THE LOUISIANA ECONOMIC
OUTLOOK: 2017 AND 2018
Prepared by:
Loren C. Scott
Professor Emeritus in Economics
And
Judy S. Collins, Managing Editor
Published by:
Division of Economic Development
E. J. Ourso College of Business
Louisiana State University
Baton Rouge, LA
September, 2016
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Economic Outlook Page 1
ACKNOWLEDGEMENTS
The document before you has one author, but in reality hundreds of you helped
put it together. Monitoring the economy is a continuous process, evolving all year long,
and many of you graciously help us along the way.
Our four gold sponsors---Cleco, ExxonMobil, Home Bank and our
donor/printer, Blue Cross Blue Shield of Louisiana---have been reliable financial
donors for years now. Their donations not only help get the LEO out, but they also
provide much needed support to the financially-stressed Economics Department at LSU.
During the year we make 100-150 phone calls around the state to business
leaders, economic developers and other decision-makers about what is happening in their
sector. We are amazed and gratified by the time you give us each year. The LEO is so
much better because of you. Few get to enjoy the kind of access and trust you give us.
A special shout out goes to the economic developers and their teams across the
state that review our data and make critical suggestions that keep us from error.
Louisiana’s chief economic developer---Secretary Don Pierson at LDED---was
especially helpful this year as we sorted through the projects in the state that were
underway versus “potential”. Among these other fine servants in our communities are
Michael Hecht, Adam Knapp, Larry Collins, Jon Grafton, Greg Gothreaux, George
Swift, Rick Ranson, Eric England, Scott Martinez, Linda Prudhomme, Bob
Fudickar, Stacey Neal, Lacey Toledano, Jason Elkoubi, Vic Lafont, Melissa
Bordelon, and Michael Eades.
When it comes to the financial status, the best information source is our good
friend Greg Albrecht in the Legislative Fiscal Office. We primarily project
employment, which means we are constantly inundating the efficient staff of the
Research Division under the direction of Ramona Robichaux at the Louisiana
Workforce Commission. Connie Fabre at the GBRIA in Baton Rouge and Larry
DeRoussell at LAIA in Lake Charles liberally share their great data bases of industrial
announcements and employment forecasts with us.
In an ideal world one wants the LEO released with a flare and a flash. Hosts
Rolfe McCollister and Julio Melara of Business Report Magazine have provided that
ideal for many years via the Top 100 Luncheon. This virtually never happens in other
states. You two are the greatest!
It seems behind every endeavor, there is always one person who is keeping all
together and providing the “oil” to make things flow well. For the LEO that is Managing
Editor Judy Collins, who does this job supremely well. Even after being a victim of the
Great Flood of 2016 she has remained a reliable team mate! Finally, our thanks go out to
Dean Richard White of the E. J. Ourso College of Business. The right person was
chosen to lead us in this challenging environment! Thanks for all your support, Dick.
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Economic Outlook Page 2
EXECUTIVE SUMMARY
For the sixth time in 3 ½ decades Louisiana’s oil patch is feeling the sting of a
decline in energy prices, and this one is a dozy. Employment declines in Houma,
Lafayette and Shreveport-Bossier have been deep enough to send the state’s numbers into
skid that should last well into 2017. On the other hand, Baton Rouge, Lake Charles, and
to some extent New Orleans are all benefitting from an historic industrial boom.
Our forecasts for 2017-18 are based on the following assumptions:

Slowed by rapid increases in regulations and higher tax rates, the U.S. economy
will continue its plodding pace of expansion with RGDP averaging 2.1%
growth annually.

We are projecting a rebound in oil prices to $5 in 2017 and $60 in 2018, though
enormous uncertainty requires us to place a $30 to $90 a barrel range around
those forecasts.

While a significant increase in demand is expected from industry, utilities and
Mexico the vast supply of natural gas is expected to keep prices near $2.50 per
mmbtu in 2017, rising to $2.90 in 2018.

Just under half of the $134.8 billion in announced projects are under construction
and just over half are at the FEED and permitting stage. Viability of the FEED
group is threaten by (1) denigration of price competitiveness due to lower oil
prices, (2) increases in taxes levied on business during three fiscal sessions in the
past year, and (3) changes to the 10-year industrial tax exemption rules..
Louisiana is now home to nine metropolitan statistical areas. Prospects for each
will dramatically turn on where the MSA is located. Essentially, we see the state split
into three regions: (1) the rapidly expanding Baton Rouge and Lake Charles regions; (2)
the languid northern tier of the state; and (3) an oil patch region that will decline through
2017. From the largest to the smallest MSA, we forecast as follows:

Layoffs in the exploration industry and companies servicing it brought
employment in the New Orleans MSA to a standstill in 2016. Layoffs will
continue to weigh on the region through 2017, but we are projecting 2,900 jobs in
2017 (+0.5%) and 5,700 in 2018 (+1%). Opening of the new VA Hospital at the
end of the year (+1,100 net new jobs), expansion of the airport, and $3.5 billion in
industrial construction will help offset oil-related layoffs and a significant cut the
Army Corps spending in the MSA. New Orleans’ record could be much better in
both years if some $19 billion in projects at the FEED and permitting level
actually go “vertical”. Indeed, we believe about $2.85 billion in potential projects
will start construction by yearend.
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Economic Outlook Page 3

Lacking a significant oil-related base to hold it back, the 9-parish Baton Rouge
region is poised to enjoy two good years of growth, adding 4,500 jobs a year over
the next two years. This reflects a reduction in the region’s 2016 addition of 9,000
jobs because many of this MSA’s industrial construction projects will be
completed as we enter 2017. Growth in the region’s high-Tech sector continues
unabated (especially at the new IBM site), and the Port is expecting 100-150 more
ship calls due to its wood pellet business. Impacts of the Great Flood of 2016 are
still being evaluated, but enormous sums of insurance, FEMA and SAB monies
will be injected into the region rebuild the 116,000+ structures impacted.

Weakness in the exploration and gaming markets drove employment even further
down in the Shreveport-Bossier MSA in 2016. Exploration will continue to
impact the area negatively through 2017, leading to a flat year of employment for
the region. We are projecting 600 new jobs (+0.6%) for 2018, led by gains at
Barksdale AFB (now run by a 4-star general), manufacturing, and high-tech.

A new round of layoffs in the energy sector pushed employment lower in the
Lafayette MSA for a second straight year in 2016 (-8,900 jobs)---the poorest
record in the state. We expect layoffs to continue to hound the Lafayette MSA
into 2017, leading to the loss of another 5,000 jobs (-2.4%). Oil prices in the $60s,
plus gains at the Port of Iberia and the high-tech sector should stabilize
employment in 2018.

Like Lafayette, the Houma MSA is being pounded by the energy sector and
energy-related firms. Edison Chouest has laid off 1,600 from its shipyards, and
Gulf Island Fabricators has cut 1,100 jobs---all leading to a loss of 5,600 jobs in
2016 (-5.8%). Unfortunately, we expect the energy drag to continue into 2017 (4,000 jobs or -4.3%) before employment stabilization in 2018. as oil prices
hopefully rebound and stabilize.

The Lake Charles MSA remains the hottest area of the state.. This region has a
remarkable 45.4 billion in industrial projects under construction and an equally
remarkable $51.0 billion at the FEED and permitting stage. The huge boom in
industrial construction workers will drive this region’s employment up by 3,800
jobs (+3.6%) in 2017, before slowing to a still-respectable +2,200 jobs in 2018. In
percentage terms, this will make Lake Charles the fastest growing region of the
state by a wide margin. This MSA’s growth rate could become much larger if the
projects at the FEED stage move to construction.

After 9 years of declines, the Monroe MSA has now enjoyed five straight years
of modest growth. Expansions at IBM and Vantage Health Plan should generate
enough growth (400 jobs a year over 2017-18) for this MSA to get back to its
previous peak employment reached back in 2002.

After three years of modest growth, we expect the Alexandria MSA to
experience a loss of 200 jobs (-0.3%) in 2017 due to layoffs at Union Tank Car
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Economic Outlook Page 4
and GE Oil & Gas. The decline would be worse had it not been for the building
of Sundrop’s $40 million pilot plant at Cowboy Town. That should be followed
by 200 new jobs in 2018 (+0.3%). This projection could turn out to be radically
conservative if Revolution Aluminum (formerly, American Specialty Alloys)
follows through with their proposed new $2.4 billion, 1,400-person plant.

