat and pressure. 

Louisana Pacific's Luoma said the company sold $635 million of its SmartSide product in 2015, and intends "to be twice that in the next three to five years." 

"We like Minnesota, we've put a lot of time and investment in doing our due diligence in this area in terms of wood supply and labor availability," he told the IRRRB Board.