Traffic flows across the Sunshine Bridge, Friday, March 23, 2018, in St. James Parish.
April 23, 2018
The New Orleans Advocate
Formosa picks St. James Parish for massive $9.4 billion chemical complex
Formosa Petrochemical Corp. has selected St. James Parish for a $9.4 billion chemical manufacturing complex employing 1,200 plant workers.
A subsidiary of the Taiwanese company could begin construction as soon as next year in an anticipated 10-year building and development process in two phases. Construction is expected to peak at 8,050 jobs over a four-year period, according to Louisiana Economic Development officials.
The company has purchased a 2,400-acre site along the west bank of the Mississippi River, downriver from the Sunshine Bridge, next to the Mosaic and AmSty chemical plants. Formosa plans to operate the complex, its fourth and largest facility in the state, under subsidiary FG LA LLC, which already is registered in Louisiana.
Gov. John Bel Edwards’ administration announced the project, dubbed “the Sunshine Project,” in a news release on Monday.
The project's 1,200 new direct jobs will pay an average $84,500 a year, according to Edwards’ administration. LED estimates the plant will result in 8,000 indirect jobs.
Because of the size of Formosa’s investment and the number of jobs the plant will create, it will “fundamentally alter the economy and the wealth of the River Region," said Michael Hecht, president and chief executive officer of Greater New Orleans Inc., the regional economic development agency.
“This is a big one,” he said.
To fill jobs at the plant, Formosa will draw workers from as far away as Lafayette and Hancock County, Mississippi, Hecht said. While the workers could live as far as an hour away, the key for St. James to benefit the most is get those people to buy homes in the parish and do their spending locally. “This is an opportunity for St. James Parish to increase their population and community wealth,” he said.
The project has been discussed for several years. The firm announced in 2015 it was studying the feasibility of the production complex and said it hoped to make a final decision by mid-2016.
According to a website dedicated to the project, Formosa is awaiting permitting approval from state and federal regulators.
The state offered Formosa an incentive package that includes a $12 million performance-based grant for infrastructure costs, which will be doled out in four $3 million installments beginning in 2021, the projected first year for hiring permanent jobs. The company also is expected to take advantage of the Industrial Tax Exemption Program, the state’s largest tax break, as well as Louisiana’s Quality Jobs program.
The complex will be built in two phases and use abundant, cheap natural gas to produce ethylene, propylene, ethylene glycol and associated polymers, which are used to make products like car casings, plastic bottles, grocery bags, drainage pipes and antifreeze, among other things.
Eric Smith, associate director of Tulane University's Energy Institute, said the decision is not particularly surprising, but called it a "nice confirmation" of Louisiana's competitiveness in the petrochemical sector. He noted Formosa already has three sites in Louisiana, which is likely one of the reasons it selected St. James Parish for the new project.
"They know how the game's played in Louisiana," Smith said.
The decision also validates Louisiana's petrochemical sector despite the an oil and gas boom in shale formations, which has suddenly put sites in Texas closer to the natural resources coming out of the Permian and Eagle Ford plays. But Smith noted that the facility, like other petrochemical projects along the Mississippi River, will hinge on the vitality of those shale plays.
Plus, there is the looming threat of tariffs on petrochemical exports to China if a trade war with the Asian country becomes imminent. That could erode the Gulf Coast cost advantage for those projects, Smith said.
An economic impact study done by LSU economist James Richardson forecasted the 10-year construction period will yield $362 million in new state and local tax receipts, plus $313 million in new state and local taxes during the initial 10 years of operation, beginning in 2025.
"This is on the larger side" of petrochemical projects, said David Dismukes, director of LSU's Center for Energy Studies.
Typically, Dismukes said petrochemical investments are $1 billion to $3 billion and involve major upgrades to existing facilities.
The plant will mean a windfall for St. James Parish tax coffers.
St. James Parish President Timmy Roussel said after Formosa’s 10-year tax exemptions expire, the parish will collect about $28 million more in property taxes. St. James currently receives about $60 million in annual tax revenue.
“When you’re putting $9.4 billion on a site, you need a lot of help,” he said. “It becomes incumbent upon us to make sure we’re putting enough effort to get our residents ready for these jobs. We need to prepare our youngsters.”
The impact of Monday’s announcement is already being felt. The parish shut down its youth detention center in 2013 and has been trying to sell the complex for several years. Less than an hour and a half after the Formosa announcement was made, Roussel said someone reached out to him with interest in buying the center for $1.2 million and turning it into a dormitory to house construction workers.
But the announcement also renewed concerns from the Louisiana Environmental Action Network, which has long raised questions about air emissions in St. James Parish. Wilma Subra, a chemist and adviser to the group, warned of the "cumulative impact" of the new Formosa facility, along with existing facilities like the Mosaic Faustina ammonia plant and Americas Styrenics' plant, both of which are on the west bank of the river near Formosa's site.
"It's going to have a huge cumulative impact on the communities which are sprinkles between these facilities," Subra said. "It's going to have a very negative impact on air pollution in that area based on what we know about it."
Formosa Plastics Group first set up shop in Louisiana in 1981, and currently operates three Louisiana plastics manufacturing facilities, with 410 employees in East Baton Rouge and Pointe Coupee parishes. The St. James Parish project, which Edwards’ administration said is “years in the making,” will be the firm’s largest in the state.
Formosa was considering a Texas site for the plant but decided to go with building the facility in St. James, an LED official said.