For Louisiana’s energy industry to fully recover from the double-whammy it’s currently experiencing, industry experts say there must be consistency in the state’s rules and regulations, ranging from ITEP to the coastal parish lawsuits.
During today’s The Future of South Louisiana Industry webinar hosted by Business Report as part of its 2020 Power Breakfast Series, panelists discussed the hurdles petrochemical companies are left to overcome without any consistency in Louisiana’s legal, tax or regulatory framework.
There’s been uncertainty in recent years over the state’s industrial tax exemption program, especially in Baton Rouge. The tax break impacts much of ExxonMobil’s corporate investment decisions, said Gloria Moncada, who oversees the company’s Baton Rouge Refinery.
“Anyone who believes ITEP is a nonissue for companies is frankly misinformed, and it’s a dangerous assumption,” Moncada said. “For [Exxon], unpredictability on ITEP means that when we’re looking at where to locate projects, we enter a zero as our assumption on receiving that incentive in Louisiana in our analysis. We’ll just assume we can’t rely on it. That’s not a good thing.”
ExxonMobil has three major integrated refineries along the Gulf Coast—the one in Baton Rouge as well as two in Texas. But when forced to make investment decisions, Moncada said the scales tend to tip in favor of the company’s Texas sites, which are in a state with better infrastructure and more predictable tax and incentive rules.
Ultimately, when assets become “noncompetitive,” Moncada said Exxon has historically minimized its investment in those assets and, in some cases, shut them down—a fate she doesn’t want to see materialize in Baton Rouge.
Another deterrent to doing business in Louisiana, industry proponents argue, is the ongoing litigation from coastal Louisiana parishes against oil and gas companies over wetlands damages. So far, parish governments have filed 42 cases against more than 200 energy-sector defendants. But rather than the state handling the cases, the Department of Natural Resources—which issues the coastal use permits—has deferred the lawsuits to parishes and their private attorneys.
“You have to go through the local courts instead of the 19th Judicial District Court, where all other agency challenges are taken, and it brings local politics to the review process,” said Marjorie McKeithen, a New Orleans-based partner at Jones Walker. “What should be looked at is making the venue as neutral and apolitical as possible.”
The issue exemplifies how district courts tend to view existing regulations as movable targets, said McKeithen, with several courts applying the Louisiana Public Trust Doctrine to coastal use permits. It’s forced DNR to engage in overall project cost-benefit analyses, which McKeithen argued is “not really their area” of expertise.
Eric Danos, who owns Louisiana-based oilfield services provider Danos, described the uncertainty surrounding the state’s coastal lawsuits as an “indefinite liability” for outside companies interested in doing business in Louisiana.
“It’s a significant impediment,” Danos said. “Companies have to know what agency they’re going to deal with and what rules they’re playing by.”
It’s not the only obstacle Baton Rouge must conquer. Moncada also referenced a recent Baton Rouge Area Chamber report showing how poorly the nine-parish Capital Region fares in terms of quality of life, particularly among minorities. BRAC was unable to provide further information before this afternoon’s deadline.
