Eastman Cancels Billion Dollar Building Project

Eastman Chemical Co. canceled plans for a $1.6 billion construction project that eliminates the promise of 1,500 construction jobs and a permanent complement of 250 employees.

Eastman Chemical Co. on Wednesday canceled plans to build a $1.6 billion industrial gasification plant in Beaumont, eliminating the promise of 1,500 construction jobs and a permanent complement of 250 employees.

The project cancellation also evaporates future tax receipts for the Beaumont Independent School District, which had granted its third-ever tax abatement for the project when it was announced in July 2007. Property taxes also would have been paid to Jefferson County and the city of Beaumont and other smaller taxing entities.

The company blamed its withdrawal on worsening global economics, squeezed margins for the product itself -- making gases like ammonia and hydrogen from crude oil refining leftovers -- and uncertainty swirling around proposed carbon-limiting federal legislation since Eastman executives unveiled their expansion plans 28 months ago.

It fell to Mark Vogle, Eastman's vice president and general manager based in Longview, to deliver the bad news Wednesday in the same room at the Greater Beaumont Chamber of Commerce where other Eastman executives had first announced the company's plans to much euphoria.

"The reaction was silence, disappointment," said Jim Rich, president of the Greater Beaumont chamber. Rich said he did not know ahead of time that Vogle would be delivering bad news.

Earlier in the day, Rich had addressed a public hearing on how Southeast Texas might spend hurricane recovery money by advocating for a "deal-closing fund" that could help Eastman begin construction. "We need investment in long-term recovery," Rich told the group at the South East Texas Regional Planning Commission earlier in the day. "We need to stimulate jobs, put people to work." Vogle, in an interview at the Beaumont chamber after he had delivered the bad news, said Eastman already had invested $230 million in the project's engineering and in land acquisition along Texas 347 next to the DuPont Beaumont industrial park site.

"It's tough news," Vogle said. "There's no getting around that. We don't take this lightly." He said no one locally should feel they did anything wrong or that there was something else they could have done to advance the project.

"The Beaumont team performed admirably," he said. "This doesn't reflect poorly on anybody or any efforts."

Eastman had to wait until trading on the New York Stock Exchange closed for the day on Wednesday before making the announcement in accordance with rules of the Securities and Exchange Commission, Vogle said.

In mid-November, Eastman's chief executive officer, James P. Rogers, told investors at an analysts' meeting in New York that Eastman was delaying its Beaumont project because of the economic landscape. Ltd.


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