Monday, September 30, 2013

Keep on fracking, I guess

The "reindustrialization" of South Louisiana continues
Royal Dutch Shell said today it plans to build a $12.5 billion natural gas plant in Ascension Parish, bringing some 740 new permanent jobs to the area.

Gov. Bobby Jindal joined Shell this morning to announce the company has selected a site near Sorrento for the planned natural gas-to-liquids (GTL) facility, though a final decision on whether the project will move forward has not been made.

Shell intends to make that call after site evaluation and preliminary engineering studies. The company did not provide a timeline for the evaluation phase.

Shell is one in a string of companies looking to expand its domestic manufacturing operations amid historically low U.S. natural gas prices. Rumors surfaced earlier this year that Shell was looking at sites in Louisiana for a GTL plant that could produce at least 70,000 barrels of liquids per day.

Sooner or later the frack boom will have to do... something.. to move the jobs number in Louisiana, right?  At the moment, we're still waiting. This is from a recent report from the Louisiana Budget Project titled The State Of Working Louisiana 2013.
Louisiana had nearly 2 million jobs as of July 2013, an increase of 7,500, or 0.4 percent, since the start of the recession in December 2007. But the state’s population has grown by 6 percent in that time, meaning the number of jobs is not keeping up with the working-age population. With the state’s population expected to grow by another 2 percent over the next three years, this means that Louisiana must create roughly 150,000 new jobs by 2016 to bring the unemployment rate to pre-recession levels. That’s equivalent to creating 4,000 jobs each month for the next three years, more than twice the rate of job growth experienced over the past year. The state created an average of 1,950 jobs per month between July 2012 and July 2013.

A large portion of the state’s job growth since the start of the recession has occurred in low-wage industries like leisure and hospitality, which added 15,900 new jobs since December 2007 (an 8 percent increase), while high-paying industries cut jobs. Louisiana manufacturers,for instance, have eliminated 14,600 net jobs since December 2007 (a 9.6 percent reduction).
Mark Moseley wrote about the disconnect between the promised reindustrialization and the slide in jobs numbers last month.
(LA Economic Development Secretary Stephen) Moret would have us believe it’s a new day. Investments are in place, huge new plants are being built. The unemployment uptick is just statistical noise before the industrial boom kicks in. Don’t you worry, fracking good times lie ahead!

He has a point. In April I made a partial list of encouraging business news items about new headquarters, plants and facilities in Louisiana. It’s an impressive array of projects, and it would be highly disturbing if, as they came online, statewide employment numbers continued to worsen.

Keep watch to see if next week’s statewide unemployment numbers rise again. If they do, it could signal more political problems for the Jindal administration. The public would want to know what is happening to the Louisiana economy right now. They wouldn’t want to hear Moret’s repeated assurances about the industrial paradise that lies over the rainbow.
The unemployment numbers are not better. And so what the public might want to know now is why their money is being appropriated for millions of dollars worth of "incentives" paid out to Shell.

Corporate welfare is at an all time peak nationally.  It's estimated that the various subsidies paid out to big businesses cost the average American household something like $6,000 per year. Louisiana is among the very worst offenders. A 2011 "report card" study by the watchdog Good Jobs First rated Louisiana's subsidy programs "D+" The introductory test on the GJF website offers this brief history.
Louisiana has a long history of enormous corporate giveaways. A decade ago, the Louisiana Coalition for Tax Justice compiled the state’s property tax exemption records for the 1980s and found that they added up to $2.5 billion, with the largest tax breaks going to giant petrochemical companies and utilities. Almost three-quarters of the exemptions created no new permanent jobs. Many of the companies also received enterprise zone tax rebates and credits. One of these, Shell Oil, collected credits for hiring new workers to replace seven employees killed in a 1988 plant explosion.

The chief economist in the Legislative Fiscal Office recently criticized these kinds of payouts like what was recently awarded to Sasol for building another gas plant.
Sasol, for example, will get $115 million in cash in 2018 and 2019 to build their liquids-to-gas facility in southwest Louisiana. In these years, state tax revenues in excess of cost will actually be negative, according to LED's own projections, but officials still state the "cumulative" tax revenues will be positive.

Albrecht disagrees with this characterization.

"They're trying to imply that it's still free even though their annual benefit is negative in that year," he said in an interview Thursday. "I think a little of disingenuous."

This cash incentive throws a wrench into the budgeting plan for those outlying years, because lawmakers will have to find the money from the state general fund, construction budget or elsewhere. When asked where he thinks the administration will say the money is coming from, Albrecht said he didn't know.

"They don't say," he said. "When (the costs from the Sasol project) starts, they're going to be gone and they've obligated future legislators to come up with $115 million in cash."

A few weeks ago Lt. Gen. Russel Honore spoke to the Rising Tide conference about economic justice and Louisiana's chemical industry. It's a remarkable talk for someone who is frequently the subject of rumors about a run for statewide office. Such rumors are certainly far-fetched. It's difficult to imagine any Louisiana politician exhibiting this much open hostility toward oil and gas.

"What we have going on off our coastline is equal to what we have going on in Nigeria as far as environmental injustice," he says at one point.

Later he directly attacks the influence of oil money on state politics, on the public universities and on commercial media.  "If I had my way we would put a proposition in that would say, if you're running for office you cannot take money from the oil and gas industry. It distorts a democracy."

Rising Tide 8 - Keynote - Lt. General Russel Honore from Jason Berry on Vimeo.

It's maybe not the most polished speech you'll ever watch but it is remarkable to hear a public figure of Honore's stature talk like this even as the state continues to open its purse to companies like Sasol and Shell without anything like an expectation that they will offer anything other than more destruction in return.

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