By TOM MURPHY

AP Business Writer

GARY, Ind. (AP) — A banner hanging from a rusty railroad bridge reminds drivers entering the city that it is “steel strong” after 100 years.

The main source of that strength sits along seven miles of Lake Michigan shoreline, where U.S. Steel’s Gary Works complex employs 5,500 people and helps make Indiana the country’s top steel-producing state.

Heavy industry continues to be an economic staple across Gary and several northwest Indiana counties known as “the region,” part of it extending to Chicago’s southeastern metropolitan area. But environmentalists and others worry about the harm it causes Lake Michigan and nearby rivers.

Those who live and work there say manufacturing and a clean environment can — and must — coexist to help keep the Rust Belt economy alive.

“It’s a false choice to say it’s one or the other,” said Jim Robinson, a district director for the United Steelworkers union. “The fact is we can have a clean environment and a healthy manufacturing economy.”

Robinson and other mill veterans are puzzled over recent public scrutiny of environmental permits for Gary Works and BP’s Whiting refinery. Opponents contend they would allow too many toxins into the lake.

The mill workers say heavy industry has made big strides in pollution control over the past few decades. They worry that jobs, which have dwindled by the thousands since 1990, will be further risked if factories are pushed too hard for more pollution control.

“I really think that they are blowing this thing out of proportion,” said Michael Millsap, another Steelworkers official.

BP sparked fresh public debate in both Illinois and Indiana over the summer when Indiana regulators approved a new permit that would allow higher discharges of ammonia and suspended solids into Lake Michigan. The company has since said it would find a way to reduce the discharges or scrap a $3.8 billion expansion.

Earlier this month, more than 300 people attended a public hearing in Gary on the U.S. Environmental Agency’s objections to a proposed wastewater permit for Gary Works. In October, the EPA blocked the permit because of concern about discharges into the Grand Calumet River that flows from Gary into Lake Michigan.

The waste in the waterways has been produced in part by Indiana’s steel industry. The mills churned out 26 million tons of raw steel last year, according to the American Iron and Steel Institute. That’s about 10 million tons more than the second most-productive state, Ohio.

Much of that production comes from the region, which also has steel operations in Portage, Burns Harbor and East Chicago.

“Steel is still probably the single-most important industry up here, although it obviously is a whole lot smaller than it was even 10, 20 years ago,” said Don Coffin, an economics professor at Indiana University Northwest in Gary.

The primary metals industry, which includes iron and steel operations, employed more than 32,000 people in 1990 in the region, Coffin said. It employed 18,500 as of last September.

The industry remains important because of the pay it offers.

Manufacturing jobs provide average annual earnings, which includes wages and benefits, of more than $81,000 in Gary’s Lake County, according to the Indiana Business Research Center at Indiana University’s Kelley School of Business.

That’s more than triple the average in retail and significantly higher than health care, two other private employment pillars in the region.

That kind of money means factory workers can afford decent homes and cars and can contribute more to the tax base, said Jaishankar Raman, an associate economics professor at nearby Valparaiso University.

“Anyone who is working there obviously is in middle class, and that reflects in terms of what they can spend,” he said.

BP runs the nation’s fourth-largest refinery on 1,400 acres in Whiting, 15 miles southeast of Chicago, and employs about 1,700 people.

U.S. Steel had a payroll approaching $500 million last year in northwest Indiana. It also runs finishing operations in East Chicago and Portage.

“I would say, almost without a doubt, they’re the employer with the largest single wage and salary budget in the region,” Coffin said.

He noted that some of that money may cross the border with workers who live in Illinois, “but it’s fair to say U.S. Steel and BP both have major impacts on the local economy.”

Some of that impact is in tax revenue. Gary Works will pay about $33 million this year in real and personal property taxes to a Gary/Calumet tax district littered with boarded-up, decaying buildings and hampered by a shrinking population.

The steel plant is the largest taxpayer in the district, along with Northern Indiana Public Service Co., according to Mike Wieser, director of finance for the Lake County Auditor’s Office.

Gary, the largest city in the region, can use the help. It has fought high crime and a slipping residential tax base for years. The population has dropped by nearly half since 1970, from more than 175,000 to 97,715 last year.

So, the primary metals and petroleum industries offer the type of high-wage jobs that governments want to see prosper, Coffin said.

“The problem is unfortunately ... industries like that come with a little baggage, in the case of northwest Indiana, a lot of baggage,” he said.

Some that baggage is about 100,000 pounds of lead dumped into Lake Michigan every year from sediment in the Grand Calumet, said Tom Anderson, executive director of the Save the Dunes Council, which works to protect natural resources in and around Lake Michigan.

Even with the concerns over the BP and Gary Works plans, industry and the environment have come much closer to reaching a proper balance in recent years, said Bob Tolpa, planning coordinator for the EPA’s regional office.

“You don’t see the big tar balls coming up on the beaches,” said Tolpa, who grew up in Gary and joined the EPA to fight industry pollution. “The whole lake is much better.”

Robinson’s union office is a few blocks south of Gary Works. He points to the blue sky outside his second floor window as a prime example of how industry attitudes toward pollution have improved.

He remembers watching the environment change in the 1970s as he drove down the Skyway toll road from Chicago into northwestern Indiana. If the wind blew from the north, motorists flipped on headlights even in the day so they could see through smoke wafting from the steel plant.

“The air was dirtier, and it was grayer,” he said.

Robinson suspects part of the current debate over pollution involves an impractical idea that there should be no emissions.

“How do you heat your house? How do you drive your car?” he said. “I mean, we haven’t reached the point ... where we have the technology to have a zero-emission society.”

He said people should insist that factories use the best technology to harness pollution. But they should not draw artificial lines, otherwise jobs at places like the Whiting refinery will go elsewhere.

“If you draw a line at zero, you probably wind up shutting most things down,” he said.

Posted 12/26/2007