Louisiana’s smallest MSA is Hammond. Hammond’s employment has been
essentially flat for nine years---driven by lower enrollments at SLU and stable
employment at North Oaks Medical Center. Neither of these entities is expecting
major changes in their activities over 2017-18, so our forecasts are for 100 new
jobs a year over the next two years. The region’s construction sector will enjoy
growth into 2017 due to the rebuild associated with the Great Flood of 2016.
Despite substantial good economic news in the state, the heavy anchor of the
depressed extraction sector will keep the overall state economy basically flat in 2017 (700 jobs net), with a recovery starting in 2018 (+13,700 jobs or +0.7% growth).
After coming tantalizingly close to the 2,000,000 employment mark in 2015, problems in
the oil patch will leave the state about 15,000 jobs short of that record by 2018.
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Economic Outlook Page 5
Executive Summary Table
Item
2016
BASIC ASSUMPTIONS:
Real Gross Domestic Product: Growth
1.8%
Inflation Rate
1.3%
30-Year Fixed Interest Rate
3.6%
Oil Price: barrel
$42
Natural Gas Price: mmbtu
$2.40
STATE PROJECTIONS:
Non-Farm Employment (000s):
Absolute Growth Rate
Percent Growth Rate: Employment
1,972.1
-17.3
-0.9%
2017
2018
2.1%
2.3%
3.6%
$53*
$2.50
2.1%
2.3%
4.1%
$60*
$2.90
1,971.4
-0.7
-0.1%
1,985.1
13.7
0.7%
MSA
PROJECTIONS:
EMPLOYMENT (000s)
Alexandria
64.2
64.0
64.2
Absolute Change
0.2
-0.2
0.2
Percent Growth Rate
0.4%
-0.3%
0.3%
Baton Rouge
413.5
418.0
422.5
Absolute Change
9.0
4.5
4.5
Percent Growth Rate
2.2%
1.1%
1.1%
Hammond
43.6
43.7
43.8
Absolute Change
-0.2
0.1
0.1
Percent Growth Rate
-0.4%
0.2%
0.2%
Houma
91.5
87.5
87.5
Absolute Change
-5.6
-4.0
0
Percent Growth Rate
-5.8%
-4.3%
0
Lafayette
205.9
200.9
200.9
Absolute Change
-8.9
-5.0
0
Percent Growth Rate
-4.1%
-2.4%
0
Lake Charles
105.2
109.0
111.2
Absolute Change
2.8
3.8
2.2
Percent Growth Rate
2.7%
3.6%
2.0%
Monroe
79.4
79.8
80.2
Absolute Change
0.6
0.4
0.4
Percent Growth Rate
0.8%
0.5%
0.5%
New Orleans
573.4
576.3
582
Absolute Change
0
2.9
5.7
Percent Growth Rate
0%
0.5%
1.0%
Shreveport-Bossier
181.8
181.8
182.4
Absolute Change
-2.1
0
0.6
Percent Growth Rate
-1.1%
0
0.3%
RURAL EMPLOYMENT
213.6
210.4
210.4
Absolute Change
-13.1
-3.2
0
Percent Growth Rate
-5.8%
-1.5%
0
Source: LSU forecasting team. *Around a wide range of $30 to $90 a barrel. **Around
a range of $2.10 to $3.50 per mmbtu.
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Economic Outlook Page 6
TABLE OF CONTENTS
Page
ACKNOWLEDGEMENTS...................................................................................... 2
EXECUTIVE SUMMARY………………………………………………………. 3
OUTLOOK FOR 2017-18; UNDERLYING ASSUMPTIONS………………….. . 8
BRIEF HISTORY OF THE LOUISIANA ECONOMY………………….………..22
THE OUTLOOK FOR THE METROPOLITAN STATISTICAL AREAS.……… 31
The New Orleans MSA: Answering Two Big Questions..............................34
Baton Rouge: Historic Storm & A Construction Peak...................................46
Shreveport/Bossier: Can’t Shake the Oil & Gas Effects…........................... 59
Lafayette: Another Year of Losses Likely.............………………………….69
Houma: When Will the GOM Return?……………………………………...78
Lake Charles: The Whole Country Envies This Expansion.………………..86
Monroe: Slow Recovery Underway………….…………………………… 101
Alexandria: Popped by UTC & GE, but RA?............................................... 105
Hammond: Look to SLU & North Oaks…………..………………………..112
THE OUTLOOK FOR THE RURAL PARISHES: 2017-18…………………….. 118
THE OUTLOOK FOR THE STATE 2017-18…………………………………….. 122
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Economic Outlook Page 7
OUTLOOK FOR 2017-2018:
UNDERLYING ASSUMPTIONS
It is in the nature of a roller coaster ride that there will be periods of climbing up
the hill and then going down the other side. Builders periodically add in straight stretches
to throw the rider’s anticipation off and to build up momentum. But riders know there
are both hills and valleys ahead---some of them very dramatic.
It is also in the nature of an economy heavily based on oil and gas production that
there will be hills and valleys---some of them dramatic. Two-thirds of the oil reserves in
the world are under the lands of countries where the government runs oil and gas
extraction. These are called NOCs----national oil companies. Think of Saudi’s
ARAMCO, Mexico’s PEMEX, Russia’s Gazprom or Venezuela’s PDVSA. One never
knows what political decision might be made by one of these governments that will send
the industry either up or down the hill. The Saudi’s decision in late 2014 to increase
production to lower oil prices and kill the U.S. shale oil plays is a case in point.
Louisiana is once again in the midst of a downhill run created by difficulties in
the energy sector. This one was created by the Saudi’s 2014 decision to significantly
increase its production---a decision that country has yet to reverse. Just as your body and
mind are screaming “How much longer?” as you plunge down the roller coaster hill,
Louisianans are screaming those same words as we pen this year’s Louisiana Economic
Outlook (LEO).
Of course on a roller coaster, you can at least see the bottom. If only that was the
case for the Louisiana economy. In 36 years of writing the LEO, rarely have we been
presented with such a murky view of the future. It is an election year in the U.S. Will
the next president be Hillary Clinton or Donald Trump? If Clinton wins, will she move
closer to the political center or continue the much more leftward lean of President
Obama? Candidly, it is very unclear what a Trump presidency would mean in terms of
economic policies. Murky.
On the energy side, will the Saudis change course soon, turn the taps back and
allow oil prices to rise? If they do, by how much and when? Murky.
In this calendar year, Governor Edwards led the charge for very significant
increases in business taxes to fund higher education and healthcare programs. Through
executive order he made significant changes to the 10-year industrial tax exemption
program. How will these changes impact short- and long-term economic development in
the state? Murky.
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Economic Outlook Page 8
The National Economy – No Help from this Side
Sometimes in the past, impacts of a weakened energy sector in Louisiana were at
least partially offset by a surging national economy. That has not been the case recently,
nor do we believe help will be received from the national side going forward.
Real Gross Domestic Product Trends
Data in Figure 1 support our sense of pessimism about the national economy. As
indicated in last year’s LEO, the Obama Administration has issued a tsunami of new
regulations and taxes. An argument might be made that these new taxes and regulations
were required to achieve the President’s goals of more fairness in the economy.
Unfortunately, economic theory and evidence also confirm that these policies shift the
cost curves upward in a company, causing the firm to produce less output and hire fewer
people. As shown in Figure 1, the result has been the slowest growth in real gross
domestic product (RGDP) of any expansion since WWII. Indeed, in the first two quarters
of 2016 this growth rate has deteriorated even further to only 1.2%.
Fig. 1: Average RGDP Growth During Expansions
1949 to 2016
9
8
7.6
Percent Change
7
6
5.6
4.9
5
4.3
4.0
4
5.1
4.4
4.3
3.6
2.8
3
2.1
2
1.2
1
0
194953
195457
195860
1961- 1970- 1975- 1980- 1982- 199190
73
80
69
81
01
Source: Bureau of Economic Analysis
200107
200916
2016I & II
National Employment Effects
Weak RGDP growth has also been reflected in the national employment numbers.
Figure 2 illustrates the monthly change in employment in the U.S. from January 2008
through July 2016 (latest available at this writing).
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Economic Outlook Page 9
Both the length and depth of the Great Recession are vividly displayed in the first
two years of data in Figure 2. The nation shed nearly 8.7 million jobs over 2008-09, a
decline of 6.1%. What is also evident in this figure is that the recovery was not
symmetrical. The deep recession was not followed by a robust recovery. From 2010
through the present, monthly employment gains have averaged about 186,000 jobs a
month, but that number improved to 253,100 a month in 2014 and 228,700 in 2015. Note
that, commensurate with the drop in RGDP growth, employment gains in the first half of
2016 have averaged only 174,500 a month.
Fig. 2: Monthly Change in US Employment
600
400
July 2016:
255,000
Ur = 4.9%
1/08 to 12/09:
-8,639,000 Jobs
(-6.1% )
Thousands
200
0
Recovery Average:
2010-15:
186,000
2014 = 253,100
2015 = 228,700
2016-H1= 174,500
-200
-400
-600
-800
-1,000
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Bureau of Labor Statistics
Achieving 255,000 jobs in July may appear strong, but in reality it is not. It is
instructive to make some comparisons between the recovery in the first six years of the
“lower-tax-rates-reduce-regulation” Reagan administration and the “higher-tax-ratesmore-regulation” of the Obama administration. Some handy comparative statistics are
provided in Table 1.
Table 1
Months of High Employment Growth: First 6 Years of Recovery
Administration
Reagan (1983-88)
Obama (2010-15)
Source: www.bls.gov
Months of:
399,000>Months<300,000
17
6
Months of:
Months>400,000
6
2
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Economic Outlook Page 10
Note that with a labor force that was 41% smaller than in Obama’s administration,
the Reagan period had six months with employment growth exceeding 400,000 and 17
months where employment grew between 300,000 and 399,000. By comparison, the six
recovery years of the Obama administration enjoyed only two months of employment
growth of over 400,000 (and one of those was the hiring of census workers in 2010), and
only five months of growth between 300,000 and 399,000.
RGDP Forecasts for 2017-18
Where will the national economy go from here? Projections are especially
difficult in the neighborhood of a presidential election. That said, we are not optimistic
about a major reversal in the economy’s current trend. While we are not seeing prospects
of a recession on the near-term horizon, our expectations are that RGDP growth rate will
remain plodding at best.
If Clinton is elected in November, her stated economic policies are pretty much in
line with President Obama’s, which would lead one to expect continued slow growth.
While Trump’s policies may lean more to the right--- towards lower taxes and less
regulation---his stance on international trade is an anathema to growth. The Law of
comparative advantage in economics suggests that repealing NAFTA---and failing to
promote similar tariff reduction agreements with other countries---would reduce the
standard of living in the U.S. and harm growth.
Neither party’s proposals are
encouraging if one’s focus is on RGDP growth.
Table 2
Actual (2011-15) and Projected (2016-18)
Real Gross Domestic Product Growth Rates
Year
Growth rate
2011
1.6%
2012
2.2%
2013
1.5%
2014
2.4%
2015
2.4%
2016
1.8%
2017
2.1%
2018
2.1%
Table 2 provides historical data on RGDP growth from 2011 through 2015, along
with forecast for 2016-18. RGDP averaged only 2.0% growth a year over 2011-15. We
are projecting the economy will grow at a 1.8% rate in 2016. In the first two quarters of
the 2016, RGDP grew at only 1.1% and 1.2%, respectively. Our forecasts for the
Louisiana economy for 2016-17 are based on the U.S. economy expanding at a 2.1%
rate annually over the next two years. No great stimulus is expected from the national
economy over 2017-18.
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Economic Outlook Page 11
The Oil Market: Turning Point Ahead?
As seen in Figure 3, oil price behavior since 1980 almost defines a roller coaster
ride. This item is one of the most difficult ones in the economy because (1) it is highly
variable overtime and (2) as mentioned above, two-thirds of world oil reserves are held
by NOCs.
Figure 3: Oil Prices
120
100
Price per Barrel
80
60
40
20
0
1980
1985
1990
1995
2000
2005
2010
2015
Note that oil prices have experienced a precipitous drop in the last two years. In
last year’s LEO we spent a considerable amount of space explaining why this drop
occurred. The cause may be summarized in a series of bullet points:

Between 2008 and 2015 U.S. oil production grew by 85%, a growth rate not
experienced anywhere else in the world. This growth can be traced directly back
to the fracking of oil from shale plays across the country.

The growth in U.S. production allowed the country to reduce its imports of oil
from 66% of total consumption to 44%. As a result, the Saudis lost 500,000
barrels a day (b/d) of sales in the U.S.

There was not enough capacity in U.S. refineries to handle the light sweet crude
from the shale plays, so producers began to look for ways to export it.
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Economic Outlook Page 12

The Saudis saw they had lost a significant share of its U.S. market, and now
shales producers were planning to cut into the Saudis’ international markets with
exports. The Saudis opened their taps and put enough new oil on the market to
drive the price from $106 per barrel in August 2014 to $28 a barrel in January
2016.

