Hilco Redevelopment Partners purchased the Philadelphia Energy Solutions Refinery (PES) out of bankruptcy in February 2020. To help understand the potential of how Hilco might reuse the PES site and its possible relationship to the long term vision, the Lindy Institute analyzed Hilco's Sparrows Point reuse project in Baltimore County.

Summary:

Tradepoint Atlantic (TPA), a subsidiary partnership of Hilco Redevelopment Partners and Redwood Capital Investments, is the owner/operator of the Sparrows Point logistics hub in Dundalk, Baltimore. The site comprises the southwestern end of the peninsula formed by the mouths of the Patapsco and Back Rivers where they enter the Chesapeake Bay. For over 125 years Sparrows Point hosted one of the largest steel mills on the East Coast, a major local economic driver. Shifting markets and declining production led to the facility’s final shuttering in 2012.

After more than a century of active heavy industrial manufacturing, Sparrows Point required extensive remediation to address deep contamination. Fortunately, the most serious contamination was sited on only 20% of the site, allowing development to proceed along with remediation. The existing benefits to the site far outweighed the environmental cleanup liability that Tradepoint Atlantic inherited: the 3300-acre site is by far the largest contiguous industrial parcel in the area, allowing a wide range of repurposing scales. Additionally, an existing deep-water port and shipyard, direct connections to two Class 1 freight lines and interstate highways, and extensive on-site rail, road and utilities infrastructure all provided a well-furnished site requiring only upgrades and extensions as opposed to raw land.

Tradepoint Atlantic accordingly set to work developing the site to be a powerful logistics hub to service a wide variety of potential clients. At full build-out, it is expected to solely contribute an additional 1% to Maryland’s total GDP. Positive municipal revenues after incentives and expenditures are conservatively projected to reach over $55.7 million for the city. During the construction phase, direct and induced jobs created in Baltimore are projected to reach 8000, generating wages of $282 million and $1.1 billion in new economic activity for Baltimore County. TPA is also expected to create 10,500 total permanent direct and induced jobs, generating up to $432.8 million in income and almost $1.3 billion in economic activity. 

Site History and Development 

Sparrows Point was named for Thomas Sparrow, who was granted the land in 1652. The low marshy plots were agrarian until 1887, when the Pennsylvania Steel Company purchased the site after recognizing its potential for marine, rail, and labor access, and began producing as Maryland Steel. Bethlehem Steel acquired the company in 1916, ramping production to make it the largest steel mill on the East Coast and employing over 30,000 at its peak. The mill produced materials for the Golden Gate Bridge and the shipyard turned out over 100 ships during World War II. 

In 2001, Bethlehem Steel filed for bankruptcy, and its assets were sold to International Steel Group in 2003. ISG was itself acquired by Mittal Steel two years later, which then sold the Sparrows Point site to OAO Severstal in 2008 for $810 million. Renco Group purchased the mill on March 31, 2012 along with others in Ohio and West Virginia in a $1.2 billion deal, and operated Sparrows Point as RG Steel. The subsidiary filed for Chapter 11 bankruptcy on May 31 of that same year. The day before, Baltimore County had formed the Sparrows Point Partnership to strategize the site’s redevelopment; it issued its recommendations for a multi-modal hub in May 2013. 

Hilco SP and Environmental Liability Transfer jointly purchased the mill at auction on September 14, 2012, with Hilco acquiring above-grade improvements and equipment and ELT acquiring the site and assuming associated environmental liabilities. Hilco determined that operating the steel mill was no longer feasible and sold its machinery. On September 18, 2014, Hilco and local firm Redwood Capital Investments partnered as Sparrows Point Terminal to purchase the full site, committing $48 million to site remediation and $3 million to the EPA for water investigations. Sparrows Point Terminal rebranded as Tradepoint Atlantic and development commenced on a logistics hub plan. 

