The Pinal County Board of Supervisors and the Town of Queen Creek have both approved a Development and Intergovernmental Agreement for a new $2.8B industrial project planned in Queen Creek in their March 16th meetings. Both also approved a resolution in support of a Foreign Trade Zone application by ES America LLC that is related to the same project.
The measures concern a site consisting of 650 acres of Arizona State Trust Land at Ironwood Drive and Germann Road in Queen Creek where ES America plans to build an approximately 1MSF manufacturing facility. Once operational, the plant will provide an estimated 2,800 jobs in the area. While there is often a publicly available project code name for developments in the early stages of agreement, representatives from both Pinal County and Queen Creek cited confidentiality and economic development considerations and declined to provide any identifying details. Officials also declined to comment on any details beyond those contained within the publicly available development/IGA agreement draft and FTZ support resolution.
ES America was incorporated in Delaware on January 10th, according to the Delaware Department of State: Division of Corporations. The Arizona Corporation Commission identifies electronics giant LG Energy Solution as the sole member in the LLC.
The company is in the process of applying to the U.S Department of Commerce for FTZ status. If granted, “Approval of the Foreign Trade Zone reduces the effective real and property tax rate paid by the corporation to 5%,” according to the request submitted to the Board by Pinal County Economic and Workforce Director James Smith.
Battery Plant a Likely Possibility
While the project is not specifically named in the Board materials, industry watchers suspect it is likely a battery plant that will support a recent agreement between electric semi-truck manufacturer Nikola Corp. and electronics giant LG Energy Solution Ltd.
Nikola is in the process of completing Phase I of its 1MSF manufacturing and assembly facility on 500 acres in Coolidge and had previously stated its intent to begin Phase II in the early part of this year. Nikola has said it plans to produce 2,500 vehicles this year.
According to a Nov. 5, 2021 article from the Yonhap News Agency in Seoul, LG Energy Solution Ltd. and Nikola Corp. signed a battery supply contract last year. In its Q3 2021 earnings statement, Nikola said, “On October 20, 2021, we entered into a long-term supply agreement with LG Energy Solution, LTD. This supply agreement will provide additional battery cells for our trucks beginning in 2022 through 2029.”
Nikola delivered its first battery electric vehicle in December in a pilot program with Total Transportation Services Inc., a port trucking company in southern California. Nikola expects to deliver its first vehicles for sale as early as Q2 but had previously warned its schedules could be impacted by component supply chain issues.
LG Energy Solution is a major battery supplier for the electric vehicle industry. The company website states, “LG Energy Solution is taking the lead in popularizing electric vehicles that are safe, fast, and environmentally friendly through cells, modules, BMS (Battery Management System), and pack products for electric vehicle batteries, the culmination of our most innovative battery pack technology. Building upon our experience of various projects with the world’s leading manufacturers, we are creating a new battery ecosystem that encompasses the entire cycle from producing batteries to reusing waste batteries.”
The company boasts what it calls a “Four-way global production system,” with bases in Korea, China, Poland and the US.
Agreement Provides Employment Incentives
The Development Agreement and Intergovernmental Agreement between ES America, Pinal County and Queen Creek had this as its first recital: “Employer wishes to locate, construct and operate a production facility on approximately three hundred (300) acres of real property within the corporate limits of Queen Creek, Arizona, in Pinal County (the “Site”). The Site that has been selected by Employer for this purpose is part of a larger, approximate six hundred fifty (650) acre parcel located within the corporate limits of Queen Creek, Arizona (the “Land”) that is presently owned by the State of Arizona, by and through the State Land Commissioner (“ASLD” or the “State”) and will be sold by ASLD at auction (the “Auction”) pursuant to ASLD’s auction process.”
Queen Creek annexed the site and rezoned it under an “Urban Employment” designation in 2019.
The draft agreement goes on to confirm that if ES America successfully acquires the site at auction, it will build a 1MSF-plus manufacturing, distribution, office and administrative space with a projected construction cost of $2.8B and employ more than 2,800 fulltime employment at buildout.
Another agreement recital reads, in part, “In recognition of the significant direct economic benefits that will accrue to Town and to County (and the general public) as a result of the Project, as well as so-called “indirect” benefits that further the public purpose of this Agreement, which benefits include… resulting employment opportunities for emerging technology, higher-paying energy conservation jobs and other jobs and additional educational opportunities for residents of Town and County…” leading to speculation the facility will be a battery plant for electric vehicles.
To encourage the development, “Among other things, Town has agreed to provide reimbursements of certain fees, and County has agreed to reimburse Employer for certain fees. Town also confirms its obligation to complete at its expense and as part of its Capital Improvement Program, certain off-site public improvements that will support the Site (regardless whether the Project is constructed) as well as other properties located within the boundaries of the Town of Queen Creek and County of Pinal.”
As part of the agreement, Pinal also plans to enter into an agreement with Central Arizona College or another public educational outlet, or to combine efforts with the Arizona Commerce Authority, for educational and training efforts to improve educational opportunities in Pinal County and train workers by leveraging programs under the federal Workforce Innovation and Opportunity Act.
Under the terms of the agreement, ES America will start construction of the required improvements within six months of successfully acquiring the site, and the improvements must be completed within 90 months of starting construction. Manufacturing operations must begin within six months of completion. The County also agrees to reimburse the employer for air quality and dust permitting fees, as well as stationary source fees.
Once the employment objective is reached, Pinal agrees to make employee education incentive payments in the amount of $3K for every Pinal County resident and $1,500 for every non-Pinal resident employed at the site. The County also agrees to create a workforce training facility with construction and operation costs of up to $6.5M. The total amount for the facility and the incentive payment program is capped at $15M.
For its part, the Town of Queen Creek will prepare the site and coordinate construction with the employer’s contractors. It will also pay all building, inspection and permit fees and development impact fees if the employment objective timeline is met. Queen Creek will also build the necessary water and wastewater infrastructure and road improvements to support the facility.
On March 10th, Queen Creek issued a request for qualifications for a Construction Manager At-Risk for a $50M project called Northeast Infrastructure Improvements in the immediate area of the project site.
The Arizona State Land Department will conduct an auction on April 19. Minimum bid is $84.444M.