The Saudi’s aim was to kill the shale plays in the U.S., lower U.S. oil production,
and remove the shale threat to their U.S. and international markets.
Did the Saudi Plan Work?
How has the gambit by the Saudis worked out? So far, it is working well. Note
in Figure 4 that the U.S. rig count has dropped precipitously---from 1,931 rigs in August
2014 to 440 in July 2016.
Fig. 4: U.S. Rig Count Weekly
2,000
9/26/14: 1,931 X
Active Rigs
1,600
1,200
800
7/8/16: 440
-1,491 (-77% )
X
400
0
10
20
30
40
50
60
70
80
90
100
110
120
130
Source: EIA
Consequences on U.S. oil production were predictable. After peaking at 9.6
million barrels per day (mmb/d) in April 2015, oil production has begun to fall. The
Energy Information Administration (EIA) expects production to drop to 8.1 mmb/d by
the end of 2016 and to drop another 3% in 2017.4
4
www.eia.gov
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Economic Outlook Page 13
An Initial Boost from the GOM
Production would have fallen even further had it not been for activity in the Gulf
of Mexico (GOM). Over 2015-2017, fourteen new deepwater production platforms
will be put in place in the GOM (see Table 3). These 14 new units will boost GOM
production 24%---from 1.54 mmb/d in 2015 to 1.91 mmb/d in 2017.
Table 3
New& Anticipated Deepwater Production Platform
Starts in the Gulf of Mexico:
2015-17
Field Name
Majority Operator Water Depth Discovery Year
(Feet)
2015 Starts:
Silvertips
Shell
9,280
2004
West Boreas
Shell
3,094
2009
Hadrian South
ExxonMobil
7,983
2009
Lucius
Anadarko
7,168
2009
Deimos South
Shell
3,122
2010
Big Bend
Noble Energy
7,273
2012
Marmalard
LLOG
6,148
2012
Dantzier
Noble Energy
6,580
2013
2016-17Anticipated Starts:
Stones
Shell
9,556
2005
Gunflint
Noble Energy
6,138
2008
Heidelberg
Anadarko
5,271
2009
Holstein Deep
Freeport McMoran
4,326
2014
Son of Bluto 2
LLOG
6,461
2012
Horn Mountain Deep
Freeport McMoran
5,400
2015
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February
2016.
Prospects for the GOM
We do not believe the new production platforms listed in Table 3 are evidence
that the GOM will be a hot spot over the next two years of our forecast. These 14
platforms are the end result of planning done three to 10 years ago when prices were
much higher. Companies are now looking much more critically at the GOM. There is
some discouraging news about prospects for the GOM. The first piece of evidence is the
drop in the offshore rig count from 56 in August 2014 to 16 two years later. One
company---ConocoPhillips---has indicted it is abandoning deepwater activity in the
GOM and focusing instead on the inland shale plays.
Second, two other companies have paid on the order of one-half billion dollars
each to cancel drillship contracts to explore in the GOM. Chevron is closing its Lafayette
office that focused on shelf activity in the GOM. Third, the Bureau of Safety and
Environmental Enforcement (BSEE) has issued amendments to well control regulations
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Economic Outlook Page 14
that could potentially drive exploration costs high enough to discourage drilling activity
in the GOM significantly. Indeed, the consulting firm Wood McKenzie projects that—
left unmodified---these rules could cause industry investments to fall by $11 billion a
year and cause exploration drilling to drop to only 10 rigs a year.
Fourth, there are the cost differences between drilling in the GOM versus in the
inland shale plays. Until very recently, exploration costs in the GOM had been rising
while inland shale play well costs were falling. Finally, though there are the 14 new
production platforms going on line in the GOM over 2015-17, production platforms
require about one-fourth the number of supply boats a year as compared to exploration
drillships---a discouraging figure for supply boat builders and operators in the region like
Edison Chouest, Tidewater, and Hornbeck. Taken together, these factors have to be very
disconcerting to businesses in the Houma and Lafayette MSA whose very life blood
depends heavily on GOM oil and gas activity. That is the bad news.
The good news is that our conversations with officials in the majors are more
promising for the GOM long terms. Exploration firms in the GOM are working closely
with supply and service firms to seriously reduce operating costs, especially in the
deepwaters. Whereas the breakeven point was in the $70-$80 a barrel range, some
discoveries are now working in the $55-$60 a barrel range due to cost reductions.
Second, the item responsible for an estimated 70% of the new costs from BSEE’s
proposed well control amendments regards something called the “drilling margin”. It is
beyond our skill set to describe this issue in detail, but the good news is that exploration
companies are nearing a working agreement with BSEE on procedures that would still
insure the safety of the well but avoid the horrendous cost increases that led to the
pessimistic impacts suggested by Woods McKenzie.
Third, while well costs in the inland shale plays may be only $8 million a well
versus $130 million (but coming down) for a well in the deepwaters of the GOM,
production from any given well is much higher in the Gulf. For example, a really
productive discovery in the Bakken Play in North Dakota may produce about 800 barrels
a day for the first year, but production then enters a very steep decline curve. Compare
that to daily production from LLOG’s Delta House platform which has nine wells
producing 9,000 barrels a day and has a much shallower decline curve.
What do we conclude about prospects for the GOM? Over our forecast period of
2017-18 we are projecting prospects to be pretty moribund in a relatively low price
environment. However, just a modest improvement in the price environment combined
with improving costs should restart this region on the other side of our forecast horizon.
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Economic Outlook Page 15
Overall Exploration Company Response to Price Decline
The rig count data in Figure 4 are one indication of the response by oil companies
to an environment of much lower prices. Another indication came from a survey
conducted by the Oil and Gas Journal. The results are shown in Table 4. Companies
have reduced their budgets by 62% between 2014 and 2016.
Table 4
Oil Company Expenditure Response to Lower Oil Prices
(Millions of Dollars)
Activity
2014
2016
Change
$194,000
$73,332
-62%
Drilling
36,860
13,933
-62%
Production
960
500
-48%
OCS Lease Bonus
Total
$231,820
$87,765
-62%
Source: Oil & Gas Journal, March 7, 2016
Outlook for Oil Prices
As mentioned in last year’s LEO this is the most difficult section of the report to
write. Because of it rather extreme variability and its connection to governmentally run
oil companies, oil price patterns can humble the very best of forecasters.
Figure 5 provides a visual of our team’s estimate for oil prices over 2017-18.
Our projections are based on the price of oil averaging $24 in 2016, $53 in 2017 and
rising further to $60 in 2018. Our confidence range around these point forecasts is from
a low of $30 a barrel to a high of $90. This wide confidence range is a reflection of the
difficulty and uncertainty of forecasting this variable.
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Economic Outlook Page 16
Figure 5: Oil Price Forecasts
120
Price per Barrel
100
2016
Average
$42
Low Range
High Range
80
2017 2018
$53
$60
$30
$30
$90
$90
60
40
20
0
1980
1985
1990
1995
2000
2005
2010
2015
What would be the basis for an expectation of slight improvement in oil prices? It
is the price of something, so our thinking comes down to demand and supply factors.
On the demand side, trends, and general agreement, suggest that worldwide demand for
oil will continue to rise as illustrated in the EIA’s Short Term Energy Outlook in Figure
6.
Note that the brown line in this figure traces historical world demand since 2011
through 2016-II, along with the EIA’s forecasts into 2017. The EIA expects demand for
oil to continue trending upwards, a forecast that is also in agreement with the OPEC
Secretariat.5 Increasing worldwide demand supports upward tendencies in oil prices.
5
OPEC Monthly Oil Report, July 2016, p.43.
______________________________________________________________________________________
Economic Outlook Page 17
Figure 6
The supply side is much more mixed and difficult to assess. As pointed out
earlier, U.S. production peaked in 2015 and is trending downward at least through 2017.
Production in major producers like Nigeria, Venezuela, and Russia has also trended
downward since prices began to fall in 2014. These movements also support a position
of rising oil prices.
On the other hand, Iraqi production has risen smartly since 2014 (from 3.3
mmb/d in 2014 to 4.3 mmb/d in May 2016). An important wildcard is the Iranians,
whose output has risen from 2.8 mmb/d before sanctions were lifted to 3.6 mmb/d in May
2016. Leaders in Iran have voiced a desire to bump their output to 5.7 mmb/d but
infrastructure problems and skill set limitations will likely prevent achieving that goal
soon.6
The real wildcard is Saudi Arabia. How much longer will this country keep the
taps open? Their gambit is costing their country a lot of money. Their sovereign wealth
fund balance has dropped from $732 billion in 2014 to $582 billion in 2016. The country
has levied 29% in internal spending cuts over 2015-16, an action that has to take a toll on
its citizens. In 2012, the Saudi budget was running a surplus of 12% of its GDP; by
2015, that had reversed to a deficit of 21.6% of GDP. How much longer are the Saudi’s
willing to sacrifice to achieve their goal? This unanswered question is one reason for the
wide range around our point forecasts for 2017-18.
6
Production data can be found in the Oil and Gas Journal, August 8, 2016, p.28 and in the January 11,
2016 edition, p.25.
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Economic Outlook Page 18
Natural Gas: Supporting an Historic Boom
Fracking not only created a sudden abundance of oil in the U.S., but it also
generated an abundance of natural gas. In fact, the new fracking thrust started first in
natural gas fields---such as the Barnett, Haynesville, Fayetteville and Marcellus plays--and then gravitated to the oil shale plays. Those initial gas shale plays added large
amounts of new natural gas to the country’s inventory, and then when fracking was used
in the oil shales, there was another huge supply of “associated” natural gas that came up
with the shale oil.
Natural Gas Price Forecasts: Demand Moves the Curve a Little
Not surprisingly, this abundant new supply had a major impact on natural gas
prices as shown in Figure 7. After six years of very high prices, natural gas prices
initially fell to the $4 range, and then when the new associated gas hit the market the
extra supply moved the price down into the $2.50 neighborhood.
Fig. 7: Price of Natural Gas
9
8
Per MMBTU
7
2016
Average
$2.40
Low Range
High Range
2017 2018
$2.50 $2.90
$2.10 $2.10
$3.50 $3.50
6
5
4
3
2
1
80
85
90
95
00
05
10
15
Our 2017-18 forecasts for the Louisiana economy are based on natural gas prices
remaining low, but rising slightly. We are projecting a price of $2.50 in 2017 and $2.90
in 2018. It should be noted that these forecasts are much less aggressive than the EIA’s
which have the price at $3.09 in 2017 and $3.62 in 2018.
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Economic Outlook Page 19
A major reason for the upward bump in both forecasts is an expected significant
increase in the demand for natural gas in the near term. Table 5 gives readers a notion
of the sources of this new demand. First, many coal-fired power plants are being shut
down by the Obama Administration for environmental reasons, and they are being
replaced by natural gas-fired plants. Secondly, industrial demand for gas is increasing as
many firms switch from oil and coal to this cheaper and more environmentally-friendly
fuel.
Table 5
Estimated Natural Gas Demand: 2016-20
Description
Amount of Natural Gas
Production: 2016
79.6 bcf/d
Additional Demand by 2020:
Additional Gas-Fired Power Plants
3.2 bcf/d
Industrial Demand
3.3 bcf/d
Mexico Exports
2.5 bcf/d
LNG Exports
6.9 bcf/d
Total:
15.9 bcf/d (+20%)
Thirdly, the firm PointLogic Energy shows in Figure 8, new pipelines running
south are markedly increasing natural gas exports to Mexico. Finally, the U.S has several
LNG export terminals under construction. As they begin to export (one already is) that
will increase the demand for natural gas. As seen in Table 5, Ponderosa Advisors is
estimating these factors will combine to increase the demand for natural gas by 20%
between now and 2020.
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Economic Outlook Page 20
Figure 8
Given this strong demand environment, why not have a more aggressive natural
gas price forecast? It is our belief that there remains a very abundant supply of this fuel
available on fairly short notice. In particular, Louisiana’s own Haynesville Play in the
northwestern part of the state is basically lying fallow. Once the home to 140+ rigs, this
dry gas play now has only 16 active rigs. Just to the north is the Fayetteville Play in
Arkansas. There were 34 rigs working this play in 2011; in August 2016 there are none.
Just a slight uptick in natural gas prices would have these plays humming again. This
abundant supply should keep a lid on natural gas prices.
A Mega Industrial Boom
One manifestation of these low natural gas prices has been to fuel an industrial
boom in Louisiana like none other in the state’s history. In cooperation with the Greater
Baton Rouge Industrial Alliance (GBRIA) we have documented the new industrial
expansions/additions in Louisiana since 2012. As of August 2016 these announcements
total a remarkable $134.8 billion.
We have been monitoring the Louisiana economy for three and a half decades. In
a really great year in the past, $5 billion in announcements would have been considered
very good. The latest total is nearly 27 times larger than our best year in the past. One of
the authors monitors nine other states in the southeast. These states run from Louisiana
up to Arkansas, across to the Carolinas and down to Florida. Only one of those states has
announcements barely exceeding $5 billion.
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Economic Outlook Page 21
Highly Concentrated by Industry and Geography
These announcements are highly concentrated in two industries. The largest
segment is the LNG export terminals with $67.1 billion in projects. In second place are
chemical firms, with $50.4 billion in announcements. They are also highly concentrated
geographically. The Lake Charles MSA is the huge winner in this race with $96.4
billion in announcements, followed by the Baton Rouge/New Orleans combined MSAs
with $38 billion. Chemical firms and LNG exporters need access to ocean-going ships to
efficiently move their products. The Mississippi River and the Calcasieu Ship Channel
provide just such access.
These expansions are highly concentrated in two industries: (1) chemicals ($50.7
billion), and (2) LNG export terminals ($59.2 billion). They are also highly concentrated
geographically. An estimated $85.6 billion is in the Lake Charles MSA and $44.5 billion
is along the Mississippi from Baton Rouge to New Orleans.
Are All the Announcements “Real”?
An obvious question is: Are all the projects a definite “go”? Just to announce that
Louisiana has been chosen for a new plant does not mean the firm will actually build the
facility. Markets change, permitting issues arise, taxes are altered, and financing barriers
are encountered. Of the $134.8 billion in projects announced since 2012, how many are
already built or are underway? Table 6 provides the answer for the state as a whole and
for the three key MSAs where the most announcements have occurred.
Table 6
Industrial Announcements: Built/Underway Vs Potentials
Amount (Billions of Dollars)
Region
State:
Built/Underway
Potential
Lake Charles MSA:
Built/Underway
Potential
Baton Rouge MSA:
Built/Underway
Potential
New Orleans MSA:
Built/Underway
Potential
Source: Loren C. Scott & Associates, Inc. & GBRIA
$59.2
$75.6
$45.4
$51.0
$10.1
$5.2
$3.5
$19.0
Statewide, about 44% of the projects announced are either completely built
or are underway. Even if none of the other projects go vertical, the state is still enjoying
the fruits of $59.2 billion in new industrial projects---a figure almost 12 times larger than
______________________________________________________________________________________
Economic Outlook Page 22
some of Louisiana’s best years in the past. There are $75.6 billion in projects at the
FEED (front end engineering and design) stage.
It is important to note that these numbers are “fluid”. For example, projects are
regularly moving from the potential category to the construction category. Indeed, two
huge contracts---Yuhang Chemicals ($1.85 billion) and Monsanto Chemicals ($1 billion)--are virtually certain to begin construction before the end of 2016. Also, sometimes the
FEED process is completed and firms decide not to make the final investment decision
(FID) to proceed with the project. In July 2016, Shell made the decision to table its Lake
Charles LNG export terminal, an $11 billion project (this project is not in the numbers in
Table 5).
It is interesting to see how this potential versus built/underway ratio varies across
the state. In the Baton Rouge MSA, two-thirds of the projects are already completed or
are underway. By contrast, the great majority of the projects in the New Orleans MSA
are at the FEED stage, though both the Yuhang and Monsanto projects are in this MSA.
In the Lake Charles MSA the breakdown is more evenly split, with $45.4 million built or
underway and $51 billion at the FEED stage.
Threats to Chemical FEED Projects: Europe/Asia Gas Prices
Table 7 documents all the chemical industry announcements in the state since
2012. Of the $50.4 billion in announced projects, $26.7 billion are underway or
completed and $23.7 billion are at the FEED stage.
Table 7
Announcements of New Chemical Plants & Expansions of Existing Plants
In Louisiana Since 2012
Chemicals Only
Capex
Status* Parish
Ascension
Air Products
$ 1,000,000,000
C
St. Charles
AM Agrigen Industries
$ 1,200,000,000
P
Calcasieu
Axiall-Lottie Corp
$ 3,000,000,000
U
Ascension
BASF
$
500,000,000
C
Ascension
BASF
$
42,600,000
C
Ascension
BASF
$
20,000,000
C
Plaquemines
Castleton Commodities
$ 1,200,000,000
P
Ascension
CF Industries
$ 2,100,000,000
C
Jefferson
Dyno Nobel/Cornerstone
$ 1,025,000,000
U
Iberville
Dow Chemical
$ 1,060,000,000
U
St. John
Eurochem
$ 1,500,000,000
P
St. John
First Bauxite
$200,000,000
P
St. James
Formosa
$9,400,000,000
P
Ascension/Caddo
Honeywell
$
89,000,000
C
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Economic Outlook Page 23
Ascension
Huntsman
$
78,000,000
C
Calcasieu
Indorama Ventures
$175,000,000
P
Grant
Investimus Foris
$265,000,000
P
Calcasieu
Matheson
$130,000,000
C
Ascension
Methanex
$
600,000,000
C
Ascension
Methanex
$
800,000,000
U
Ouachita
Mid South Extrusion
$
4,000,000
U
Ascension
Momentive
$
66,000,000
P
St. Charles
Monsanto
$1,000,000,000
P**
Vermilion
Myriant Corporation
$
100,000,000
C
Iberville
American BioCarbon
$
312,000,000
U
Iberville
Nachurs Alpine Solutions
$
14,000,000
C
St. John
Nalco
$
18,700,000
C
Ascension
Occidental Chemical
$145,000,000
C
Ascension
Praxair
$100,000,000
U
Ascension
PSC Nitrogen
$40,000,000
P
Calcasieu
Sasol Ethylene
$ 11,000,000,000
U
Iberville
SE Tylose at Shintech
$
120,000,000
U
Ascension
Shell Chemical
$717,000,000
U
Iberville
Shintech
$ 1,500,000,000
U
Iberville
Shintech
$
500,000,000
U
Iberville
SNF Flopam
$
362,000,000
C
Ascension
Stepan Companies
$
70,000,000
P
St. James
South LA Methanol/ZEEP
$ 1,300,000,000
P
St. James
Syngas Energy
$360,000,000
P
Ascension
Taminco/Balchem
$
37,588,000
U
Lafourche
Virdia
$60,000,000
U
Calcasieu
Westlake
$
330,000,000
U
Calcasieu
Westlake
$
425,000,000
C
Calcasieu
Westlake
$128,000,000
C
Calcasieu
Williams Olefins
$
375,000,000
C
Ascension
Williams Olefins
$ 5,000,000,000
P
St. James
Yuhang Chemicals
$ 1,850,000,000
P***
Total all Projects
$ 50,318,888,000
Total Potentials
$ 23,626,000,000
Total
Completed/Underway
$ 26,692,888,000
Source: Tabulations as of August 2016 by author & staff of Greater Baton
Rouge Industrial Alliance. *C=completed; U=underway; P=potential. **FID given 4/16.
***Late 2016 ground-breaking.
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Economic Outlook Page 24
It is important to note that it was not just low domestic gas prices that fueled all
these announcements. It was also the fact that natural gas prices had not fallen in Europe
and Asia---two significant competitors to the U.S. in the world chemical market. Note in
Figure 7 that from about 2010 through well into 2014 the price of gas in Europe and Asia
was much higher than in the U.S. U.S. chemical firms began to capture more and more
of the international chemical market, because the natural gas-guzzling firms in Europe
and Asia simply could not stay competitive. This was true even though chemical firms in
Asia had a competitive advantage over U.S. producers in labor costs, taxation, and
logistics.
Why were natural gas prices so much higher in Europe and Asia? Because these
regions had to import their natural gas, and their supply sources priced the natural gas
off the price of oil. Suppliers such as Russia or Qatar would basically price their natural
gas at about 15% of the price of oil. If oil was selling for $100 a barrel, these countries
would charge $15 per mmbtu for their LNG. There was no way a chemical firm in
Europe and Asia---paying $15 for its natural gas---could compete with U.S. firms paying
only $3. Thus, the high oil prices of 2010-mid-2014 generated very high natural gas
prices in those regions.
Figure 7
Careful observers will notice in Figure 7 what has happened to our country’s
competitive advantage in natural gas prices in recent months. The gap between U.S.
prices and those in Europe and Asia has narrowed substantially as their oil-price-based
natural gas prices have plummeted. With oil prices at $40 European and Asian chemical
______________________________________________________________________________________
Economic Outlook Page 25
firms are now paying $6 per mmbtu. The U.S still has a price advantage with natural gas
prices here at $2.50. However, our competitive advantage has dropped form $15/$3 to
$6/$2.50.
It is important to understand that regarding Asia, full equality in natural gas prices
is not necessary to shift the advantage to Asia’s side, because their competitive advantage
in labor costs, taxes and logistics remains. It is the “tails” on the foreign gas price lines in
Figure 7 that has caused some of the companies at the FEED stage ($28.8 billion at this
writing) to move their foot from the accelerator to at least tapping on the brake.
Threats to LNG Export FEED Projects
There is another significant group of plants at the FEED stage that are being
threaten by lower oil prices---proposed LNG export facilities. Table 8 lists the ten LNG
export terminals announced. All but two are in the Lake Charles area. There are over $65
billion in projects announced, a figure that does not include the two projects in
Plaquemines Parish for which no capital expenditures have been released. Only two of
these projects are underway---Cheniere and Sempra. Cheniere recently completed one of
its six “trains” and has begun exporting LNG.
Table 8
Announcements of New LNG Export Terminals
In Louisiana Since 2012
LNG Export Terminals
Capex
Status* Parish
Cameron
Cheniere Energy
$20,000,000,000
U
Cameron
Sempra
$10,000,000,000
U
Cameron
So. Ca. Telephone & Energy
$9,300,000,000
P
Cameron
Venture Global
$4,250,000,000
P
Plaquemines
Venture Global
NA
P
Cameron
G2 LNG
$11,000,000,000
P
Calcasieu
Magnolia LNG
$3,500,000,000
P
Cameron
Delfin LNG
$7,000,000,000
P
Plaquemines
LA LNG Energy
NA
P
Calcasieu
Driftwood LNG
$2,00,000,000
P
Total Announced
$65,050,000,000
Total Underway
$30,000,000,000
Total Potential
$35,050,000,000
Source: Tabulations as of March 2016 by author & staff of Greater Baton
Rouge Industrial Alliance. *U=underway; P=potential
The other eight LNG export projects, representing over $35 billion in potential
investments, are at the FEED and permitting stage or seeking additional financing. The
data in Table 9 illustrate the dilemma facing these remaining eight firms.
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Economic Outlook Page 26
Unlike Qatar and Russia---who price their LNG at about 15% of the price of oil--our exporters price their LNG off the Henry Hub price of natural gas, plus additions for
the cost of liquefaction, capital recovery, and transportation to Asia. Note that this sums
to a total charge of $9.53 per mmbtu by the Louisiana supplier when the Henry Hub price
was $3.50. The Louisiana LNG firm enjoyed a very nice competitive advantage over
Qatar and Russia---$9.53 per mmbtu versus $15.
However, when the price of oil fell to $40, Qatar will now charge 15$ X $40 = $6
per mmbtu. The Henry Hub price for natural gas has fallen to $2.50. The Louisiana’s
firm’s competitive advantage has vanished ($6 versus $8.53). Louisiana LNG exporters
are now at a significant competitive disadvantage. Some of these firms are toying with
the $3.50 capital recovery figure to see if there is some way to bring that down enough to
remain competitive.
Table 9
Relative Cost of LNG
Foreign Supplier Charge (15% of Oil Price)
Louisiana Supplier Charge
Henry Hub Price
15% for liquefaction
Capital Recovery cost
Transportation to Asia
Total Louisiana Supplier Charge
Oil Price = $100
$15 mmbtu
Oil Price = $40
$6 mmbtu
$3.50
$0.53
$3.50
$200
$9.53
$2.50
$0.53
$3.50
$200
$8.53
Clearly, the price of oil matters a lot to these remaining eight firms, which is why
some of them may be moving the foot from the accelerator to the brake until it becomes
clear where oil prices will finally settle. Our oil price forecast of $60 for 2018 would
