MIDDLETOWN — The proposal to build a $310 million cogeneration plant on the site of AK Steel Corp.’s steel mill has been canceled, according to the company.

The decision announced Friday jointly by AK Steel and Air Products and Chemicals Inc. ends about four years of debate.

Plans were to construct a first-of-its-kind plant in North America at AK Steel’s Middletown Works to capture waste gas from the blast furnace of the steel plant and convert it to steam and electricity. It was developed by Air Products of Allentown, Pa., which has an expanding Middletown office.

It was a sign of another significant investment in the city by Middletown’s largest employer. AK Steel employs approximately 2,100 people in Middletown and another approximately 300 people at its headquarters in West Chester Twp.

AK Steel is one of the region’s largest companies with annual revenues of more than $6 billion.

“It’s unfortunate it didn’t work out, but also it’s strictly economics,” said Barry Racey, AK Steel spokesman. “Cogeneration is a good technology and it’s good for the environment and it’s good as an alternate way of generating electricity and steam, in our case.”

However, at today’s electricity prices and future projections, it’s cheaper for AK Steel to buy electricity than it is to generate it, according to the company.

The average Ohio industrial retail price for electricity was 6.21 cents per kilowatt hour in 2011, compared to 6.71 cents in 2009 and 5.76 cents in 2007, according to the U.S. Energy Information Administration.

“Despite a contingent $30 million grant from the U.S. Department of Energy, current and projected electricity costs do not justify the economics of proceeding with the project,” AK Steel and Air Products said in a statement with the release.

Today, the steel plant’s blast furnace gas is burned off. The proposed facility could have been used to generate about one million megawatt hours of power annually, enough to serve more than 85,000 Ohio homes, according to Air Products.

AK Steel said it will continue to explore energy-efficient technologies.

Staff writer Tom Gnau contributed to this report. Contact this reporter at (513) 705-2551 or clevingston@coxohio.com. Follow this reporter on Twitter @ChelsLevingston