ExxonMobil’s announcement today that it is proposing a more than $240 million investment at its north Baton Rouge refinery to modernize and upgrade the aging facility is a major deal for the Capital Region that will determine the future competitiveness of the plant, according to economic development officials and energy experts.
“I cannot overstate the importance of this project to the region,” says Baton Rouge Area Chamber President and CEO Adam Knapp. “This is a competitive project that is critically important to make the site competitive for future projects down the road.”
ExxonMobil officials have said their north Baton Rouge refinery, more than 60 years old, is losing out to the energy giant’s newer, more efficient refinery in Baytown, Texas, a problem that has been exacerbated by the downturn in global demand caused by the pandemic.
The three-year modernization program would help reverse that trend by improving processing capability, increasing flexibility for meeting market demand, advancing overall site competitiveness, and installing technology for a voluntary 10% reduction of volatile organic compound emissions.
The investment would create an average of 600 temporary construction jobs a year between 2021-2023 and generate an estimated $5 million a year in sales tax revenues. It would also enable the refinery to retain 1,300 engineer, operator and technician jobs, though it would not create any net new permanent jobs.
David Dismukes, executive director of LSU’s Center for Energy Studies, says after the downturns the energy sector has experienced in 2020—a dynamic illustrated by last week’s closure of Shell’s Convent refinery—the potential investment by ExxonMobil is significant for the area
“Big picture, in December 2020 we don’t want to do anything that would screw around with not getting an investment like that,” he says. “There are not a lot of investments like this every day.
This is probably bona fide, ready to go and if they get approval they are going to move forward.”
In order for the deal to move forward, ExxonMobil will seek approval for a $20 million property tax break over 10 years under the state’s Industrial Tax Exemption Program, an incentive the state has already offered.
ExxonMobil officials say they have been talking up the investment with elected officials in north Baton Rouge and have their support.
But community organizers with Together Baton Rouge, which has been critical of the state’s ITEP program, say there are several questions they want LED to answer before granting the incentive.
“What is the evidence that this is a genuinely competitive investment?,” says Rick Moreland of TBR. “Have all of ExxonMobil’s routine annual maintenance costs been excluded from the $240 million figure, or have they been bundled into the proposal? What does a formal cost-benefit analysis of this proposal show after accounting for lost public revenue and public-sector jobs?”
Dismukes says while he appreciates the need for local governments to get the property tax money they deserve, he believes it’s important to recognize the need to maintain the competitiveness of ExxonMobil’s Baton Rouge refinery.
“I don’t wanna overdramatize it but if they stop putting cap ex in it will be less competitive and down the road that would matter,” he says. “Refineries are shutting down. I know a lot of people have very strong emotional opinions about ITEP but preserving cap ex and jobs oughta be just as important.”
ExxonMobil officials say the corporation’s decision on making the final investment could hinge on whether the ITEP abatement is granted. If it is, a final investment decision will be made in the first quarter of the new year, with construction starting in the second quarter.
