Louisiana’s chemical industry accounts for $79.7 billion in sales and $15.7 billion in household earnings in the state, according to a new industry-backed study.
The report, conducted by economist Loren Scott for the Louisiana Chemical Association, also found the chemical industry supported two of every seven jobs in Louisiana. The figures include the sector’s direct and indirect impact.
“Our expectations are that the benefits shown above are very likely to grow in the future,” the report said. “Very low natural gas prices are not only reducing operating costs substantially for these plants, but also low natural gas prices are enabling the industry to gain market share away from European firms.”
Scott’s study made repeated mention of the Industrial Tax Exemption Program, the state’s most lucrative tax incentive. The program has come under scrutiny in recent years, and is in the midst of another round of changes to the rules. Gov. John Bel Edwards initially reined in the program two years ago with an executive order, a move that gave locals a say in whether to approve or reject the local property tax breaks.
At a meeting of industry leaders Wednesday in downtown Baton Rouge, Scott rallied support for the ITEP, calling it necessary for Louisiana to compete with Texas as the Bayou State continues to lag behind its neighbor in other key factors like education and infrastructure.
The event was the latest indication that the tax incentive remains forefront on the minds of industry leaders, especially as officials consider new changes and locals continue exerting their newfound authority over the program.
"As I travel and talk to (industry), it's dominating their discussions," LCA President Greg Bowser said in an interview.
The release of the chemical association study represented the second time in as many weeks a major industry group held an event aimed at rallying support for the ITEP, after the Greater Baton Rouge Industry Alliance held an ITEP-focused event. Meanwhile, educators and activists critical of the ITEP held a gathering Tuesday to push the East Baton Rouge School Board to reject all ITEP applications that come before them and use the money to improve public education.
The new set of rules for the ITEP, which are not yet final, represent a move toward "predictability," Bowser said. But he added the changes still rein in the dollar value of the exemptions from how the program was structured before the executive order.
The proposed changes, outlined by Louisiana Economic Development, would give local governments some immediate tax payments from manufacturers by reeling back the exemption amount to 80 percent over 10 years, instead of 100 percent at an initial term of five years.
Scott’s study identified two “major threats” to the chemical industry: Changes to the ITEP and additional business taxes associated with resolving the state budget crisis.
The chemical industry in Louisiana has experienced a rush of investment in recent years, as firms continue to take advantage of low natural gas prices and the state’s raw materials, major waterways for transport and proximity to the Gulf of Mexico. For decades, companies have also routinely been granted property tax breaks for the capital-intensive projects, with little scrutiny from the state.
The report said the industry has been in “major expansion mode” since 2012, though the value of shipments dropped by 25 percent from 2012 to 2016 to $50.4 billion. Scott said the drop is likely a reporting issue, as recent data sets are not complete, but upcoming reports should shed light on the trend.
Last year, nearly $10 billion in chemical products — about 18 percent of all chemical products made in Louisiana — were exported to other countries. The sector employs 29,109 people directly, but Scott said many more full-time contract workers are not counted in that number.
East Baton Rouge Parish had the fourth-most chemical jobs, at 3,117 in 2017, while Ascension had second-most at 4,053. Calcasieu boasted the most chemical jobs with 4,928.