In 2016, Baltimore County created the Chesapeake Enterprise Zone to include TPA, and designated the entire site as a Foreign Trade Zone or freeport. That same year the Maryland General Assembly granted a 6% sales tax abatement on the site’s construction materials and supplies. TPA’s Mid-Atlantic Multi-Modal Transportation Hub (MAMMOTH) project was awarded a matched $20 million TIGER grant in 2018 for infrastructure upgrades, as TPA purchased the remaining 150-acre Sparrows Point Shipyard. The Revitalize Sparrows Point coalition formed from community, labor, and business leaders to negotiate details of a public-private partnership between Baltimore County and TPA; the result was County approval of a $78 million infrastructure development grant that included women and minority hiring provisions and development of a public park. 

Timeline

• 2001: Bethlehem Steel bankruptcy 
• 2012, March 31: RG Steel purchases steel mill 
• 2012, May 30: Sparrows Point Partnership forms 
• 2012, May 31: RG Steel bankruptcy
• 2012, September 14: Hilco and ELT purchase site
• 2013, May: Sparrows Point Partnership report 
• 2014, September 18: Hilco and Redwood Capital acquire site
• 2016: Chesapeake Enterprise Zone, FTZ #74 created, abatement approved 
• 2018: TIGER and County grants awarded

Current Site Conditions 

Land: 

• 3300 acres total, 1000 acres/15 million sf remaining availability (raw land or build to suit) 
• Power infrastructure: natural gas (over 1000 psi) and electric service (multiple 115 and 34.5 kV circuits) 
• Other infrastructure: large diameter water mains including a 48” line and multiple 36” and 16” lines creating reliable flow and pressure throughout the property’s loop system and network of mains  
• Entirely within Foreign Trade Zone #74 (free port) with activated Alternative Site Framework 
• BGE Smart Energy for Economic Development (SEED) Program (qualified commercial customers receive 25% reduced electric + natural gas distribution/demand charges, 75% reduced service extension cost in Enterprise Zone) 
• Chesapeake Enterprise Zone (Real Property Tax Credit: Eligible companies that make improvements to real property in the Zone can benefit from property tax credits over a 10-year period; State Income Tax Credit: state income tax credit for newly hired employees; BGE “Rider 7” Electricity Price Reduction Program: rate reductions for companies that increase employment by at least 10 full-time equivalent persons) 
• More Jobs for Marylander’s Act Tier 1 (manufacturers receive 10 years of 5.75% income tax credit per position; credit against state property tax; refund of sales/use tax; waiver of SDAT fees) 
• Opportunity Zone (non-manufacturers eligible for 10 years of 5.75% income tax credit per position)
• HB 1533 Sales/Use Tax Exemption for construction materials/equipment/warehousing (6%) 

Marine Terminal: 

• 150 acre parcel (900 total acres for marine-associated activity) 
• Access to 50′ main shipping channel, access channel 41’ to 36’ 
• 85 ton Gottwald shore-mounted crane 
• East/West berths (2 of 4 currently active): 2,200 linear foot berth, 36′ of water (plans for further dredging), protected turning basin 
• Will be dredged to 42′
• Finger Pier: 1,150′ long pier, 41′ of water, dual side loading (plans for further dredging) 
• Active separate barge berth, 20’ of water 
• Graving dock (1200’ x 200’ x 28.5’)
• Covered storage buildings, space for project cargo, bulk/break-bulk cargo, and auto ro-ro storage, rail -serviced sites for transloading, reserved acreage for drop-log/transfer lot
• Heavy lift pad with 3000 psi 

Rail: 

• Largest private rail yard on East Coast with access to CSX and Norfolk Southern 
• 70 miles of short-line rail on site, currently uses 5 locomotives (capacity 12 100-car trains), can handle hazmat (can serve multiple operations, has multiple yards) 
• Long and short-term storage, capacity for over 2400 cars 
• Full locomotive shop on site for maintenance, tank and LPG car cleaners + flaring services for pressurized tank cars
• Value-added services: Car storage, car repair, car/tank cleaning, and sorting and assembling