Louisiana

Experts warn oil and gas can’t save Louisiana’s economy — even under Trump

Published

7 days ago

November 14, 2024

Experts warn oil and gas can’t save Louisiana’s economy — even under Trump

President-elect Donald Trump has promised to lift roadblocks to oil and gas production and approve construction of more than a dozen liquefied natural gas terminals in Louisiana and elsewhere.

At the same time, a special session in the Louisiana Legislature that began Nov. 6 seeks to cut state taxes for oil refineries and petrochemical companies. The state’s generous property tax exemption for industry won’t be touched.

But a new report and long-time observers of the state’s economy say continuing to expect the oil and gas industry to provide an economic renaissance in Louisiana is unrealistic. Not only do those industries no longer drive Louisiana’s economy — providing just 4.5% percent of state revenue, compared with 40% percent in the late 1990s — but slowing global demand for those commodities is poised to further diminish the industry’s benefits to the state.

Louisiana’s growth trajectory is less like most of its neighboring states and more like Puerto Rico, which has experienced negative or very small economic growth in recent years, said Tom Sanzillo of the Institute for Energy Economics and Financial Analysis (IEEFA) and an author of the report titled “The Declining Significance of the Petrochemical Industry in Louisiana.”

“At the turn of the 21st century, Louisiana had one of the country’s fastest-growing economies, placing sixth among the states for five-year average gross domestic product (GDP) growth”, according to the report. “Today, Louisiana is 49th out of 50 states in GDP growth. It also ranks 49th in population growth and 45th in median household income.”

The report also notes that in 1999, the oil and gas sector accounted for 33% of the state’s GDP. By 2022, it had sunk to 14%.

“I mean, we’re reviewing stuff all over the world now,” Sanzillo said. “And I looked at that, and I said, ‘That can’t be right. This is stunning.’ ”

Louisiana Gov. Jeff Landry, center, greets Rep. Polly Thomas, R-Metairie, left, with Rep. Mike Johnson, R-Pineville, to the right, as he enters the Louisiana House of Representatives on the opening day of a legislative special session, Nov. 6, 2024, at the Louisiana State Capitol in Baton Rouge. (Hilary Scheinuk / The Advocate, Pool)

State a leader in fossil fuel emissions

Because of its ties to fossil fuels — either through production of natural gas and oil or by burning it and using it at petrochemical plants — Louisiana is the sixth largest emitter of carbon dioxide, a major greenhouse gas, in the United States.

And Louisiana is the second most vulnerable state to climate change caused by those emissions — prone to stronger hurricanes, rising sea levels and increasing heat and rainfall.

“The oil and gas industry has a hold on the popular imagination, our self-image and our politics that is way disproportionate to their actual economic impact and their impact on actual communities,” said Jan Moller, executive director of the Invest in Louisiana, a nonpartisan economic think tank.

The IEEFA report says the state must diversify its economy to thrive, a conclusion echoed by a Moody’s Investor Service report that warned earlier this year of “revenue volatility stemming from (Louisiana’s) financial and economic dependency on oil and gas extraction and refining.”

Louisiana State University economics professor emeritus Jim Richardson agrees the state must diversify. He served 30 years as the economist on the Louisiana Revenue Estimating Conference, the state’s economic forecasting panel.

“We’re an oil and gas state, but, well, we need to be more than that,” Richardson said.

Despite Louisiana’s relatively low population, the state produces a large amount of carbon dioxide and other greenhouse gas emissions because of the amount of industry, including petrochemical plants, which either burn fossil fuels or use them to create chemicals. (World Resources Institute)

Petrochem sector already saturated

Sanzillo says even a Trump administration can’t change worldwide markets. Global supply of some of the chemicals produced in Louisiana is already exceeding worldwide demand, according to the report.

