Louisiana
Professionals in business, industry, and government recently discussed the importance of creating improved infrastructure, favorable business climates and a capable workforce in Louisiana, especially now that chemical and other manufacturers have started to pull back on investments due to a drop in oil prices.
“The challenge is oil prices have been low for so long,” said Rhoman Hardy, general manager of Shell Chemical in Geismar. “One month is not a big deal, but years — and the prospect of more years — is a challenge.”
According to Hardy, despite the low oil prices, Louisiana still has its advantages when it comes to investment.
“In this business, feedstock really matters,” he said. “Cheap natural gas-derived products give us a chance to do competitively well. The U.S. Gulf Coast is one of the best places to invest. It’s now a matter of deciding between the U.S. Gulf Coast and the Middle East. Those are the places where your natural gas prices are less and you have the chance to build something that will be competitive for a long period of time. I think right now opportunities for investment will be more strained, so being a place a company can invest is even that more important. In the end, stability matters. Don’t underestimate stability, because companies are making very long-term, capital-intensive investments.”
Hardy was a member of a panel at the recent Louisiana Chemical Manufacturing Initiative’s annual conference in Baton Rouge. Hardy and other participants addressed opportunities and challenges for the state’s chemical manufacturing industry.
“Louisiana has the highest location quotient for clustering chemical manufacturing in the country,” said James Chappell, director of state economic competitiveness for Louisiana Economic Development (LED). “Louisiana also has one of the lowest tax burdens, ranking No. 1 for new capital-intensive and labor-intensive manufacturers. LED is constantly thinking of ways to make Louisiana more competitive.”
As far as financing all the infrastructure that will complement Louisiana’s chemical manufacturing industry, Louisiana Associated General Contractors CEO Ken Naquin offered one solution.
“Doubling the current state tax rate of 20 cents to 40 cents per gallon could generate up to $600 million per year,” said Naquin, who is a member of the Governor’s Task Force for Transportation Infrastructure Investment. “An increase in the state fuel tax could be a viable way to finance Louisiana’s future infrastructure needs as well as certain designated megaprojects.”
According to Naquin, megaprojects are usually ones that cost more than $50 million and are designed to improve traffic flow or enhance other modes of transportation.
“Louisiana is third from the bottom in fuel taxes in the U.S.,” Naquin said. “If we double it, we would still be eighth from the top. Every penny brings in $30 million; $600 million would allow us to address our annual needs and set aside money for a 10-year bond program to address some of these mega projects.”
When it comes to chemical manufacturers, an improved infrastructure would also make Louisiana more appealing.
“The Sasol plant in Lake Charles has to have 90,000 piles put in while traveling over a two-lane state highway with a ditch on each side,” Naquin said. “This just doesn’t work.”
Infrastructure improvements would enhance the state’s ability to compete with neighboring Texas. According to Naquin, Texas invests $12 billion annually in infrastructure, whereas Louisiana invests $550 million annually.
“We will not build those megaprojects in my lifetime under the current funding situation,” Naquin explained.
