APPEL: How Excited Should We Be About The Air Products Announcement?

The media is as usual wagging their collective tails over the Governor’s announcement that Air Products will be building a “blue” hydrogen facility in Ascension.

Let me be clear, with a few reservations, any economic development project in Louisiana is a good thing. My key word though is “reservations.”

Let’s talk about the unreported details. The feed stock for blue hydrogen is primarily natural gas, something we have available in great abundance. Therefore, my first reservation is whether, with the demand for hydrogen growing and our proximity to the feedstock and to transportation links to move the hydrogen to market with no assistance needed from the state, the Air Products decision to come to Louisiana wouldn’t have been a foregone conclusion?

I suppose a lot of my cynicism is based on this: what will be the cost to Louisiana to have Air Products spend $4.5 billion here and only create 170 permanent jobs?

The media laps up the Governor’s credit-taking for new jobs, but never asks at what cost. How much per job will be directly or indirectly paid out by taxpayers in the state for 170 new jobs?

And that cost is environmental too. Air Products will inject massive amounts of carbon dioxide into porous subterranean structure. Has anyone inquired as to what the long-term ramifications of that are? If history is prologue, the answer to both of these questions is probably highly inconvenient for the Governor – but no one ever asks.

Now, here is the 1,000-pound gorilla in the room. The vast majority of our economic activity in the state is what I call primary in nature. Substantial energy and petrochemical manufacturing is located here, it is capital-intensive but employs relatively low numbers for such investment. I know these facilities spin off many jobs in construction, maintenance, and so forth, but I am speaking to direct employment. Secondary employment would be same no matter what type of industry was here.

The majority of the products made here go elsewhere for secondary manufacturing, the process that employs the largest numbers of workers. The same holds for our ports. They are some of the largest in the world, but with the exception of low employment petrochemicals, little cargo for export is made here, even less import cargo is processed, assembled, or distributed here. Added to that, our large cities have very few corporate jobs or businesses resulting from such massive investments in energy, petrochemicals, or ports.

For the 170 who will work for Air Products and the construction workers who will build this new facility, the announcement is a good thing. But depending on how much the Governor has committed in taxpayer cash and how much environmental impact he has committed for us to absorb, the benefits to ordinary citizens may be not so good.

Let’s look at a much rosier scenario. Let’s assume that we continue to induce the petrochemical industry to build here, and they continue to produce vast quantities of primary materials. But at the same time, we restructure our state’s business climate so that we attract heavy manufacturing that will use those materials to make end-user products, we lure major distribution facilities to ship our products, and we attract the corporate headquarters or sub-headquarters of manufacturing and distribution companies. Then our investment in attracting primary companies would really pay off, not with 170 high paying jobs, but with thousands.

The only problem is that for as long as anyone can remember we have been burdened with governors who have no vision and no political courage to tackle the substantive problems that prevent us from having a strong business climate. We have governors that are more than happy to ignore tough political leadership it would take, instead are willing to settle for $4 plus billion-dollar investments that probably would come in any case. Investments that will directly employ few people and may have a negative impact on the environment.

We can always be happy with the status quo. We can always be happy taking with high capital, low employment manufacturing that usually pollutes. We can always be happy watching so many other southern states capture the secondary manufacturing plants that are also high capital but employ thousands. We can always be happy electing leaders who have no concept of prosperity, but are good at protecting their own political interests. We can always be happy with our culture.

I am not. I love our culture, but I see no reason we can’t have a great culture and nurture educated, highly paid citizens of Louisiana at the same time.

But that’s just me I suppose.

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