Governor Kim Reynolds with her predecessor Terry Branstad in photo originally published on Reynolds’ official Facebook page in September 2020

Scott Syroka is a former Johnston city council member.

Antitrust regulators should block the proposed sale of OCI Global’s Iowa Fertilizer Co. plant in Wever (Lee County) to Koch Industries. The deal would be outrageous, but we must look back to fully understand why.

HOW IOWA TAXPAYERS HELPED FUND OCI’S FERTILIZER PLANT IN WEVER

Then-governor Terry Branstad and Lieutenant Governor Kim Reynolds offered nearly $550 million in tax giveaways to OCI’s predecessor, Orascom, to build the plant prior to its 2017 ribbon cutting.

That included $133 million in local giveaways such as Lee County property tax abatement over twenty years. Another $112 million in state giveaways like corporate tax credits and forgivable loans. And an estimated $300 million in federal tax giveaways from the get-go thanks to the Iowa Finance Authority approving Orascom for $1.2 billion in Midwestern Disaster Area bonds created by Congress after the 2008 floods.

Now, I don’t fault Branstad and Reynolds for investing taxpayer dollars in building a fertilizer plant. Farmers are paying way too much for fertilizer due to issues like excessive industry concentration, and those inflated costs rob farmers of profits, contribute to the hollowing out of Iowa, and drive up food costs for everyone. More jobs are always welcome, too.

No, where they got it wrong was giving away the farm to land the project—taxpayer dollars that could have been used for priorities like funding schools, taking better care of seniors, catalyzing small business startups, and more.

While Orascom received hundreds of millions in corporate welfare, the state was forced to cut more than $130 million from its budget, according to local news affiliate WHO-TV.

BRANSTAD AND REYNOLDS GOT PLAYED

At the time, Branstad and Reynolds argued the estimated $300 million in federal tax giveaways wasn’t enough to keep the plant from being built in Illinois, and that’s how they justified an additional $245 million in state and local tax giveaways.

Sorry, but that math ain’t mathing. As former state senator Joe Bolkcom noted, “The flood disaster bonds gave Iowa a $300 million advantage over Illinois from the start.” That’s because none of Illinois’ proposed sites qualified for the bonds.

Additionally, Branstad said in 2012, “Illinois is the loser…not just because of the incentives,” but rather “…because of the way they have mismanaged their state’s finances for too long.”

If Iowa had a $300 million advantage that Illinois couldn’t match, and Illinois was allegedly so poorly managed that they didn’t pose a real threat to winning the plant, then why did Branstad and Reynolds offer an additional $245 million?

Whether incompetence or corporate cronyism drove that decision, it’s embarrassing either way.

IOWANS WERE WARNED

Some tried to warn us. Thank yous are in order for Bolkcom, Iowa State economist Dave Swenson, and Mike Owen, formerly of the Iowa Policy Project, now with nonprofit Common Good Iowa. All were vocal critics of the enormous tax giveaways for the Orascom deal.

Here’s the three of them speaking out against Branstad and Reynolds’ fiscal irresponsibility:

Bolkcom in 2012: “This is the worst economic development deal in state history.”

Swenson in 2014: “I think this was by far the dumbest economic decision made in Iowa.”

Owen in 2017: “Expensive boondoggle.”

The Associated Press quoted Branstad as saying of Bolkcom at the time, “I think he is very partisan and uninformed and has misled the public as to the benefit this project will have.”

When asked to comment on Koch’s recently announced acquisition attempt, Bolkcom told Bleeding Heartland via email, “Branstad gave away the farm in 2012. Iowa’s generous incentives were unnecessary. The new plant was destined for Iowa without the incentives. It remains the worst economic development deal in state history.”

Bolkcom added, “More consolidation of fertilizer production will increase prices for Iowa farmers. I’ll be waiting to hear the strong opposition from Iowa Republican politicians to this proposed Koch acquisition.”

HOW “COMPETITION” JUSTIFIED TAX BREAKS FOR THE FERTILIZER PLANT

Proponents of the Orascom project claimed building the plant would help increase competition in the fertilizer market and drive down costs. Again, those would be good outcomes—if they had panned out.

Branstad even made a case for the deal by attacking Koch Industries. Speaking to reporters in 2013, the governor said, “I understand the Koch brothers don’t want the competition [….] They want to keep out competition. We want competition.”