While it provides an overall picture of oil, gas and petrochemical production in Louisiana, the report focuses specifically on two substances: ethylene, a building block for other chemicals and plastics, and methanol, which is used for fuel and to make plastics, paints and cosmetics. Both substances are made using fossil fuels as feedstock.

Industrial capacity to manufacture ethylene exceeded demand for the substance by an annual average of 17 million tons from 1990 through 2023, according to the Independent Commodity Intelligence Service. Ethylene capacity is expected to exceed demand over the next six years by 53 million tons, according to the same source.

The IEEFA report examined 24 petrochemical projects in Louisiana in various stages of development. Of those, 61% are ethylene or methanol plants, with investments totaling $82 billion. Those plants have been approved for $6.8 billion in property tax breaks through the state’s Industrial Tax Exemption Program (ITEP).

In fewer than 30 years, Louisiana has seen a dramatic shift in how much oil, gas and petrochemical extraction and production contributes to its economy. The author of a recent report on the state’s economy calls the drop “stunning.” (State of Louisiana Executive Budget 2024–2025)

State sees future in oil, gas and petrochem

Louisiana Economic Development, a state agency, looks at some of the same petrochemical projects cited by IEEFA and sees evidence that the industries themselves are diversifying, benefitting the state’s economy.

“Diversification and innovation in Louisiana’s energy sector has been well documented, and nationally recognized,” LED spokesman Mark Lorando said. “Since 2018, companies have committed more than $61 billion of capital investment in a wide variety of new energy projects across the state, representing the potential creation of more than 26,000 direct and indirect jobs.”

He added, “Many of these companies, including our legacy energy industry, are implementing innovative technologies in renewable fuels and blue hydrogen, as they capitalize on a workforce skilled in energy production.”

At least a third of the projects highlighted by LED will rely on carbon capture and sequestration (CCS). Sanzillo’s group and others say CCS is “unproven and expensive.”

The oil, gas and petrochemical sector also are not the job creators they once were. Currently, oil, gas and related industries employ 45,000 people, according to LED — fewer than 3% of the state’s 2 million workers. Another 260,000 have jobs indirectly associated with the industry. As recently as the 1980s, more than 120,000 people were directly employed by the industry.

Part of that decrease is from automation at chemical plants. “Our industrial capacity can grow, but the number of people working there does not necessarily grow at the same rate. And again, is that bad from a company perspective? Are they trying to be mean to us? No, they’re merely trying to be competitive in a worldwide economy,” Richardson said.

Engineers are often the primary employees at the petrochemical plants, not blue-collar line workers, Moller said. “These aren’t your parents’ factories.”

Louisiana’s oil production has dropped significantly since 1990, and far below its peak in 1967 – when it accounted for 17% of all U.S. oil. As production has dropped so too has the income that the state receives from oil extraction. (IEEFA and Energy Information Administration)

Deep tax cuts for industry eyed

Under Landry’s tax plan, some corporations would have their income taxes more than cut in half — from a maximum 7.5% to 3%. A franchise tax, which is imposed on a business’ net worth, would be eliminated. Louisiana is one of 18 states and the District of Columbia that levies a franchise tax.

But Moller points out that “Louisiana already has the most generous corporate, manufacturing incentive anywhere in the country … in ITEP. Now we are going to cut back the two taxes that we do get,” Moller said. Under ITEP, manufacturing industries — including those manufacturing chemicals — are exempt from paying 80% of their property taxes for up to 10 years.

Landry’s plan proposes the state make up for the loss of corporate taxes through a variety of measures, such as cutting incentives to the film industry and making permanent a .45 cent increase in sales tax on online products and services, including video streaming services.

Louisiana has the 10th most regressive taxing regime in the nation, putting 13.1% of the tax burden on families making the lowest amount of money, while taxing the richest taxpayers 6.5%, according to the Institute for Taxation and Policy, a nonprofit, nonpartisan tax policy group.