make the Qatar/Russia price $9 per mmbtu and at least restore our competitive advantage.
Threat to the FEED Projects: State Government
A new threat has arisen to these FEED projects, and future projects considering
Louisiana, since our last LEO was published. When newly elected Governor John Bel
Edwards took office, he inherited a state budget with a substantial deficit for FY16 and an
even bigger deficit projected for FY17. Governor Edwards has attacked this issue
primarily by raising more revenues rather than cutting expenditures. In fact, the FY17
budget will be approximately $2.9 billion larger than FY16 because the Governor
immediately authorized Medicaid expansion which increased the federal funding part of
the state budget. The state portion of the budget actually increased slightly from about
$15.2 billion to $15.9 billion.8
8
http://revenue.louisiana.gov/Miscellaneous/FY17%20State%20Budget%20at%20Appropriated.pdf
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Economic Outlook Page 27
Business Tax Impacts
Three fiscal sessions were called in the last 12 months to address the budget
deficit. The business sector carried a substantial part of the burden of closing the revenue
gap. Based on figures for each bill generated by the Legislative Fiscal Office, the
Louisiana Association of Business & Industry (LABI) has estimated the total amount of
new taxes imposed on business by fiscal year. LABIs estimates are as follows:
 FY16: $575 million
 FY17: 1.33 billion
 FY18: 1.35 billion
Some of the new taxes are temporary (until tax reform measures can be passed)
and some are permanent. Among the larger taxes are:
 Changed the inventory tax credit from a refund to a carry forward (can only be
used against income tax liability) for credits more than $1 million and reduced the
refundable portion by 25% for many other taxpayers;
 Prohibited the amount of net operating loss deduction from exceeding 72% of
Louisiana net income;
 Removed more than 150 exemptions and exclusions from the 4% sales tax from
April 14, 2016 to June 30, 2016; Removed exemptions and exclusions from 2% of
the sales tax from July 1, 2016 to June 30, 2018 (but 3% on business utilities and
1% on manufacturing machinery and equipment); and removes 1% of business
utilities exemption from July 1, 2018 to March 31, 2019.
 Imposed a new 1% sales tax from April 1, 2016 until June 30, 2018 and limited
more than 125 exclusions and exemptions to the existing 4% tax including
business utilities (which are subject to the new tax;
 Expansion of the franchise tax to some LLCs (Act 12 James, 1ES)
 Expansion of sales tax to manufacturing inputs/byproducts (Act 2 Broadwater,
2ES)
The chemical firms listed back in Table 7 are huge consumers of electricity and
natural gas utilities. They also carry significant inventories. In the bowels of every one
of the firms listed as “potentials” in Table 7 is an accountant estimating the rate of return
on equity of the firm’s proposed project. Actions taken by the two governors and the
Legislature in the last 12 months have moved that equation against pulling the “build”
trigger.
Changes in the TYITE
One key factor in helping that rate of return on equity equation move in
Louisiana’s favor has been the presence of the ten year industrial tax exemption
(TYITE). Until June 24, 2016 firms were able to approach the Board of Commerce and
Industry with their proposed capital expenditures on a new plant, replacement of key
machinery, environmental upgrades, and the Board would grant the firms an exemption
______________________________________________________________________________________
Economic Outlook Page 28
from paying local property taxes on those expenditures for five years with an opportunity
for a renewal for another five years.
On June 24, 2016 the Governor issued executive order JBE 2016-26. In this order
he made the following changes in the TYITE:
 All contracts shall now require an “Exhibit A” consisting of a Cooperative
Endeavor Agreement (CEA) between the State, the Department of Economic
Development and the applicant providing for the creation or retention of jobs.
Effectively this means TYITEs will no longer be awarded for replacement
equipment, environmental upgrades, maintenance capital, or other investments
that do not create new jobs or do not provide compelling evidence of the
retention of existing jobs. The TYITE can be reduced or eliminated if the
applicant does not meet the job goals in the CEA.
 All new contracts now must include “Exhibit B” consisting of local approvals
consisting of a resolution from the parish council or police jury, and the school
board, and the sheriff’s office.
These changes do not apply to any CEAs issued before June 24, 2016, so
agreements with the firms listed back in Tables 7 and 8. However, if these firms in
the future want to apply for a TYITE for replacement equipment, environmental
upgrades, maintenance capital, or other investments that do not create new jobs or do not
provide compelling evidence of the retention of existing jobs, those applications will be
turned down. Again, when that accountant in the bowels of the firm was calculating the
rate of return on equity (ROE) for a Louisiana location, no allowance was made for this
change. It is a change that moves against the ROE equation of a new firm or expansion
of an existing one.
Importantly, the Governor also signed into law a bill that requires manufacturers
to choose between the inventory tax credit and TYITE. If a site utilizes TYITE, the
company is no longer eligible for the refundable inventory tax credit.
The Exhibit B addition---gaining local government approval---will add to the cost
and time to achieve a TYITE in the future. There is some disagreement over whether or
not local government entities have been awarded veto power over a firm’s application.
The Governor’s executive order clearly says all applications “must include Exhibit B
consisting of approvals…” This wording suggests strongly that local entities have gained
veto power over the TYITE. Testimony by the Governor’s executive counsel suggests
this is ambiguous.
To the extent that the TYITE program factored significantly into a firm’s decision
to locate or expand in Louisiana, these changes have added costs and uncertainty to the
equation---moves that on the net harm economic development in the state. This makes it
curious as to why the Governor chose these changes when they have zero impact on the
state’s budget.
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Economic Outlook Page 29
To be fair, Louisiana’s greatest competitor for the chemical and LNG projects
listed in Tables 7 and 8 is Texas. From a TYITE standpoint only (ignoring tax and labor
force differences), these changes do not throw us wildly out of line with Texas as seen in
Table 10. Unfortunately for Louisiana, firms will consider all tax differences between
the two states. Louisiana is now at a significant disadvantage compared to Texas which
has unified sales tax collection, does not tax manufacturing utilities, does not tax
manufacturing equipment, and does not tax manufacturing inputs, and has significantly
lower local sales tax rates.
Table 10
Comparison of Property Tax Exemptions in Texas & Louisiana
(Before Executive Order JBE-26)
Louisiana
Texas
Authority
State
Local/County
Discretion Exercised
No
Yes
Percent of Exemption
100%
Up to 100%
Term of Exemption
10 Years
Up to 10 Years
Job Creation Requirement
None
Retention of Baseline to
200 New Jobs
CapEx Requirement
None
$0.3 - $3 million
Maintenance Capital eligible
Yes
No
Source: Louisiana Department of Economic Development
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Economic Outlook Page 30
THE OUTLOOK FOR THE METROPOLITAN STATISTICAL AREAS
There are 64 parishes in Louisiana, and the U.S. Bureau of Economic Analysis
(BEA) has taken 35 and separated them into nine metropolitan statistical areas
(MSAs). These parishes are all grouped around one or more major cities in the state.
Map 1 shows the location of each and the parishes that are in each MSA. Important
changes took place in 2015 when the definitions of three MSAs expanded: (1) Lafayette
added Acadia, Vermillion and Iberia Parishes, (2) Shreveport-Bossier added Webster
Parish, and (3) New Orleans added St. James Parish. For the first time in decades
Louisiana added an entirely new MSA---Hammond---which is composed of Tangipahoa
Parish.
Map 1: Louisiana Metropolitan Statistical Areas
Like a Box of Chocolates
In the great movie “Forest Gump”, Gump says to a stranger, “My Momma say life
is like a box of chocolates.” The point was that you never knew what life was going to
serve up to you. While the chocolates in the box are all “chocolates” each one is really
different from the others. Louisiana's nine MSAs are much like that. They are all part of
the Louisiana economy, but each one is very unique and different from the others. Each
has a different economic base. Each recovered from the Great Recession at a different
pace. Each has felt the collapse of oil prices in a different way, and each has different
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Economic Outlook Page 31
obstacles to overcome going forward, and the future prospects for each are quite
different.
New Orleans MSA, with an estimated 573,400 non-farm workers, is the largest
MSA in the state. Though there have been some great advances in this region since the
mid-2000s, this MSA’s employment still remains 51,300 jobs (or 8.2%) below its PreKatrine/Rita peak. Situated in the “toe of the boot” near the mouth of the Mississippi, the
MSA’s system of ports ranks among the largest in the world in terms of tonnage moved.
It houses a huge medical complex for veterans and non-veterans, and it is the home to
several universities---the largest being the University of New Orleans and Tulane
University. New Orleans proper is a tourism magnet, in some cases attracting tourists to
its substantial gaming industry anchored by the state’s only land-based casino, two other
riverboat casinos and the Churchill Downs Racetrack. A number of large refineries
(including the third largest in the country) and chemical firms reside within this MSA’s
boundaries, along with some key energy companies such as Chevron and Shell. Recently
the region has attracted a burgeoning tech sector.
Second in size, Baton Rouge provides jobs for about 413,500 non-farm workers.
The petro-chemical industry looms large in this MSA with the largest concentration of
chemical employment in the state, the country’s fourth largest refinery, and an unusually
high concentration of industrial construction workers to support that base. Both LSU
and Southern University are located in this MSA along with Baton Rouge Community
College, which is now larger than Southern. This is also the location of the State Capitol,
which means government employment plays a major role in this MSA. Its growing high
tech sector is anchored by the new IBM complex in downtown Baton Rouge. It is the
home of three riverboat casinos and has a healthy film and digital gaming sector.
The fourth largest MSA is Shreveport-Bossier (181,800 jobs in 2016). This
MSA contains the State’s largest gaming sector with six riverboat casinos and one
racetrack. A very active port exists on the Red River in the Shreveport-Bossier area. It
hosts a number of large employers including a 500-person steel mill that is under
construction. With just over 9,155 military and civilian personnel, Barksdale Air Force
Base gives this community a significant military presence. High tech is a growing
presence in this region with the addition of Computer Science Corporation as the 800-job
anchor of the MSA’s National Cyber Research Park. Shreveport-Bossier is in the heart of
a huge deposit of natural gas called the Haynesville Shale
Louisiana’s third largest MSA is Lafayette (205,900 jobs) and its sixth largest is
Houma (91,500 jobs). We put these two together because both have an unusually high
concentration of firms associated with the oil and gas extraction industry, so fluctuations
in energy prices powerfully impact these two regions. They are, however, not identical.
Lafayette is more diverse, hosting the nation’s largest jewelry settings manufacturer, a
large, successful ambulance firm, and a firm that provides ER personnel to hospitals in
several states. Because of its location closer to the Gulf, Houma supports major
shipbuilding and fabrication firms and is home to Port Fourchon, a port that services over
90% of the structures in the Gulf.
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Economic Outlook Page 32
The most closely watched MSA in the state over the next few years is likely to be
Lake Charles, (105,200 non-farm jobs). Like Baton Rouge, Lake Charles has an
unusually heavy chemical and refining base---the second largest concentration in
Louisiana after Baton Rouge. Over 70% of the $134.8 billion in announced industrial
expansions since 2012 are scheduled to occur within this MSA. The industrial
construction sector was already a major player in this region; now it is likely to expand
very dramatically. Two LNG export terminals are under construction in this MSA and
six more are at the FEED stage. With three casinos (two very large), a racetrack, and a
large Indian casino nearby, Lake Charles is the state’s second largest gaming market.
Another unusual characteristic of this MSA’s economy is the large aircraft maintenance
and repair sector at Chennault Airpark.
Located in the northeastern area of the state, Monroe (79,400 non-farm workers)
is the third smallest of the nine MSAs. This MSA can brag of housing one of only two
Fortune 500 firms in Louisiana----CenturyLink. Chase has a large mortgage facility
Monroe. The large Graphics Packaging facility gives Monroe an out-sized presence in
the paper and lumber sector. Vantage Health is a growing, new presence in the area with
over 1,200 employees.
The second smallest piece of cholate in the box would be Alexandria. Located in
the central part of the state, this MSA had 64,200 non-farm jobs in 2016. There is a
diverse mixture of major players in this MSA including Cleco (a large utility company),
Proctor & Gamble, Union Tank Car, Crest Industries, and Roy O. Martin Lumber. One
of the MSA’s jewels is England Airpark, which houses Union Tank Car and recently
became home of a 150-person Immigration and Customs Transfer Facility. Alexandria
has a strong military influence due to nearby Fort Polk---the largest single employer in
the state.
The smallest of Louisiana’s nine MSAs is its newest member---Hammond. With
employment at 43,600 in 2016, Hammond’s economic base is Southeastern Louisiana
University and a significant healthcare sector anchored by the very large North Oaks
Medical Center. Tangipahoa Parish is also a bedroom region for people who work in
New Orleans, Baton Rouge, and in plants along the Mississippi River. Some 14% of
income earned by Parish residents is earned outside of the Parish.
In the sections below we will give a brief employment history of each of the
state’s nine MSAs, along with the Louisiana Econometric Model (LEM) forecast for
2017-18. In each MSA, we will explain the key factors and companies driving the
region’s future.
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Economic Outlook Page 33
The New Orleans MSA: Answering Two Big Questions
The New Orleans MSA is the largest in the state and is composed of eight
parishes---Orleans, Plaquemine, Jefferson, St. Charles, St. John the Baptist, St.
Tammany, St. James, and St. Bernard. Employment in this MSA is now at about
573,400---still about 39 percent larger than the Baton Rouge MSA. These nine parishes
are located in “the toe of the boot” (see Map 3).
It has been a wild ride for this MSA over the last 35 years. The good news is the
MSA enjoyed a solid recovery from the Great Recession despite the drag of a 4,500-job
loss at Huntington Avondale Shipyard. New hires in a hospital sector whose construction
is finally completed, major industrial construction projects, and new high tech firms are a
plus for the future of the New Orleans MSA, but the oil and gas exploration sector is--and will be---a dragon the region.
History Pre-Katrina & Rita
Figure 8 tracks the non-farm employment history in New Orleans from 1980
through 2016. New Orleans suffered mightily during the 1981-87 recession, losing
40,400 jobs or 8.3 percent of its workforce. This MSA had more extraction sector
employees than any other area in the state in 1981---20,600. By 1987, problems in the oil
patch had driven that figure down by nearly 30 percent to 14,600, as many firms
relocated their headquarters operations to Houston and employment in the industry in
general declined.
New Orleans’ manufacturing sector also took a beating, falling from 61,300
workers in 1981 to 41,700 by 1987. Much of this decline occurred in the shipbuilding
segment of manufacturing which alone lost 6,900 jobs. Shipbuilding at the time was very
energy-focused with little diversity in its orders. Multiplier effects from these
shipbuilding layoffs dealt the MSA’s real estate, retail, services, and financial markets
punches that would have them floored until well into the 1990s.
Like the other MSAs with strong energy ties---Houma and Lafayette---New
Orleans began a slow recovery in the late 1980s. Then another round of layoffs at
Avondale Shipyards and the soft natural gas prices of 1991-92 flattened growth in 1992.
A further blow occurred when the Challenger accident caused a slowdown in flights of
that spacecraft. This meant fewer flights and fewer external fuel tanks to be built by what
was then Martin Marrietta.
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Economic Outlook Page 34
640
Fig. 8: New Orleans MSA Non-Farm Employment
1990-2016
2016:
Flat
But Irratic
620
Thousands
600
580
-40,400 Jobs
(-8.3% )
2009-10:
2002:
-6,700 jobs
-10,300 jobs
(-1.3% )
(-1.7% )
560
X
2005-06:
-133,700 jobs
(-21.8% )
540
2016
Compared to 2001 Peak:
-55,200 jobs (-8.8% )
520
500
480
80
85
90
95
00
05
10
15
The big jump in 1994 and 1995 shown in Figure 8 will look familiar to readers
who carefully examine these same two years in the graphs of the other two major casino
markets---Lake Charles and Shreveport/Bossier. Four riverboat casinos with about
3,300 workers opened during this time period. Secondly, the land-based casino opened
at a temporary site, and construction began on the massive permanent location at the foot
of Canal Street. This injection of new jobs was enough to generate healthy annualized
growth rates of 2.6 percent per year during 1994-95.
New Orleans’ employment trend from 1999 to 2001 was virtually flat. Then, in
2001, employment in the region responded to the national recession and other events with
a one-year loss of 10,300 jobs, ranking it number five among the hardest hit MSAs in the
state by the post-911 national recession. Note in Figure 8 that the two years after the
recession---2003-04---were not particularly great recovery years. High natural gas prices
led to the closing of some ammonia fertilizer plants in the area and to general
sluggishness in the region’s large chemical industry. Employment rose at a moribund 0.5
percent rate a year. An important fact from examining Figure 8 is that for six straight
years before Katrina and Rita hit, employment in this MSA was virtually flat.
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Economic Outlook Page 35
The Impact of Katrina & Rita
Of course, the most profound message from Figure 8 is the impact of hurricanes
Katrina and Rita on the MSA. On an annual average basis, Katrina and Rita caused
employment to fall by a remarkable 133,700 jobs or 21.8 percent. These two storms
effectively drove New Orleans MSA’s employment back to levels it had not seen since
1977. Three decades of employment growth were wiped out overnight. According to
Figure 8, the New Orleans economy had recovered 81,800 of those jobs by 2016, but the
MSA employment is still lower than it was in 1980 and is still 55,200 jobs (-8.8%) below
its 2001 peak employment year.
Actually, the use of annual average data in Figure 8 does a poor job of illustrating
how badly these storms impacted the New Orleans economy. On a monthly basis the
job-destruction was much greater than suggested by the annual average data. By the time
Rita had re-flooded New Orleans, the region had lost 177,900 jobs, an astounding 29.5
percent decline.
Recovery rate very slow: A disheartening factor has been the slow recovery
since the storms. More frequently one would see a “V” pattern in employment right after
a disaster as massive federal recovery and private insurance monies flow into the area for
the re-build effort. We saw this “V” pattern, for example when observing the recovery in
Lake Charles and Pascagoula, Mississippi.
In New Orleans, the recovery looks like a “kindergarten L”. Why has the
recovery rate been so slow? Few would dispute that housing has been a key factor.
First, there is just the sheer size of the destruction. There were almost 182,000 homes
in the New Orleans MSA that incurred either severe or major damage, i.e. damage bad
enough to render the home uninhabitable. Some have estimated this is seven times more
homes destroyed than in any other natural disaster in our country’s history.
Secondly, these homes were rendered uninhabitable by flood waters. When
flood waters enter a home, regular home owner’s insurance no longer applies. The owner
must have purchased national flood insurance. As it turns out, 74 percent of these
homeowners had no flood insurance. Those who did have flood insurance discovered
that it covered only 80 percent of the pre-flood value of the home up to a maximum of
$250,000. Virtually every home owner, even if they had flood insurance, was left with a
gap in their coverage.
To cover this gap in coverage, the generous taxpayers in the other 48 states agreed
to send a pot of money to Louisiana and Mississippi to help homeowners bridge this gap--what was referred to in Louisiana as the “Road Home” monies. These monies were
critical in rebuilding many of the homes. Still, there remain large swaths of New Orleans
East and St. Bernard Parish where people have simply chosen not to return.
Finally, consider four other issues. Recall from Figure 8 that in the six years
before the storms hit the economy in New Orleans was basically flat. Families that had
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Economic Outlook Page 36
been dispersed by the storms to Dallas, Houston, San Antonio or even other parts of
Louisiana, typically found themselves in much more robust economies with more, and
higher-paying, jobs. Secondly, it is a fact that public schools in the New Orleans area
were among the worst in the state (if not the nation). Dispersed families found
themselves in cities with much better public school systems. The good news is that the
advent of charter schools into the Orleans Parish system has apparently improved these
schools significantly. Thirdly, dispersed families watched with alarm the deteriorating
crime situation in New Orleans, and this no doubt retarded the return rate.
The Drag of the Great Recession
Finally, the Great Recession hindered this MSA's recovery. Bolstered by
massive amounts of construction spending to rebuild houses, levees, locks, etc., and the
boost from the availability of Go Zone funding, the New Orleans MSA actually enjoyed
employment growth in 2008. However, the drag of the national economy finally had an
impact in 2009 and 2010, when the MSA lost 6,700 jobs---a 1.3 percent decline. That
was actually not a bad performance considering that the national economy fell by 6.1
percent. The performance of the New Orleans MSA economy during the Great
Recession was actually the best performance relative to the state's other 9 MSAs.
Solid Recovery from the Great Recession
Recovery from the negative impacts of the Great Recession has been impressive
for the New Orleans MSA. Note back in Figure 8 that the region enjoyed four straight
years of solid growth. Indeed, the MSA had recovered all the jobs lost during the
recession by 2011.
This performance is particularly impressive given that it occurred against the
backdrop of the 4,500+ layoffs at Huntington Avondale Shipyards, about two-thirds that
loss again at the Michoud Assembly Facility, and at least a $1 billion decline in Army
Corps of Engineers spending on rebuilding the area’s levee system.
2016: The Drag of Oil & Gas
It is unfortunate that the region could not stay on the steady growth path of 201115. The New Orleans is the home of many firms in the oil and gas industry or in
industries closely aligned with exploration and production activities. The recent large
decline in oil prices has dinged the region enough that employment began declining in
August 2015. As examples, Shell moved 95 people to Houston, Freeport McMoran
dropped 32 jobs, Hexion closed at facility at Norco (-97 jobs), and Chevron has had a
reduction in force at its Covington office. Too, the Army Corps of Engineers reduced its
spending by $162 million on its Hurricane and Storm Damage Risk Reduction System.
Offsetting these declines was the opening of the huge new University Medical
Center Hospital to replace the old Charity Hospital, some $3.5 billion in industrial
construction (primarily on the Dyno Noble facility), and the final construction work on
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Economic Outlook Page 37
the new VA Hospital. The result of all this is that the track of employment in this MSA
has been erratic in 2016. In some months it is down over a 1,000 jobs (February, April,
and May of 2016) and in others it is up over 1,000 jobs (January and June, 2016). On the
net, employment in the region is flat for 2016-H1, a trend we expect to continue through
the remainder of the year.
Forecast for 2017-18: Boost from Construction, Drag from Oil
Where the New Orleans MSA goes over the next two years leans heavily on the
answer to two big questions:


