We’ll give some credit to the Baton Rouge Business Report’s JR Ball, who has committed an act of business journalism in his latest column. Namely, Ball points out that what’s happening in Baton Rouge is ExxonMobil, the city’s largest private employer with some 15,000 people working at its facilities in East Baton Rouge, is signaling its indifference to sticking around town over the long haul.
At issue is the $240 million ExxonMobil is talking about spending at their oil refinery in town. That money isn’t for an expansion. It’s for a retooling of the way the plant handles its feedstock in order to make its processes more economic and to keep it competitive with the other plants ExxonMobil operates.
When the $240 million was publicly announced last month, this was the treatment by Gov. Edwards and the company’s officials.
According to LED, the proposed suite of projects would improve the 517,000-barrel-per-day refinery’s processing capability, increase flexibility for meeting market demand, boost overall site competitiveness and install technology that would voluntarily cut volatile organic compound emissions by 10 percent. LED added the projects are pending final engineering, design and investment decisions, and the agency pointed out that ExxonMobil next year could decide to proceed.
“The 2019 announcement of the company’s decision to progress the Baton Rouge polypropylene project, combined with this potential investment, demonstrates that ExxonMobil has confidence in the future of Louisiana and in our outstanding workforce,” commented Edwards. “Louisiana looks forward to working with ExxonMobil to make this investment happen.”
Edwards was referring to ExxonMobil’s Nov. 2019 groundbreaking for a more than $500 million polypropylene project that will double capacity at the Baton Rouge Polyolefins Plant.
LED stated the projects announced last week would retain 1,300 existing jobs at the refinery and support 600-plus onsite construction jobs over a three-year span. The state agency noted the $240 million-plus in projects would create more than 20 full-time job opportunities for graduates of the North Baton Rouge Industrial Training Initiative, an ExxonMobil-backed initiative that provides no-cost, fast-tracked industrial craft training to locals.
“We are proud of our long history in Louisiana, and I’m very excited about the positive potential of this investment for ExxonMobil and for the state, especially during this challenging economic time for industry,” stated ExxonMobil Baton Rouge Refinery Plant Manager Gloria Moncada. “This suite of projects positions our site for future investment at our refinery and chemical plants in Baton Rouge. We look forward to working with Gov. Edwards and our local community stakeholders in partnership as we move toward a final decision.”
Everybody’s all smiles.
Except not really. The local folks were a little less ebullient about the proposal.
“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?”
Who is Rick Moreland? He’s retired now and spends his time as a community organizer with the Alinskyite rotters and moochers at Together Baton Rouge. But Moreland used to be the head of the English Department at LSU, and rode his bike to work even when it was pouring down raining, he was so virtuous. That clearly makes him a lot more qualified than the economic development pros who are pushing this deal to evaluate it.
They’re looking at the $20 million 10-year ITEP break as a seawall which prevents ExxonMobil from beginning to de-emphasize Baton Rouge in favor of Baytown.
ExxonMobil is not growing as a company, you know. Worldwide demand for oil and gas is down, not up, and that’s also true for petroleum products as the world economy slackens. With Joe Biden’s cabal of clowns about to take power in Washington, it’s likely to cost ExxonMobil, which is coming off a 2020 the company spent in the red, a lot more money to do business.
They just finished laying off 2,000 people company-wide. Now is really not the time to try to stick these people for $2 million a year in tax increases when they’re talking about injecting $240 million in capital expenditures into the local economy.
But dumbass Rick Moreland who, given enough time, might be able to construct his clownish, uneconomic objections to ExxonMobil in proper iambic pentameter, will likely swear up and down that ExxonMobil will always be in Baton Rouge.
Sure they will. Just like Shell will always have a refinery in Convent, right? Oh, wait.
With all that as prelude, here’s Ball to slap a little truth on top of the pile…
Mighty ExxonMobil is done with having sand kicked in its face by 98-pound weaklings like Together Baton Rouge, the East Baton Rouge Parish School Board and anyone else who refuses to embrace the absolute, no-questions-asked necessity of its ITEP requests, Ball writes.
It’s one thing for the company to deal with Louisiana’s crazy tax code, ever-changing regulations, environmental activists, political shenanigans, no direct pipeline access to Texas, a long and winding Mississippi River and way-too-expensive river pilots, but uncertainty about the ITEP is ExxonMobil’s Alamo.
The most salient hint that this is it for ExxonMobil is that the $240 million project on the table isn’t about expanding operations or getting into some new line of business. It’s simply a proposal to update the facility with today’s technology. In other words, it’s a kitchen remodel, changing out the old appliances for newer ones. And it ain’t happening, officials say, if there’s no ITEP.
If a company worth $350 billion isn’t willing to blindly sign-off—no strings attached—on a relatively inexpensive project that’s necessary to keep a facility efficiently up and running, then it’s safe to assume ExxonMobil has questions about the long-term viability of its Baton Rouge operations.
When you screw over the largest employers with bad tax codes, worse business climates, lousy quality of life and a never-ending assault by communist clowns like Rick Moreland, sooner or later they realize they’d be better off somewhere else.
And yes, ExxonMobil can go somewhere else.
No, they won’t just close up shop immediately and lay everybody off. What they’ll do is stop spending any money on capital expenditures, and they’ll repeatedly draw down their production capacity – while dumping employees along the way. Eventually the plant gets run-down enough that they put it on the market, and perhaps it’ll get bought by somebody else. What’s likely is that somebody else will be a company with a lot less ready capital for investment than ExxonMobil – and they’ll have a whole lot greedier hand out for government bennies than ExxonMobil does right now.
Or maybe nobody buys it. Maybe you end up like Convent with a dead refinery.
Except nobody cares about an abandoned, rusting oil refinery in Convent, Louisiana. But an abandoned, rusting oil refinery directly north of downtown Baton Rouge becomes a massive, Soviet-style monument to governmental and economic failure.
Rick Moreland isn’t bothered by that prospect. Either that or he’s too stupid to even see it coming. What he cares about is how many public sector jobs ExxonMobil can fund with its tax dollars.
The problem is the Rick Morelands of the world control who wins elections in East Baton Rouge Parish. Which is why even despite the capable commentary of J.R. Ball in the Baton Rouge Business Report, East Baton Rouge Parish is all but kaput.