Fiscal Myopia: “We’re an Oil and Gas State”

Aug 17, 2017

Perhaps lawmakers avoid getting their fiscal myopia checked because they’re waiting for a bonus to pay for the eye exam -- like New Iberia Representative Blake Miguez, who is expecting the oil and gas industry to boom again.

“Will it come back? You know, there’s a lot of global things going on with the price of oil and, you know, we’re state-level government,” Miguez observes. “But what we can do is prepare for when things do turn around with the price of oil – that we’re there to take advantage of it.”

LSU economist Dr. Loren Scott says there’s another side to the low prices for oil and natural gas: Louisiana’s chemical sector is booming.

“We’re getting a lot of new jobs in that area because of low energy prices,” Scott states, pointing to the massive expansions of chemical plants in southwest Louisiana, which use oil and gas to manufacture their products.

Still, with oil exploration and drilling in decline, shouldn’t Louisiana consider developing alternative energy sectors– like wind and solar? Scott says it wouldn’t be cost-effective.

“The sun shines less here than it does in Arizona, and the wind doesn’t blow near as much here as it does in West Texas,” he says, adding, “If you think that once you build a chemical plant there’s far fewer jobs – once you build a solar farm, there’s five jobs.”

How else could we diversify our economy? We did try developing the movie industry in Louisiana, and look how that turned out.

“We jumped into it and we were very successful because we were paying 35% of somebody’s cost of operation,” Scott says.

Lawmakers decided that was too expensive, but isn’t that also an argument for curtailing some of the other tax breaks we offer industry – especially considering the ongoing fiscal crisis? Scott says no, pointing in particular to the recent push to revise the ITEP program.

“We wouldn’t have gotten the plants in the first place if we hadn’t had the 10-year industrial tax exemption there,” he insists.

“It’s strictly math. We’re constantly in competition with Texas. If we don’t provide something like they provide, it throws the math off – and we end up losing.”

And when it comes to building up the state’s technology sector, Scott notes that it has grown over the past five years, with IBM in Baton Rouge, and the cyber center in the Shreveport-Bossier City area. Yet he adds, “The number of jobs created is good, but it’s probably equivalent to two Sasols.”

Scott proudly adds, “We’re an oil and gas state.”

So we’ve embraced an image for Louisiana -- one that doesn’t need glasses.

Tomorrow, we’ll discuss vision for Louisiana’s future.