How bad will the oil drag be?
Will announced industrial expansions actually start construction?
Our projections for this MSA are shown down in Figure 9. We are projecting
that the New Orleans MSA employment will add 2,900 jobs (+0.5%) in 2017, and
5,700 jobs in 2018 (+0.9%). This would rank the MSA’s performance third (in
percentage growth) among the state’s nine MSAs over the two-year forecast period. The
MSA will still be 46,600 jobs (-7.4%) below its previous 2001 peak.
The Oil Drag & Others
A non-trivial part of the New Orleans economy is its attachment to the oil and gas
industry. In 2014 (latest data available), the oil and gas exploration industry
comprised about 7.7% of the MSA’s real gross domestic product.9 This figure does
not include ancillary industries like fabricators, shipping, and ship building companies for
whom oil and gas extraction is the life blood. Shell has 1,900+ employees and
contractors at One Shell Square and is moving 95 to Houston. Chevron has a 700+ person
facility in Covington and is reducing its force. Freeport McMoran has terminated 32
from two New Orleans facilities. Back on pages 14 and 15 we described our concerns
about the immediate future of exploration activity in the Gulf. Not much help is expected
for the oil and gas sector over the next two years.
Weakness in oil prices has negatively influenced other areas of the New Orleans
economy. Marathon, a company engaged in both exploration and refining, has
cancelled its proposed $2.5 billion residual oil upgrade expansion at its refinery in
Garyville. Valero has shelved indefinitely of its proposed $700 million refinery
methanol unit at Norco. Also at Norco, Hexion has closed its facility at the cost of 97
jobs.
Significant losses in the New Orleans area have not been confined to just the
exploration and oil related areas. Research by City Business Magazine indicted that
enrollment declines at Loyola and Tulane has led to employment reductions of 408 and
9
www.bea.gov
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Economic Outlook Page 38
1,372, respectively at these universities.10 We are skeptical of the size of the reported
layoffs at Tulane but the university has indicated it would cut some staff positions.
On the north shore, Trinity Marine has closed its 336-person barge
manufacturing facility effective this past spring. A soft yacht market has dropped
employment at Trinity Yachts to only 60. It is our understanding that if no buyer is
found for the yard soon, it will totally shut down. Noranda Alumina in Gramercy has
been hammered by a weak alumina market and is expected to close the doors at its 444person plant in 2016. Chiquita is leaving the Port of New Orleans to return to Gulfport,
which should cost the Port about 100 longshoreman jobs and reduce container traffic by
60,000 to 78,000 a year (-15%). Brown’s Dairy is closing its 186-person milk processing
plant and moving to the Hammond area. Louis Dreyfus is closing a 49-person packing
facility for Imperial Sugar in Gramercy.
Fig. 9: New Orleans MSA Non-Farm Employment
Forecast: 2017-18
640
620
Thousands
600
580
560
540
2017: +2,900 (+0.5% )
2018: +5,700 (+1.0% )
520
3rd in Growth rate
Absolute:2nd
500
480
80
85
90
95
00
05
10
15
If these negative events were the only ones to report in New Orleans the prospects
for the MSA’s immediate future would be dire. Fortunately for the region there are a
number of positive things happening that we believe will be sufficient to move the MSA
into a modest growth in 2017 and 2018.
10
New Orleans CityBusiness, March 18-31, 2016.
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Economic Outlook Page 39
Major Boost from the Healthcare Sector
Healthcare will be a source of significant new, high-wage jobs in New Orleans
over 2016-17. After almost six years of construction work, the new “Big Charity”---now
dubbed the University Medical Center---medical complex in downtown New Orleans
began operations in August 2015. This new 424-bed hospital added an estimated 1,110
net new healthcare jobs to the region.
“Project Legacy”, the new Veteran’s Administration Hospital is scheduled to be
fully completed by the end of 2016. A ribbon-cutting is schedule for November 18th,
2016. The hospital will open in phases throughout 2017. This $995 million, 240-bed VA
Hospital is expected to add a net 1,100 new healthcare jobs in New Orleans.
Ochsner Medical Center has embarked on a $250 million expansion program.
OMC has started construction on a p $104 million project to add six floors to its 8-story
West Tower, a project that will continue through 2018. Included in the expansion are (1)
an $84.5 million Center of Excellence (including a new transplant and new neurological
facility) on the north side of Jefferson Highway, (2) A $34.9 million expansion of the
Gayle and Tom Benson Cancer Center, (3)a $12.4 million out-patient imaging center, and
(4) $24.4 million in upgrades on the existing facility. Construction impacts alone are
expected to generate 1,087 jobs in Jefferson Parish in 2017 and 845 in 2018.
TriWest Healthcare Alliance announced it is opening a new operations center in
Jefferson Parish to provide high-quality healthcare to veterans and their families. The
firm announced 285 jobs paying an average of $35,700 for this new facility.
Industrial Announcements: Will They “Go Vertical”?
As noted back in Table 6, at this writing we are aware of $22.5 billion in
industrial announcements of new plants or expansions of existing plants within the
New Orleans MSA since 2012. This is an unusually high figure for this MSA. What
especially draws attention is that a significant majority---$19 million---of this number
have yet to “go vertical”. They are still at the front end engineering and design (FEED)
stage or are still arranging for final financing. Growth in this MSA over the next two
years hangs significantly on how much of this $91 million is real and begins construction.
Perhaps it would be helpful to the readers to break this $22.5 million in
announcements into three categories: (1) under construction now, (2) potential, but with a
high probability of moving forward, and (3) iffy announcements with a lower probability
of moving forward.
Industrial Announcements: Under Construction
Fortunately, this region has several projects underway. The MSA is benefitting
now from the construction jobs and will benefit again when the plant becomes
operational and takes on new, full time employees.
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Economic Outlook Page 40