Fast forward to today. While Koch failed to stop a competitor plant from being built then, they’re attempting to get the last laugh on Branstad and Reynolds now.

If regulators approve the proposed Koch acquisition, then our tax dollars will have gone toward building a fertilizer plant owned by Koch—even though advocates argued a decade ago the deal was needed because there weren’t enough fertilizer plants not owned by Koch.

The more than half a billion in taxpayer dollars offered to build the plant was intended to create jobs, increase competition, and drive down costs. Permitting the Koch deal to go through would achieve exactly the opposite.

KOCH’S INCREASING POWER IN THE FERTILIZER INDUSTRY

That’s why I hope to see current Governor Reynolds and other Iowa Republicans ask regulators to block Koch’s acquisition of OCI’s Wever plant.

If for some reason they don’t, the U.S. Department of Justice and Federal Trade Commission should protect farmers and consumers anyway and block this deal. The DOJ and FTC are our nation’s antitrust guardians and are required to review deals like these for anticompetitive concerns.

That’s good news because this is Koch’s latest attempt to further consolidate its market power. That includes a 2021 acquisition of Compass Minerals micronutrient assets and a 2022 acquisition in Jorf Fertilizers Company III, the “world’s largest phosphate mining and leading global fertilizer group.”

Koch’s already one of the top nitrogen fertilizer producers, earning a place as one of the four largest companies that comprise Big Fertilizer.

To get a sense of how concentrated the market is, just imagine a Cy-Hawk football game hosted at Kinnick Stadium, but the Cyclones get to control who sits in 52,000 of the 70,000 seats. That’s the reality for farmers today, where Big Fertilizer controls 75 percent of the nitrogen market, according to farm group Farm Action. The proposed Koch-OCI deal would hand over control of even more Kinnick seats to the Cyclones.

GREATER MARKET CONCENTRATION LEADS TO HIGHER FERTILIZER AND FOOD COSTS

Rather than acknowledge any market concentration concerns, Big Fertilizer tries to blame spiking fertilizer costs on factors like shortages, increased operating expenses, and geopolitical events—while openly bragging to investors otherwise, as Farm Action has demonstrated.

Indeed, researchers found that fertilizer price hikes “actually appear to be more closely aligned with the rising prices farmers are able to get for their grain harvests.” That tracks with what farmers themselves have observed.

The Cedar Rapids Gazette reported in 2022 that farmers were struggling as the fertilizer industry’s profits soared. Robb Ewoldt, a Scott County farmer and former president of the Iowa Soybean Association, told reporter Erin Jordan, “[Fertilizer companies] are making a lot, lot of money. It always seems to coincide with when our grain prices go up.” Ewoldt’s exactly right.

Because of monopoly power, Big Fertilizer can fluctuate its prices in sync with grain prices to steal from farmers’ profits, rather than being subject to traditional concepts of market supply and demand.

With such concentrated control of the market, Big Fertilizer price gouges Iowans and forces farmers to operate in a system where the house always wins.

THE PUBLIC IS CLAMORING FOR ACTION

When the U.S. Department of Agriculture issued a recent request for information from the public on fertilizer access, roughly nine in ten commenters described their concerns about high fertilizer prices and more than seven in ten expressed concern about the power of fertilizer companies.

Incidentally, commenters also noted concern about how rail industry concentration contributes to higher fertilizer prices. That’s relevant as Iowans are engaged in a parallel fight with Big Rail corporations like Canadian National, which recently announced its attempt to acquire Iowa Northern Railway and further consolidate that industry.

When Big Fertilizer exerts its monopoly power, it increases the amount the rest of us pay, not only for food and fertilizer, but in taxpayer subsidies for farmers, too. Rather than blame farmers for receiving subsidies, we need to redirect anger to the corporate monopolies like Koch, which make the subsidies necessary in the first place.

We can start by keeping Koch from gaining even more power over us. Indeed, the only thing more embarrassing than making “the worst economic development deal in state history” would be if our own tax dollars were also used to increase Koch’s concentration of the fertilizer market too. Concerned citizens should contact the DOJ and FTC and ask them to block Koch’s proposed acquisition of OCI’s fertilizer plant in Wever.