Get Involved

Loss of major petrochemical project to Texas reflects weakening business climate in Louisiana, industry officials say

April 20, 2017
By Stephanie Riegel
Originally Posted on Greater Baton Rouge Business Report

Louisiana Economic Development Secretary Don Pierson tried to put a good face on the disappointing announcement Wednesday that Louisiana lost out to Texas in landing the world’s largest ethane cracker plant, which is being developed by ExxonMobil Chemical Co. and Saudi Basic Industries Corp, or SABIC.

“We were a strong finalist,” Pierson said. “We are very proud of the case we made on behalf of our state.”

But business and industry leaders say that’s not good enough, and they question whether Gov. John Bel Edwards’ administration really understands the importance of economic development in the state.

“The reality is we have a business climate issue here in Louisiana,” says Louisiana Association of Business and Industry President and CEO Stephen Waguespack. “As we compete with states like Texas we have to look ourselves in the mirror and be honest. We are becoming well known as a state that blames business, sues business and changes the rules and tax code on business frequently. That leads to instability and hostility, which is a dangerous recipe for economic development.”

Exxon and SABIC will develop the $10 billion plastics complex at a site near Corpus Christi. It is expected to create 6,000 temporary jobs, more than 650 permanent jobs and have an annual direct payroll of $60 million.

In a statement accompanying the announcement of its decision, ExxonMobil cited Texas’ favorable business climate as one of the key factors behind its decision. Greg Bowser, president of the Louisiana Chemical Association, says that’s very telling.

“When you look at the comments from the search team, one of the things they talked about is a positive business climate and right now there’s not a positive business climate in Louisiana,” Bowser says. “We’re talking about putting taxes on business that other states want to take off. The business climate here has not been a positive one over the last 15 to 18 months.”

Iain Vasey, a former Baton Rouge Area Chamber executive, and Tommy Kurtz, a former LED official, both head up the Corpus Christi Regional Economic Development Corp., the lead agency that helped land the deal for south Texas.

They point to several other factors they believe play into the deal: Immediate proximity to a deep-water port; ozone attainment, which means ExxonMobil will not have to procure costly air attainment credits that could add hundreds of millions of dollars to the cost of the project; a predictable tax climate; a community college system that works closely with economic development agencies on workforce training programs; a high-quality K-12 school system; and, perhaps, above all, a concerted partnership among multiple agencies trying to land the deal.

“I’d say the biggest thing is the breaking down of the silos,” says Vasey, CCREDC president and CEO. “There were probably 50 to 100 people involved in helping to pull this together. Everybody played a part.”

It’s a lesson Louisiana better learn fast, Bowser says.

“Louisiana has to understand that these things are more competitive and people are going to be competing for these investment dollars,” he says. “It’s nice to be in the running, but you don’t want to come in second too many times.”