The developer of a liquefied natural gas export facility in southwest Louisiana won approval for a controversial tax break that could reach more than $2 billion over 10 years, potentially the largest exemption awarded in the state’s history.
The Louisiana Board of Commerce and Industry voted in favor of the exemption for Driftwood LNG LLC, a subsidiary of Tellurian Inc., on Friday. A spokesman for Gov. John Bel Edwards said he will sign off on it.
The exemption is for a $15.9 billion LNG export facility that is expected to create 300 jobs, according to Louisiana Economic Development Secretary Don Pierson. It is expected to create 6,400 temporary construction jobs.
In the first year alone, the tax break will be worth an estimated $283.7 million.
The vote Friday came after a lengthy debate, and over objections from Together Louisiana, an advocacy group critical of the state's Industrial Tax Exemption Program. The group on Friday argued that the process that local taxing authorities used to approve the exemption violated open meetings laws and did not give residents a fair say.
Residents and organizers urged the board to delay the vote until the application could go back to local officials for more scrutiny. The organizers presented a petition signed by more than 1,000 residents seeking to delay the vote.
"No members of the public, no residents had any way to know … this deliberation was happening," said Together Louisiana organizer Broderick Bagert, adding the group was not against the project.
The project could be the largest capital investment in the state's history. Tellurian has said it will make a final decision on whether to build the plant in the first half of 2019.
The local property tax exemption is expected to reach more than $2 billion over 10 years if it is renewed after five years. The vote Friday awarded the first five-year installment of that tax break.
The Industrial Tax Exemption Program has been tweaked since Edwards instituted a reform reining in the program in 2016, and now offers manufacturers up to an 80 percent property tax abatement for 10 years. Before the reforms, the Board of Commerce and Industry routinely granted 100 percent exemptions of local property taxes for 10 years.
But the Driftwood application falls under an exception to the rules. Because the company filed the advance notification with Louisiana Economic Development between June 24, 2016, and Oct. 21, 2016, it qualifies for a 100 percent exemption for up to 10 years, an exemption Together Louisiana said would total $2.4 billion.
Local officials in Calcasieu Parish already approved the tax break with little debate, the Lake Charles American Press reported. The paper also reported a local committee tasked with crafting recommendations on ITEP requests may have broken public meetings laws by meeting in secret, a point Together Louisiana made Friday.
But board members mostly voiced support for the project and exemption. Board member Jan Moller proposed delaying the vote until February, but that motion failed 17-2. The board then voted unanimously to approve the exemption.
Jason French, of Tellurian, which is developing the project, said a delay would be "very problematic," as the company is currently looking to ink contracts with customers.
Developers of LNG export facilities have flocked to the Lake Charles region in recent years, planning multibillion-dollar projects and racing to meet peak global demand for U.S. natural gas in the mid-2020s. Driftwood’s investment would be the largest LNG facility to date in terms of capital investment, possibly in the entire country.
State Sen. Norby Chabert, R-Houma, who sits on the Board of Commerce and Industry, called the Driftwood project a “heck of a deal,” and said it is “not our job” to determine whether local residents had enough information about the deal.
Department of Transportation and Development Secretary Shawn Wilson, the governor’s designee to the board, also spoke in favor of the exemption, arguing delays can be “very complicated and impactful” to companies.
While the local taxing authorities approved the exemption, Mack Dellafosse, president of the Calcasieu Parish School Board wrote a letter in his “personal capacity as a resident” seeking a deferral of the exemption.
“I believe the Calcasieu Parish School Board may have voted in favor of a 100 percent exemption without being supplied with very pertinent information,” Dellafosse wrote. “The information provided to board members was very minimal and failed to include critical details.”
Dellafosse said the project would gain more public support if it was delayed and went through the local process again.