The biggest project under construction in the region is the new $850 million
Dyno Nobel International ammonia production plant at the Cornerstone
Chemical (CC) site in Waggaman is virtually complete. CC is also spending $175
million on maintenance and upgrades at the site. Once operational in 2016-III,
Dyno will employ 65 people with an average annual wage of $55,700.

Pin Oaks Terminals is constructing a $600 million petroleum liquids storage
terminal in St. John the Baptist Parish. Construction began in June on the first
dock to be operational in May 2017. An engineering-procurement-construction
(epc) was issued to Smith Tank and Steel to build two million barrels of tank
capacity at the site to be ready for mid-2017. The site is permitted for another 10
million barrels.

Zen-Noh Grain is spending $150 million on a new dock extension and
continuous barge unloading system at the company’s site in Convent. The project
is expected be completed by June 2017, hiring 48 new workers.

Bunge has begun work on $200 million in dock facilities and grain elevator. This
project should be completed in early 2017.

At its site in Killona, Entergy is spending $37.1 million for refueling outage and
maintenance work. Requiring 1,100 contract workers, this project should be
completed by the time the LEO is released.
Industrial Announcements: High Potential
Among the projects that have not gone vertical at this writing, some are near the
top of the probability lists according to economic developers familiar with the projects.

A virtual certainty at this point is the $1.85 billion, world-scale methanol plant
planned by Yuhuang Chemicals for St. James Parish. Construction on the $850
million Phase I is expected to start in late October or early November.
Construction on the $1 billion Phase II is to start right after Phase I is completed.
The company plans to start operations in 2018-I and hire 400 workers at $85,000
a year. Yuhuang: (1) has signed a long term natural gas transportation capacity
agreement with Transcontinental Gas Pipeline, (2) has finalized its land purchase
at the site, and (3) has let a contract with Air Liquide build a $170 million unit to
supple oxygen to the plant. As one of the state’s first wholly-owned Chinese
companies, the methanol produced by this plant is primarily for export to China.
Very high probability.

At the Port of New Orleans, TCI Plastics will be constructing a $36 million
logistics facility to package and ship PVC resins and polyethylene and to
manufacture plastic film. The firm plans to open in 2018 to coincide with the
opening of the new Sasol ethylene plant in Lake Charles. TCI will hire 160
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Economic Outlook Page 41
employees at an annual wage of $33,400. Port officials estimate that the TCI
facility will result in 9,000 new containers flowing through the Port, a 16%
increase in container traffic. Very high probability.

The board of Monsanto gave a final investment decision in April 2016 on a
proposed $1 billion expansion of a herbicide producing plant. The project would
add 95 jobs at $76,500 annually to the facility’s 645-person workforce. Very high
probability.

Entergy Corporation is will seek a final okay from the Louisiana Public Service
Commission before year end on an $850 million expansion of its power plant
located in Montz, Louisiana. Very high probability.

A final investment decision in expected before year end from the board of
Formosa Petrochemical on construction of a $9.4 billion facility in St. James
Parish. It is our understanding that a landowner issue still remains to be resolved.
The new world-class facility will house ethane crackers and downstream chemical
manufacturing plants. Formosa would create 1,200 jobs at the site paying $84,500
a year. It would be built in two phases and would be one of the largest single-site
ethylene production complexes in the world. High probability.

Also in St. James Parish, South Louisiana Methanol is near a final decision to
build a $1.7 billion ethanol plant---the largest in North America---across from the
Nucor plant. The company received its air permits in January 2014 and signed a
10-year agreement in July 2014 with Transcontinental Gas to transport gas to the
site. It would employ 63 people at $66,500 a year. This project is still moving
forward. Good probability.

Venture Global is examining the possibility of constructing an LNG export
facility on 632 acres of land south of Myrtle Grove in Plaquemines Parish.
Venture Global did not provide an estimated capital expenditure for this facility.
The company envisions 20 liquefaction trains, which would put it well over the $2
billion mark. Plan A is to start construction in 2017-II. Reasonable probability.

