ExxonMobil said Friday it will move forward with a more than half-billion-dollar expansion of its polyolefins plant in north Baton Rouge, the oil and gas giant’s largest local capital project in nearly a decade.
The final investment decision comes a year after Exxon first announced it was considering the project, and just weeks after the company warned it might reduce its local investments after being rejected for two unrelated tax breaks by the East Baton Rouge school board.
Construction on the expansion will begin this year, Exxon said. It is expected to add 45 permanent jobs, 20 permanent contractor jobs and support 600 temporary construction workers. The project will add a new polypropylene line with a capacity of 450,000 tons a year, a unit that will start up in 2021.
The company previously said it would spend more than $500 million on the project. It is expected to be the largest investment Exxon has made in Baton Rouge since 2010, when it spent $800 million adding an ultra low-sulphur diesel unit to its refinery. Turner Industrial and Jacobs Engineering landed the engineering, procurement and construction contract for the latest project.
Exxon is currently in the midst of $20 billion spending plan along the U.S. Gulf Coast. John Verity, president of ExxonMobil Chemical Co., said growth in feedstock supply along with increased global demand for chemicals is driving the company’s expansion in the region.
A rush of natural gas and oil from the U.S. shale boom has in recent years led companies to spend tens of billions of dollars building petrochemical plants in Louisiana, mainly along the Mississippi River from Baton Rouge to New Orleans and in the Lake Charles region.
Exxon last year won unanimous approval from state and local officials on a tax break worth an estimated $31.7 million over a decade for the polyolefins expansion, through the state’s controversial Industrial Tax Exemption Program. Because of recent reforms to ITEP, the company is required to pay 20 percent of the property tax bill on the expansion despite the exemption.
Gov. John Bel Edwards and East Baton Rouge Mayor-President Sharon Weston Broome both endorsed the project.
In addition to the ITEP exemption, Exxon is expected to get Enterprise Zone incentives and will use Louisiana Economic Development's FastStart workforce training program, Edwards's office said.
In January, the East Baton Rouge School board denied Exxon two separate tax exemptions on projects already completed at its local plants. Exxon responded with a terse statement chastising the “uncertainty” surrounding tax incentives and warning it could deter future spending at its Baton Rouge plants.
“We are glad that effort has resulted in the announcement today,” Exxon spokeswoman Stephanie Cargile said. “However, there are future investment opportunities we will be considering as part of the Growing the Gulf initiative, and we hope that the current business environment will improve to help us bring future projects to Baton Rouge when we need it most.”
Together Baton Rouge, which has been the most prominent critic of the ITEP program, applauded the decision Friday and called it an example of “how real economic development is supposed to work.”
The Rev. Lee Wesley, an organizer with Together Baton Rouge, said the expansion of the polyolefins plant is a new project that creates jobs — the type of project that ITEP should be used for. Wesley said the group is “delighted” about Exxon’s expansion.
“I don’t think there’s any uncertainty about ITEP,” Wesley said. “I don’t think the denial of those applications creates a sour climate for businesses that are looking for a place to locate.”
Exxon has for the past several years been at the center of a contentious and public debate over the value of tax breaks through ITEP, which exempts local property taxes that would otherwise go to schools, roads and other services.
Several major industry groups hailed the investment decision as good news while simultaneously criticizing opposition to the tax breaks and calling for a more “business-friendly” environment.
Tyler Gray, head of the Louisiana Mid Continent Oil and Gas Association, said the “vast majority” of investments from Exxon’s Growing the Gulf initiative has gone to Texas, where the company is based.
The Louisiana Chemical Association, Greater Baton Rouge Industry Alliance and Baton Rouge Area Chamber issued statements calling for more certainty and saying the current business environment is too unpredictable.
Adam Knapp, president and CEO of the chamber, said the organization made trips to Texas to meet with Exxon officials over the past year to court the project. He said manufacturing investments like this one are good for the area’s long-term job prospects.
He also said Baton Rouge has to have a more “stable business climate” if it wants to continue to win big billion-dollar projects.
“We’ve been very concerned about Exxon’s willingness and interest to invest,” Knapp said. “This is a great sign we have the ability to win projects and provide a climate for investment to the company.”