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Oklahoma is not OK.
Earlier this week, Volkswagen announced that it would build its first North American electric vehicle battery plant — projected to employ about 2,000 workers — in the Canadian province of Ontario.
Oklahoma was disappointed because the state had made what it thought was a strong bid, with a $700 million incentive package. (For comparison purposes, Virginia offered $750 million for the Amazon headquarters in Arlington.)
“There’s no doubt that today’s announcement was disappointing,” Oklahoma Gov. Kevin Stitt said after the news broke.
This isn’t the first time Oklahoma has lost out on an electric vehicle battery maker. “Last year, Oklahoma lost out on a deal to lure a $4 billion Panasonic electric battery facility to the MidAmerica Industrial Park,” the Tulsa World reported. “Panasonic opted, instead, for De Soto, Kansas, to supply batteries for Tesla. It was expected to generate 4,000 direct jobs in that state.”
In 2020, Tesla chose Austin over Tulsa for its CyberTruck factory.
One of Oklahoma’s legislative leaders, the president pro tem of the state Senate, expressed frustration that the state keeps coming in second. “We’ve just got to figure out how to become more competitive,” he said — and vowed to set up a committee to figure out how Oklahoma can do better.
You might wonder why any of this matters to Virginia. There are multiple reasons.
1. The electric vehicle industry is driving a lot of job creation (and changing politics in the process). Mock electric vehicles if you want, but the auto industry doesn’t particularly care what you think. It’s investing heavily in electric vehicles (and since electric vehicles are basically big batteries on wheels, that means a lot of electric vehicle battery factories such as this one). That means a lot of jobs are being created and that has a way of changing the politics surrounding electric vehicles. Generally speaking, liberals have loved them and conservatives haven’t, but that’s changing. Most electric vehicle plants are going to red states and not blue ones. The Ford plant that Gov. Glenn Youngkin turned away from Pittsylvania County, and that wound up in Michigan, is an exception. Other big electric vehicle plants have wound up in Georgia, Kentucky and Tennessee. Here’s Oklahoma, one of the most Republican states in the country, that was swooning over the prospect of an electric vehicle plant and offering big dollars to make it happen. Georgia may have voted Democratic (barely) in the 2020 presidential race and the 2022 Senate race, but it has a Republican governor, Brian Kemp, who has built a reputation for wooing electric vehicle-related firms to his state. Is it because he’s a “tree-hugging dirt worshiper,” as the old saying has it? Probably not. But he sure likes the idea of seeing jobs created in his state. Certain cable TV talk show hosts might continue to bad-mouth electric vehicles but look for once-critical politicians to be a lot less critical, especially if their states are in the running for jobs that electric vehicles and their supply chains are creating.
2. The economic geography of the future is being determined now. Every major automaker (and some minor ones) are either building electric vehicle plants or trying to figure out where to build them. This has created something of a land rush. Once this first round is built, they won’t need many more for a while, so that has upped the sense of urgency among states hoping to win one. (That also shows how strongly Youngkin felt about Ford’s Chinese partner for him to feel it was politically safe to nix that deal.) While the traditional automaking heartland in Michigan, Indiana and Ohio is getting some plants, most are going to Sunbelt states. We could devote a whole column to the reasons why — lower-cost, nonunion labor is surely a factor — but whatever the reasons, the fact remains: The economic geography of this emerging industry is being drawn now.
3. Southwest and Southside Virginia want to be players in this new industry. I don’t know whether the Southern Virginia Mega Site in Pittsylvania County was a candidate for this Volkswagen plant or not (Oklahoma is the only runner-up publicly mentioned), but we know that the site was a runner-up for the 8,100-job Hyundai electric vehicle battery plant that went to Georgia. And while there’s dispute about whether Ford had picked Pittsylvania or merely considered it, we know that Virginia was in the running for that plant until Youngkin said “no deal.” We already have an automotive cluster in the Roanoke and New River valleys, with Volvo’s truck plant in Pulaski County (which now makes electric trucks) as the signature company. Just last week, a German company that makes vehicle parts announced it would locate its North American headquarters in Salem, creating 119 jobs at the former General Electric plant. Even if we weren’t in the running for this Volkswagen plant, it behooves us to pay attention to industry trends. Some of those trends might be uncomfortable for those of certain political persuasions, which brings us to the next point:
4. Volkswagen picked Canada over the United States because of that country’s “high” standards for “environmental, social and corporate governance.” That wasn’t the only reason Volkswagen picked the Canadian site but it was one of them, according to KFOR-TV in Oklahoma City. A Volkswagen spokesman told the station that Canada won out for five reasons, with “high ESG standards” the second one listed. (First was Canada’s “position as a green supplier of choice for electric vehicles and batteries.”) ESG, as it’s commonly known, has become a flashpoint for some conservatives who rail against “woke” corporations. In January, Virginia Attorney General Jason Miyares joined a coalition of other states in challenging the ESG practices of certain major banks and institutional investors. “Pressuring companies to align with a net zero emissions reduction target does not appear to be about transparency or maximizing shareholder value; instead, it seems to be focused on changing behavior, at the expense of Virginia consumers,” Miyares said in a statement. Utah state Treasurer Marlo Oakes has been more colorful in condemning ESG. “It is Satan’s plan,” he said. These may be satisfying talking points, but here are 2,000 jobs going to Canada and not the United States because of that country’s “high ESG standards.” The website Tech Crunch warned last year that this “war on ESG” could wind up having negative economic consequences; this would seem to be one of those.