In 2013, a Russian firm---Eurochem---announced plans to construct a $1.5
billion ammonia-urea production plant in either St. John Parish. Land has been
purchased for the site, air permits have been submitted, and engineering is
underway. The company’s board must still give the FID for the project.
If
constructed the plant would hire 200 workers at $58,000 a year. Reasonable
probability.
Industrial Announcements: Much Lower Probability
Our conversations with economic developers lead us to rank several announced
projects as iffy at this point in time.
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Economic Outlook Page 42
 In July 2014, Nucor opened the first phase of its iron production plant in St.
James Parish. Phase II is a $400 million reduced iron plant (+100 jobs), and
Phase III is a $500 million pellet plant (+200 jobs). Because of weakness in the
steel market we place a very low probability on Phase II being started over 201718. At the end of 2015 the firm missed a deadline to keep $340 million in state
support. It will have to reapply.
 Gavilon Commodities has offered plans to build a $250 million greenfield grain
elevator in St. James Parish that would employ 150. The company’s assets were
purchased in July 2013 by Marubeni, a Japanese corporation. Land was
purchased for $10.4 million for the site in January 2013. We place a low
probability on this project moving forward.
 Syngas Energy announced a $250 million methanol and ammonia facility in St.
James Parish,10 miles south of the Sunshine Bridge. We are told this project is
on hold or possibly canceled.
 Ram Terminals wants to construct a $150 million coal export terminal at the
Plaquemines Port that would create 125 jobs. The company has reapplied to the
Department of Natural Resources for permits, but environmentalists have asked
to have the permits re-examined, a request that DNR has granted. This project is
presently on hold.
 Also at the Plaquemines Port, NOLA Tanking has indicated a desire to construct
an $80-$100 million tank farm at the Myrtle Grove Plantation. We understand
this project is now inactive.
 In October 2014, Castleton Commodities announced plans for a $1.2 billion
methanol plant at the former AMAX Nickle site near Braithwaite. The firm has
encountered permitting issues, and we understand it will be two years before
much movement.
 Louisiana LNG Energy has secured funding from ArchLight Capital Partners to
build a mid-scale LNG export terminal just below the Port of New Orleans. The
company was recently acquired by Parallux Energy, a company that wants to
double the previously announced capacity. Applications for permits have been
made to the Federal Energy Regulatory Commission. No capital expenditure
value was provided on this project. Probability of proceeding: 50%
 AM Agrigen Industries has FEED work underway for a $1.2 billion granulated
urea plant in St. Charles Parish. Air permits have been secured, and water
permits are pending. The firm would hire 150 permanent workers at $55,000
annually. We understand the land option on this project is about to expire and
probabilities are low that it will go forward.
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Economic Outlook Page 43
 First Bauxite Corporation recently announced plans to build a $200 million
bauxite processing plant to manufacture proppants used in fracking wells. Once
constructed the plant at the Port’s Globalplex site in St. John the Baptist Parish
would employ 100 employees at an average annual wage of $70,000. Given the
state of the exploration industry, and the fact that the firm does not yet have a
Cooperative Endeavor Agreement (CEA) with the Department of Economic
Development, we place a low probability on this project moving forward.
Note that in the last two sections we have listed multi-billions of dollars in
projects that could announce, over our forecast period, ribbon cuttings to start
construction of their facilities. It clearly would not take many positive decisions within
this group to seriously boost this MSA’s employment.
Public Construction: Can the Corps Cutbacks Be Overcome?
Described above were the industrial construction projects for this MSA. There
are also a sizeable number of public projects underway over our forecast period. The
question is, will they be large enough to offset serious downsizing in spending by the
U.S. Army Corps of Engineers (the Corps) in the region.
The Army Corps of Engineers has continued its extraordinary spending in this
region on its Hurricane and Storm Damage Risk Reduction System. However, as seen in
Table 11 the volumes---while still very large---have been in decline and will be
noticeably smaller in 2017-18. Corps spending on HSDRRS will fall by $180 million
in 2017 and by another $278 million in 2018.
Table 11
Army Corps of Engineers Actual & Planned Spending:
Hurricane and Storm Damage Risk Reduction System
Fiscal Year
Spend (Millions of Dollars)
2014
$942
2015
$970
2016
$808
2017
$628
2018
$350
Source: U.S. Army Corps of Engineers
Offsetting the declines at the Corps will be the startup in April 2016 of the $826
million upgrade of the Louis Armstrong Airport (whose call name is MSY). This figure
includes $546 million for a 30-gate terminal with three concourses and a parking garage
on the north side of the airport. Visitors to the airport can see the work underway across
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Economic Outlook Page 44
the runway to the north. The project is to be completed in 2018 in time for the 300th
anniversary of New Orleans.
Further offsetting the Corps spending decline will be a scheduled $478.6 million
in state road projects in the MSA, a whopping 58% bump from the $302.5 million
reported in last year’s LEO. Among the bigger projects will be $90 million to 4-lane
LA3241 from LA36 to LA435 and from I-12/LA434 interchange to LA36. In addition,
the $748 million redevelopment of the Iberville Project remains underway. Of the five
phases, three are completed, and Phases 4 and 5 should be finished by the end of 2017.
Over the next two years, $164.2 million in projects will be underway by the Recovery
School District. The RTA has budgeted $90.7 million for projects underway or planned,
including $41.1 million for the Ramparts/St. Claude expansion. Finally, there are press
reports that the region will receive $1.2 billion from the federal government to repair
underground sewer, water and drainage structures damaged due to Katrina.
Good News from the Manufacturing, Cruise & Tech Sides
This region received several pieces of good news this year from its manufacturing
sector. We are told that at the Michoud Assembly Center, Blade Dynamics is about to
finally blossom and add 500 new jobs over the next two years, while a similar number of
new jobs are expected to be generated at the USDA Finance Center at Michoud.
Textron Marine in New Orleans East is presently at 232 employees. The firm
just garnered a new $84 million contract with the Navy its Ship-to-Shore Connector
amphibious craft. An additional $175 million contract was secured this year. Essentially
the program is fully funded through with options out to 2030. The site’s workforce will
ramp up to 600 to handle this work. The Textron site in Slidell is stable at 427
employees to assemble the COMMANDO Select and COMMANDO Elite armored
vehicle lines. Contracts with Canada, Iraq and Columbia should keep employment stable
through 2017. New contracts will be required to avoid some downturn in 2018.
Florida Marine added 40 jobs at its headquarters in Mandeville and broke
ground on a $7.2 million expansion in late 2015. The firm will be adding 400 at its
shipyard in Harvey. Next Generation Marine recently christened two new vessels and
will add 60 employees over the next 12 months. The firm also opened its global
headquarters in Metairie in May. Cajo---a Finnish company---is establishing its first
U.S. facility making laser-based machinery in New Orleans. Hiring of 40 new employees
at an annual salary of $55,000 has already started.
New Orleans has landed two new cruise lines in this past year. In 2015, Viking
Cruise Lines made New Orleans the homeport for its first North American cruise
itineraries and is adding 416 jobs in operations and crews. In addition, French American
Line established its headquarters and Louisiane vessel in New Orleans. The launch date
for operations is September, 2016 and will create 94 new jobs in the region.
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Economic Outlook Page 45
New Orleans continues its nice track record of attracting tech firms. InXile has
opened a new video game development office, adding 50 jobs at $75,000 annually.
Smashing Boxes---which makes products and services spanning web, mobile and
connected devices---is opening an office in New Orleans and hiring 85 new people at an
average salary of $75,000.
Boost from Private Non-Manufacturing Construction
Finally, we should note that this MSA will get an economic shot in the arm from
some sizeable private construction projects that are hotel-focused. The $130 million
renovation of the Jung Hotel should be completed this year, with 145 hotel suites, 175
apartments, and 50,000 square feet of retail space. Four Seasons has won the bid for a
$364 million renovation of the World Trade Center. The renovation will create a 350room hotel on floors 7-19 and condominiums on floors 21-30. A challenge by a losing
bidder to Four Seasons has a court date of October 24th, but Four Seasons is proceeding
with renderings to go to construction.
On a smaller scale, Building & Land Technology Company is spending $30.3
million on a renovation of the NOPSI Building and the Dryades Building into a 217-room
hotel, and Homewood Suites has a $44 million project under construction. Tulane has
started construction of a new $35 million addition to the Freeman School of Business that
should be completed in January 2018.
Baton Rouge: Historic Storm & A Construction Peak
Last year, for the first time in its history, this MSA’s employment broke through
the 400,000 level. There are now an estimated 413,500 jobs in this MSA, the second
largest behind New Orleans. It is the largest MSA in the state in terms of numbers of
parishes---nine, including East Baton Rouge, West Baton Rouge, Livingston, Ascension,
Iberville, St. Helena, Pointe Coupee, East Feliciana, and West Feliciana (see Map 1). In
terms of population, East Baton Rouge Parish was the most populous in the state in 2014
at 446,042 according to the Bureau of Economic Analysis.12
The authors have been monitoring the Baton Rouge economy for 40 years. We
have never seen an industrial expansion like the one underway in this MSA. We have
tabulated $15.3 billion in announced industrial expansions in this MSA (see Table 6).
What differentiates this MSA from New Orleans and Lake Charles---sites of other major
industrial announcements---is that in the Baton Rouge MSA almost all the announced
projects are under construction. An estimated $10.1 billion are underway or completed.
Of the remaining $5.2 billion, $5 billion is for projects at one site that will likely be
starting well past 2020. That means only about $155 million of this MSA’s announced
project have still to break ground. What this means is industrial construction
12
www.bea.gov
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Economic Outlook Page 46
employment in this region will likely peak in 2016 and then drop off in 2017 as these
projects near their completion.
The other key factor in the Baton Rouge MSA’s immediate future is the impact on
the economy of the historic flooding that occurred in August 2016. At this writing,
thousands of residents have been forced into shelters by flood waters up to their roof tops.
Great swaths of the region will be under water for several days. Below, we will attempt to
estimate the impact of this unusual event on the economy.
Petrochemicals, Construction, Universities & Government
The petrochemical industry is a huge factor in this MSA’s economy. This MSA
has the largest concentration of chemical industry activity in Louisiana. Between the
three of them, East Baton Rouge, Ascension, and Iberville Parishes had 9,943 chemical
workers in 2014. Baton Rouge is home of the nation’s fourth (and the world’s twelfth)
largest refinery---ExxonMobil---located just north of the state capitol building. Placid
Refinery is also located in this MSA.
Because the petrochemical industry is very capital-intensive, when it expands, so
does the industrial construction. Industrial construction jobs are also closely tied to
“turnarounds” at these plants, i.e., when the plants are shut down completely for
scheduled maintenance. In July 2016 the Baton Rouge MSA had an unusually high 13%
of its workforce (53,600 jobs) in the construction sector, the second highest percentage in
the state. Only Lake Charles was higher at 15% (15,800 jobs). The comparable
percentage for the whole state was 7.2%. Turner Industries, Performance Contractors,
CB&I, the Newtron Group, and Cajun Contractors are among the larger industrial
construction companies in the area.
The Baton Rouge MSA also is the location of the State Capitol and the vast
office complex associated with it. Two major state universities---LSU and Southern
University---are located in Baton Rouge, along with one of Louisiana’s largest
community colleges. Baton Rouge Community College is actually larger than Southern
University in terms of enrollment. This MSA is also home to an emerging high tech
sector, led by Electronic Arts game company and the large IBM facility.
Recent History of Baton Rouge
Figure 10 shows employment trends in the Baton Rouge MSA over 1980-16. This
MSA was only mildly touched by the terrible recessionary years of 1982-87. Baton
Rouge dropped 4,800 jobs or 2.2 percent of its workforce as compared to the 9 percent
decline in the state as a whole over that same period. Note the distinct jump in the
employment trend line in Figure 10 in 1990. This was due to the addition of five more
parishes to this MSA by the Department of Labor.
The really good years: The years from 1988 to 2000 were heady ones in the
Baton Rouge MSA. This region had the most enviable growth record in the state in terms
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Economic Outlook Page 47
of both size and consistency. The MSA immediately recovered the 1982-87 losses with a
banner year in 1988 when it gained 10,300 new jobs. Then the region’s employment
went straight up for 13 straight years over 1988-00, adding a robust average of 7,500 jobs
each time the calendar turned.
The really weak years: The tables decidedly turned against Baton Rouge over
the next four years. This 9-parish MSA lost 3,900 jobs or 1.1 percent of its workforce in
2001 due to the national recession---an unusually short and mild dip compared to what
happened nationally. Its recovery from that dip was nothing like that of 1988. It took
three years to recover the jobs lost in 2001, and those three years were ones of very
modest growth as seen in Figure 10.
Fig. 10:Baton Rouge MSA Non-Farm Employment
1980-2016
440
400
360
Thousands
2016: +9,000 Jobs (+2.2% ) X
Statewide
Recession:
-9.0%
BTR: -2.2%
-4,800 Jobs
2005-06:
The "Katrina Effect"
+18,500 jobs
(+5.4% )
320
280
Five Parishes Added X
240
2001:
-3,900 Jobs
(-1.1% )
200
80
85
90
95
00
2009-10:
-11,300 jobs
(-3.1% )
2nd Best in State
05
10
15
The culprit behind this slow growth pattern was the chemical industry. We have
already pointed out the dominant role played by this industry in the MSA’s economy.
The chemical sector was hurt by two factors. Initially, the national recession hit sales in
this sector very hard and weakened considerably the price of chemical products.
However, the second factor was in many ways the most problematic. High natural gas
prices (see Figure 7) radically raised operating costs for these firms. Several chemical
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Economic Outlook Page 48
firms in the MSA announced layoffs or closed either temporarily, partially, or
completely. The region’s ammonia fertilizer plants especially suffered.
The Katrina Effect
Evacuees in: Baton Rouge is the closest large MSA to New Orleans, so it
initially absorbed a huge number of evacuees. From FEMA assistance applications, we
estimate that the Baton Rouge MSA initially absorbed about 248,386 evacuees. This
MSA’s population exploded by over 34 percent overnight. Traffic came to a standstill
across the area, supplies vanished from grocery stores and gasoline stations, and every
rental unit in the area was absorbed. There was a wild real estate period of about one
month when realtors were selling more houses in a week than in the previous year. The
median price for a single family home leapt 27 percent, the largest jump among the 151
MSAs surveyed by the National Association of Realtors. Sales tax collections in East
Baton Rouge Parish rose by 34 percent in September 2005.
Evacuees out: There was, of course, no way for the MSA to permanently absorb
a quarter of a million people over such a short time span, if for no other reason than there
were not enough jobs available to support that many people. For example, in November
2005, the traffic count on I-12 east of the I-12/I-10 split was up 22 percent over August
2005. By 2007 that count was up only 3.1 percent. On the I-10 bridge over the
Mississippi, the count initially jumped by 26 percent, November over August. By 2007
that count was up only 2.9 percent.
More importantly, the Census Department made an estimate of the area’s
population as of July 2007. That estimate showed the MSA’s 2007 population of
770,037 was up 39,921 over July 2005---a 5.5 percent increase. As seen in Table 12,
the bulk of that population increase occurred in East Baton Rouge (18,121), Ascension
(10,000) and Livingston (9,100) Parishes. The area clearly experienced an “evacuees in
– evacuees out” phenomenon. A similar phenomenon was experienced in Hattiesburg,
Mississippi and Mobile, Alabama.
Table 12
Population Change by Parish
July 2005 – July 2007
Parish
Absolute Change
Percent Change
East Baton Rouge
18,121
4.4%
Ascension
10,000
11.2%
Livingston
9,100
8.5%
West Baton Rouge
1,091
5.1%
Pointe Coupee
564
2.6%
St. Helena
437
4.3%
East Feliciana
276
1.3%
Iberville
272
0.8%
West Feliciana
60
0.4%
Source: U.S. Census Bureau
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Economic Outlook Page 49
Katrina boosted employment. Not only do the population numbers show that
this MSA benefited from the storms, the employment numbers shown in Figure 10
confirm that as well. The employment line in Figure 10 took a distinct upward turn in
2005 and 2006. The MSA’s employment rose by 18,500 jobs or 5.4 percent over this
period. Obviously such a rapid growth pattern could not be sustained long run.
2007: Construction Leads to a Strong Year
As seen back in Figure 10, the Baton Rouge MSA managed to continue the postKatrina, torrid pace of adding 9,000-10,000 jobs a year. Incentivized by the Go Zone
legislation, a massive amount of new construction work began in 2007.
2009-10: Impacts of the Great Recession
It is clear from Figure 10 that the Great Recession had an impact on the Baton
Rouge MSA, though the region performed better than most in the country and the state.
To repeat, the national economy began losing jobs in January 2008 and U.S. employment
fell by 6.1 percent. By contrast, the Baton Rouge MSA did not lose the first job until
September 2008, and it lost only 3.1% of its jobs. This was the second lowest loss of any
MSA in the state.
The MSA was not without some serious job losses during the recession. For
example:

