Proposed increases in federal environmental regulations and volatile energy prices could hamper Louisiana’s economic growth over the next two years, according to economist Loren Scott, who delivered his annual economic outlook at Business Report’s Top 100 Luncheon today.
But while there are reasons for concern, the overall outlook for the state is still generally positive, with nearly half of the $145.5 billion in industrial expansion projects previously announced either under construction or completed.
“More than $62 billion are in the vertical stage or are completed,” said Scott, who touched on the highlights from his detailed report, “The Louisiana Economic Outlook: 2016-2017,” which he prepared with LSU economist James Richardson. “In the past, $5 billion worth of activity was considered a good year so we’re still far ahead of the game.”
Environmental regulations proposed by President Barack Obama’s administration could negatively affect the other $83 billion worth of industrial projects that are currently either in the planning or permitting stage, Scott said. The Environmental Protection Agency’s Clean Power Plan Act, if enacted, would eliminate 40% of the coal-fueled power plants in the U.S. and replace them with solar and wind-fueled plants. Scott said that would drive up the cost of electricity to Louisiana’s industrial users by 48%.
Rising natural gas prices in the U.S. coupled with lower natural gas prices in Europe and Asia and continued low oil prices around the globe could lessen demand for natural gas exports. That, too, would be bad for Louisiana, which has some $59 billion in announced LNG export projects in the planning and design phase.
On the positive side, Scott predicts oil prices will rise slightly over the next two years—to $55 a barrel in 2016 and $60 a barrel in 2017. He’s particularly bullish on the nine-parish Baton Rouge region, which is expected to see job growth of 2.2% in 2016 and 1.5% in 2017.
“In terms of job growth, that would make us the fastest-growing area in the state,” he said.
Helping to fuel Baton Rouge’s economic growth is the area’s $8.1 billion share of those industrial construction projects. All but about $100 million of the projects announced for the Capital Region are actually underway or completed, which will give this area more stability than some other areas of the state, Scott said.
Among the recent wins for the Baton Rouge economy mentioned by Scott: Dow Chemical’s $1 billion investment in two polyolefin plants, Methanex Corp.’s $1.1 billion move of two idle methanol plants from Chile to Ascension Parish and Genesis Energy’s $150 million storage terminal for oil.
Scott’s report contained few surprises for those in the business community, who say they came away from it feeling generally positive about the state.
“I think overall it was very positive and mirrors what we’re hearing from our members—that there is opportunity for growth and optimism,” said Louisiana Association of Business and Industry President Stephen Waguespack. “But there is softness there. We have had such a big gap the past few years you could almost get away with pool policy. I think what this shows is that luxury is gone now.”
The Top 100 Luncheon wrapped up the Louisiana Business Symposium, which was presented by Business Report and took place at the Crowne Plaza today. The symposium kicked off with the Best Places to Work Awards Breakfast this morning, at which the area’s top employers were honored and executives from a few of the firms participated in a panel discussion. Sandwiched between the breakfast event and luncheon were a number of free seminars on employee engagement and business alignment.
—Stephanie Riegel