Louisiana Gov. Jeff Landry holds a copy of the Louisiana tax code during his speech to the Legislature at the State Capitol in Baton Rouge on Nov. 6, 2024, the opening day of a special session in which he is asking lawmakers to overhaul the state’s tax structure. (Hilary Scheinuk / The Advocate, Pool)

The state has been grappling for years to find a way to plug the fiscal hole left by tax breaks given to oil and gas industries. Moller said this session won’t fundamentally help.

He noted that Louisiana Gov. Huey P. Long, a populist who served as governor from 1928 to 1932, “struck a social contract with oil and gas that persisted for like, 50 years, and it was basically like, ‘We’re going to open ourselves to you.’

“And in exchange, those industries would pay taxes to keep the government operating, and keep taxes low for everyone else. And that was the social contract, and it worked until it stopped working in the 1980s,” Moller said. “We’ve never seriously figured out how to replace the money that we got from the oil and gas industry for generations.”

In the report, IEEFA calls for something akin to a federal military base closure committee in which government and industry come together to find ways to mitigate the loss of oil and gas revenues and explore new avenues of economic development.

Richardson has watched as three decades of Louisiana governors and politicians worked to attract different industries — including health care, technology and tourism. He says there’s no easy answer to fix the state’s economy.

“Everybody wants to grow and everyone wants to do better,” he said. “I think we’re having a hard time finding that next sector that we can actually grow big time.” But, for the state’s governors, who may only serve four years, “If they want a success story, (energy) is what they are going to do.”

The institute’s report points out that many of the projects are being developed in Black communities, including in the corridor between Baton Rouge and New Orleans called “Cancer Alley.”

“Maybe once a long time ago those communities could have claimed big benefits and taxes and … jobs,” Sanzillo said. “Now, they’re just getting a burden.”

Floodlight is a nonprofit newsroom that investigates the powerful interests stalling climate action.

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Louisiana

Know the Foe: Gaining Louisiana Tech insight with BleedTechBlue

Published

33 mins ago

November 21, 2024

Press Room

Know the Foe: Gaining Louisiana Tech insight with BleedTechBlue

As we will do throughout this football season, HawgBeat went behind enemy lines to gain insight on the Louisiana Tech Bulldogs with BleedTechBlue Publisher Ben Carlisle.

Louisiana Tech has been on a bit of a roller-coaster this season, as it defeated a team like Western Kentucky (7-3 record) and nearly beat NC State on the road, but the Bulldogs lost Tulsa, FIU and Sam Houston.

Under Cumbie’s leadership, Louisiana Tech has accumulated a 10-24 (7-16 CUSA) overall record in three seasons. This year, the Bulldogs boast the No. 104 total offense (344.4 YPG) and No. 61 passing offense (232.2 YPG) in the country.

Here is what Carlisle had to say about Saturday’s matchup, which is set to kick off at 3 p.m. CT at Razorback Stadium in Fayetteville…

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Louisiana

Louisiana lawmakers search for ways to pay for Landry’s proposed income tax cut • Louisiana Illuminator

Published

8 hours ago

November 21, 2024

Press Room

Louisiana lawmakers search for ways to pay for Landry’s proposed income tax cut • Louisiana Illuminator

Gov. Jeff Landry’s ambitious plan to overhaul Louisiana’s tax structure has largely been pared down to a more modest goal – cutting state income taxes.

Lawmakers are working on a way to make sure the state can pay for that desired tax reduction while not having to make damaging cuts to areas such as health care and higher education.

Options include raising the state sales tax rate higher than it is now, retaining a higher corporate income tax rate than proposed or settling on an income tax cut that is smaller than Landry originally pitched weeks ago.

The governor wanted to move to a flat personal income tax rate of 3% – the highest rate currently is 4.25% – but it will cost the state more than $1 billion annually. Landry’s income tax plan also leaves the state approximately $700 million short of what is needed to cover the costs of government, according to senators.