5. Volkswagen also picked Ontario over Oklahoma because that province has a more decarbonized power grid. Here’s another point that might discomfort some conservatives. The VW spokesman told KFOR-TV that another reason Ontario won out was because it has a “widely decarbonized power mix.” Phasing out fossil fuels — and the speed with which it should be done — remains controversial in the United States. Here in Virginia, the Clean Economy Act, which mandates a carbon-free electric grid, is something Republicans would like to get rid of, or at least amend. I will leave that debate to others. Instead, I’ll just point out that some companies are indicating a clear preference for green energy, with this being one example.
Ontario gets 92% of its energy from noncarbon sources (59% nuclear, 24% hydroelectricity, 8% wind and 1% solar).
By contrast, Oklahoma gets 47.6% of its power from noncarbon sources, nearly all of that being wind (44.0%).
Virginia ranks even lower: 32.5% of our power comes from noncarbon sources, with nuclear accounting for 28.4%. Our primary power source is natural gas at 55.2%. Coal amounts to just 5.3% of our power.
We’ve often viewed things as jobs vs. the environment. Here’s a case where the two go hand-in-hand. Not every company views things through the same lens, but for those that do, Virginia’s relatively low percentage of noncarbon energy at present seems to be a handicap. On the flip side, Ontario’s high percentage of noncarbon energy was a selling point.
6. It’s possible to read Volkswagen’s decision as an indirect argument for nuclear energy. Notice that Ontario’s decarbonized energy grid is driven primarily by nuclear power. To the extent that Volkswagen’s decision relied on the energy question, it really relied on Ontario’s dependence on nuclear power. Historically, support for and opposition to nuclear energy has split along ideological lines, with conservatives in favor and liberals against. That seems to be changing, at least among some on the left, who are starting to see nuclear as a way to replace fossil fuels. Even with all the solar farms being built across Southside Virginia, solar still accounts for just 2.5% of the state’s electrical generation, according to the Energy Information Administration, and we still don’t have an on-shore wind farm (the one proposed in Botetourt County has been delayed for years). Virtually all of the state’s noncarbon power comes from nuclear energy. Youngkin has championed a new breed of nuclear reactors — called small modular reactors — and specifically wants one in Southwest Virginia. He’s not convinced that renewables can ever supply all of our energy needs. Here’s the odd situation where he might find common cause with some on the green energy side: Nuclear has helped Ontario win 2,000 jobs from a company that valued noncarbon energy. On the other hand, Youngkin has also championed natural gas, and that accounts for most of our power, and doesn’t appear to be going away any time soon.
Addendum: For those who dismiss wind energy (such as former President Donald Trump), take a look at Oklahoma’s energy mix. It gets more power from wind than any other source. So do Kansas and Iowa. (Iowa, in fact, gets 61% of its power from wind.)
7. This shows the value of megasites. Youngkin has pushed for more large industrial sites — and to have them “shovel-ready.” The reason the Southern Virginia Mega Site lost out to Georgia for the Hyundai plant was apparently that the Georgia site was closer to being construction-ready. This has been a relatively noncontroversial thing — former Gov. Ralph Northam was making the same point late in his term — but it’s still worth repeating. The Financial Post, a Canadian financial news site, reports that “Ontario set the stage last month for the Volkswagen announcement, introducing and quickly passing a law adjusting the municipal boundaries for a 1,500-acre ‘mega site’ in southwestern Ontario.”
8. We don’t know yet what role incentives played but it’s likely they weren’t the decisive factor. We know Oklahoma’s incentive package was in the neighborhood of $700 million. I haven’t seen any dollar figure mentioned for what was offered north of the border, so I asked The Windsor Star, a daily newspaper in Ontario that has covered the announcement. I was told there’s a reason for why no incentive figure has been mentioned: The amount of federal and provincial aid hasn’t been announced yet. The key word there may be federal: The expectation is that Canada’s national government kicked in some incentives, as well, because landing this plant was considered a national priority. That’s what the Oklahoma governor meant when his office said, “Oklahoma has never been in a position to compete with an entire country for a major project.” The Windsor Star did tell me that a previous electric vehicle battery plant in Ontario, which is projected to create about 2,500 jobs, received $1 billion (Canadian) in both federal and provincial incentives. In U.S. dollars, that would be about $730 million, so in the neighborhood of the Oklahoma offer for the 2,000 or so jobs expected from Volkswagen. Put another way, Oklahoma probably wasn’t outbid for the plant; other factors likely made the difference — things like those pesky ESG standards and lots of noncarbon energy.
So there, eight reasons why Volkswagen’s decision to pick Ontario over Oklahoma matters in the Old Dominion.