Through his Revenue Secretary Richard Nelson, the governor had originally crafted a proposal that would exchange a broader base of tax collections for lower personal income and corporate taxes. Nelson said Louisiana would be able to pay for across-the-board personal income and corporate tax rate cuts totaling billions of dollars as long as the state scrapped generous business tax breaks and applied the sales tax to a greater range of products.

The governor has struggled to get lawmakers to fully embrace the trade off, however.

Legislators have eagerly voted for bills to cut corporate and personal income taxes but stalled on proposals to help make up for that lost revenue.

Landry’s tax package started to unravel last week when the Louisiana House of Representatives refused to vote for legislation that would extend the sales tax to more services, such as lawn care, home repair and dog grooming.

“Obviously, the services bill in its original form was a little over $500 million, which would equate to about a half a point on the personal income tax,” House Speaker Phillip Devillier, R-Eunice, said.

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This week, the Senate declined to fully roll back some of the state’s expensive business incentive programs, such as its movie and television tax credits and historic preservation tax breaks that collectively cost the state hundreds of millions of dollars annually.

A plan to eliminate a state inventory tax credit, which covers taxes businesses pay to local governments, has been delayed until 2026, and a proposal to increase a tax on heavy machinery and equipment used by industrial employers has also been scrapped.

If he doesn’t find a way to make up for that money, Landry runs the risk of revisiting the same political problems that plagued former Gov. Bobby Jindal.

Jindal also cut income taxes without replacing the lost revenue or finding a permanent way to cut government spending. His policy led to chronic budget problems for years and made the former governor deeply unpopular when he left office.

Senate leaders appear to be pushing for a higher state sales tax rate to help fill the hole left by the personal income tax cut.

It was scheduled to automatically drop from 4.45% to 4% in July, though Landry had already pitched keeping the extra 0.45% permanently as a way to cover the corporate and personal income tax reductions. Now, lawmakers are considering an even higher rate to cover the state’s expenses; 5% has been floated for a few days.

“This isn’t a tax-lowering session. This is a tax-reorganization session,” Rep. Michael Echols, R-Monroe, said Wednesday.

Louisiana already has one of the highest average sales tax rates in the country, and that levy is a larger burden on poor people who have to pay the same rate as the wealthy. Very low-income households don’t pay income tax and won’t necessarily see benefits from cuts Landry and lawmakers make in that arena.

“As soon as you start to increase the sales tax more, the plan becomes more regressive,” said Rep. Matthew Willard, D-New Orleans, leader of the House Democratic Caucus.

Several Republicans and Democrats in the House also weren’t enthusiastic about the sales tax portion of the original tax plan and might not want to vote for a 5% rate. A bill to keep the state sales tax at 4.4% barely passed the House, with just two votes to spare last week.

“That would be the top number we need for sales,” Sen. Franklin Foil, R-Baton Rouge said Wednesday morning. “We don’t necessarily have the votes to do that yet. We need to get a tally of where things stand.”

GET THE MORNING HEADLINES.

Lafayette Sen. Gerald Boudreaux, head of the Senate Democratic Caucus, said his party doesn’t want a higher sales tax rate, but Democrats also fear government programs they champion, like social services, will be targeted if they don’t support the proposal.

“We want to make sure the things that are important to us will be funded, right?” Boudreaux said Wednesday before he and other Democratic senators headed off to a meeting with Landry.

Rep. Jack McFarland, R-Jonesboro, was bullish on the legislators’ willingness to raise the sales tax to 5%.

“I think it can get there. It’s an easier path for that than it is for broadening the base,” he said.

If lawmakers aren’t willing to raise the sales tax more, legislators could look to retain more of the current corporate income tax rate, but they’ve already pulled back on an original plan to cut that tax dramatically.

Landry initially pitched replacing the graduated corporate tax rate that tops out at 7.5% with a flat 3%. But the senators moved that levy back up to 6% earlier this week to claw back some revenue. A further increase might be unlikely given pressure from business lobbyists.

Corporate taxes are also a notoriously unstable source of tax revenue. In part because sizable tax credits can be applied in any budget cycle, corporate tax collections have ranged from $193 million to $1.6 billion annually over the past 10 years, according to the Public Affairs Research Council of Louisiana.

Legislators could also increase the personal income tax rate from 3% but seem very reluctant to do so. If it does go up, they would try to keep it to a small adjustment, like up to 3.1% or 3.2%.

“My belief is the personal income tax will, probably will, stay at 3(%),” said Foil, who heads the Senate committee that oversees tax policy.

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Louisiana

Arkansas vs. Louisiana Tech: Star comparison, PFF grades, season stats

Published

16 hours ago

November 20, 2024

Press Room

Arkansas vs. Louisiana Tech: Star comparison, PFF grades, season stats

The Arkansas Razorbacks (5-5, 3-4 SEC) will look to secure bowl eligibility Saturday against Louisiana Tech (4-6, 3-4 CUSA) at Donald W. Reynolds Razorback Stadium in Fayetteville.

Hailing from Ruston, Louisiana, the Bulldogs will bring the nation’s No. 12 total defense with them to Fayetteville fresh off an upset win over Western Kentucky, which was leading the Conference USA standings prior to last Saturday.

“We’re catching them when I think they’re playing their best football,” Arkansas head coach Sam Pittman said Monday. “They deliver some problems. The structure of their defense. They’re a 3-3-5 but it’s different because they have a robber, a rover — a guy basically who’s hard to get to to block. Who is a really, really good player. The (Kolbe) Fields kid.

“So offensively, they’re running the ball a lot better than they have all year. Not throwing it quite as much as what they did earlier in the year. Bu the transfer from Coffeyville (Omiri Wiggins) is a hard runner. Their line is playing well. They’ve got a lot of speed at wideout. So I think they’re going to come in with a lot of confidence, obviously, after their win last week. We’re excited to have them here and on senior day for us. But we know that was a big win for them last week and they’ll come in with a lot of confidence I’m sure.”

Arkansas is statistically better than the Bulldogs in generally every major offensive category, but the Louisiana Tech defense is stingy. Former Razorback Zach Zimos has logged nearly 500 snaps on the year at linebacker, which is a position he switched to after being a safety with the Razorbacks.

“He’d hit you,” Pittman said. “When he hit you, you got stuck. Certainly playing a different position than we had him here. But I like Zach, I always have. I’m happy for him. I think he’s one of the leaders over there. He’s played a lot of ball. I’m just really happy for him and he’s doing a good job. He’ll hit you, now, so we’ll have to figure that out.”

The Razorbacks will be trying to bounce back from a 20-10 loss to Texas that set them back to a .500 record on the season. A win over the Bulldogs would make Arkansas bowl eligible after the Hogs missed the postseason last year.

“This game, winning, if we can win, it will allow us to play not just another one but another one after that,” Pittman said. “And we just have to continue to improve. So I think that’s what we’ll talk about a little bit more than even what Louisiana Tech has been able to do lately.”

HawgBeat has also compared both teams’ grades from Pro Football Focus, which is a football analytics website that provides grades for each individual player and full teams after analyzing each game for all Football Bowl Subdivision (FBS) teams. Grades are given from 0-100, with the higher the grade signifying better performance.

Here’s a look at how both teams stack up based on stats from this year and high school star ratings:

Offense

Louisiana Tech || Arkansas

Scoring: 21.9 (109th) | 30.7 (45th)

Total yards: 344.4 (104th) | 458.3 (11th)

Passing: 232.2 (61st) | 278.0 (20th)

Rushing: 112.2 (115th) | 180.3 (80th)

Third downs: 41.7% (57th) | 47.3% (15th)

Sacks allowed/game: 3.3 (122nd) | 3.1 (117th)

Turnovers: 19 (118th) | 17 (98th)

Defense

Louisiana Tech || Arkansas