Dow Chemical in Iberville Parish closed one facility (-160 jobs) and laid off 400
contract workers.

Trinity Marine closed its barge manufacturing facility in Port Allen (-190 jobs).

Capital One Bank closed its call center at a cost of 180 jobs.

Chase Bank closed its operations center, dismissing 247 people.

Wells Fargo closed a call center, terminating 70.

IEM moved its headquarters to North Carolina, taking with it 50 very highpaying jobs.

Excide Batteries temporarily closed its shop, terminating off 132 people.
In addition to these announcements, budgetary shortfalls in state government led
to layoffs in that sector of about 1,300 workers.
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Economic Outlook Page 50
Recovery from Great Recession Getting Stronger Each Year
Recovery from the Great Recession in the Baton Rouge MSA has been getting
stronger each year as seen back in Figure 10. Employment growth in 2011, 2012, 2013,
2014, 2015 and 2016 were 1.4%, 1.5%, 2.7%, 2.6%, 2.2% and 2.2%, respectively. By
October 2012, the MSA had recovered all the jobs lost during the Great Recession
and began setting new employment records. This boom was largely led by the massive
industrial construction activity in the region. Indeed, construction employment in the
region jumped from 37,900 in July, 2011 to 53,600 in July, 2016---a remarkable 41%
increase in only five years.
The MSA accomplished this growth despite a couple of significant setbacks.
First, the region lost 925 call center and distribution center jobs, including the 400person Home Depot call center. Secondly, state government faced some serious
financial challenges as a result of the recession and other factors. Governor Jindal
steadfastly refused to solve these budgetary issues by raising taxes, which meant cuts in
government spending were the order of the day. As the state capital, Baton Rouge tended
to bear the brunt of those cutbacks. Since July of 2009, state government has shed 5,000
workers (-12.5%) in the Baton Rouge MSA.
Forecast for 2017-18: Construction Drop off in 2017?
Figure 11 contains our forecast of employment for this MSA for the next two
years. We estimate that in 2017, the Baton Rouge region will add 4,500 jobs (+1.1%)
and will follow that with an additional 4,500 jobs in 2018 (+1.1%). In percentage
terms, this would place the Baton Rouge MSA #2 compared to growth rates in the other 8
MSAs in the state. In absolute terms, its growth of 9,000 new jobs is projected to be the
fastest in the state. The primary reason for the drop off in the MSA’s growth rate starting
in 2017 is that several industrial construction projects will peak in 2016 and begin using
fewer workers starting in 2017.
Record $10.1 Billion in Industrial Expansions Underway
As mentioned above, Baton Rouge’s six very strong years of growth in a row is
largely due to the record industrial expansions in the area. Again, unlike the case in New
Orleans and Lake Charles, the great majority of the announcements in this MSA are
under construction, whereas in those other two MSAs many announcements are at the
FEED stage and are only “potentials”. As we pointed out back in the assumptions
section, natural gas prices have fallen sharply in the U.S. but are significantly higher in
Europe. Chemical firms are prodigious users of natural gas. The price advantage in the
U.S. has been translated into a price advantage for our chemicals over those produced in
Europe. Consequently, U.S. firms are cutting into Europe’s share of the world chemical
market (see pages 19-25).
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Economic Outlook Page 51
Fig. 11: Baton Rouge MSA Non-Farm Employment
Forecast: 2017-18
440
Cracked 400,000 barrier in 2015 X
400
Thousands
360
320
2017: +4,500 jobs (1.1% )
2018: +4,500 jobs (1.1% )
2nd Fastest in State!
(in % terms)
280
240
200
80
85
90
95
00
05
10
15
Among the projects underway or completed in the Baton Rouge MSA are the
following:

Dow Chemical is spending $1.06 billion on two polyolefin plants and other
capital upgrades. One project was finished in 2015 and another should be
completed by the end of 2016. The projects will add 71 new jobs at an average
annual wage of $49,000.

In Ascension Parish the 1,600-person BASF plant has finished four new facilities
at a total cost of $500 million. About 100 new jobs have been created.

$2.1 billion is being spent by CF Industries in Donaldsonville to build the
nation’s largest nitrogen fertilizer plant. This project is in the final stages of
construction and will be completed in 2016. It will employ 93 people.

Shintech has a $1.4 billion expansion underway that includes an ethane cracker
and connections to PVC and VCM production lines in Iberville Parish.
Completion is expected in 2018-II, and 100 new jobs at $68,500 annually will
result.
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Economic Outlook Page 52

Also at the Shintech site, SE Tylose is nearing completion of a $120 million
chemical plant. The company is hiring 30 workers for the new plant.

Methanex Corporation has spent $1.1 billion to move two idle methanol plants
from Chile to Ascension Parish. The first plant opened in 2014, and equipment for
the second plant was completed in 2016-I. The 2-plant complex employs 165
people at $56,000 annually. The firm is still examining the possibility of moving
a third plant from Chile to the Ascension site which would involve another $600
million investment. Siting issues have delayed this third unit.

Honeywell has spent $80 million on expansions at two of its sites in Baton Rouge
and one in Geismar. The firm has retained 200 jobs and added another 10 to its
workforce.

Genesis Energy has completed a $150 million, 1.1 million barrel storage terminal
for oil, intermediates, and refined products at the Port of Baton Rouge. The firm is
expected to receive its first cargo in October 2016.

At the USA Rail & Terminal Industrial Park in Port Allen, Thermaldyne is
building a new $19 million waste remediation plant and adding 45 jobs at $70,000
annually.

American BioCarbon (formerly NFR BioEnergy) has moved its headquarters
from New York to White Castle and has begun spending $312 million to build 10
sugar-refining hubs that would take bagasse and produce hardened energy pellets
for use as fuel in global power plants. The firm will hire 127 by the end of 2016
and expected to be at 450 by 2019. The full $312 million would be spent by the
end of 2018.

Former officials with Shaw started up a new company---Epic Piping---and have
just completed a $45.3 million, 200,000 square foot pipe fabrication facility in
Livingston Parish. When completely hired up, the firm will employ 560 people at
an average annual wage of $56,500.

In summer 2016, Katoen Natie began construction of the first phase of a $150
million, two million square foot plastics storage and distribution center. The first
phase will involve a $36 million investment and employ 50 people. When fully
built out, the complete project will employ 210 people.

Shell Chemical broke ground in February 2016 on a $717 million alpha olefins
plant that should be open in 2018. The firm will add 20 new jobs at $104,000
annually.
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Economic Outlook Page 53

Praxair is constructing a $100 million carbon monoxide expansion at its site in
Geismar. This project should be complete in 2018-H2.
Construction of these plants is the principle reason why construction employment
is up 41% in the MSA since 2011. However, as indicated in the listing, several of these
plants are nearing completion. The Greater Baton Rouge Industrial Alliance (GBRIA) has
conducted a survey of its members regarding construction employment through 2017.
Figure 12 provides the results from that survey. The GBRIA survey suggests that
construction employment will peak in October 2016 at 28,348 and fall to 18,587 by
the end of 2017, a decline of almost 9,800 jobs. This decline is a primary reason why
we have projected a marked decline in the Baton Rouge MSA employment growth rate in
2017-18 (1.1% a year) as compared to 2016 (2.2%).
Figure 12
Greater Baton Rouge Industrial Alliance Construction Employment Survey
This construction employment decline could be at least partially offset if some of
the area’s “potential” projects actually broke ground. There are at least three potentials
that have chosen the Baton Rouge MSA as their preferred site but are still working on
permitting, financing or other issues. They include:

Momentive Specialty Chemicals is planning to spend $66 million at its Geismar
facility and add 5 new jobs.
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Economic Outlook Page 54

PSC Nitrogen announced in July 2015 that it planned to build a new $40 million
urea plant in Geismar to be completed in mid-2018. No new jobs are projected
with this expansion.

Stepan Company is exploring the possibility of constructing a $60 million to $70
million plant in Geismar that would employ 33 people at an average annual wage
of $70,000. The firm would need to buy property from and use raw materials from
Shell’s Chemical plant.
Baton Rouge’s construction fortunes could really be enhanced if the region went
from a “short list” status to the “named site” on three key projects. In August 2016 it
became public that a joint venture between ExxonMobil and Saudi Basic Industries
Corporation (SABIC) is planning a huge multi-billion dollar petrochemical complex on
the Gulf coast, and apparently a site near Plaquemine, Louisiana is under consideration.
Secondly, economic developers are working hard to land a project known by the
nickname “Project Flex”. This is a $3 billion project that would create 130 high-wage
jobs and is a possibility for Ascension Parish. It also should be noted that
LyondellBasell plans to choose a site on the Gulf coast for a multi-billion dollar plastics
plant. It is our understanding that Ascension Parish, St. James Parish, and Lake Charles
are in the mix under consideration. Landing even one of these mega projects could
reverse the tide of construction job losses facing this MSA,
As mentioned in last year’s LEO, all this new industrial activity in the Baton
Rouge region has spurred a non-trivial boom in the rail sector---especially on the west
side of the River. For example:

In Port Allen, USA Rail Terminals is spending $11.3 million on a railroad
facility and a 200-acre industrial park just south of the old Mississippi River
Bridge. The site will have the capacity to store up to 1,200 railcars. Announced
in February 2015, the project will be completed this year. Forty-three new jobs--at a relatively high annual wage of $80,000---come with this project.

At the Port of Baton Rouge, Union Pacific Railroad plans to construct an 18month, $19.6 million rail expansion project. The company will spend $7 million
on longer receiving tracks and power switches to accommodate unit trains (trains
with 100 railcars), and another $12.6 million on a chambering yard for railcars
waiting to be loaded or unloaded. At this writing, this project has not started.
Grain & Pellets Create a Boom at the Port
The Union Pacific project at the Port of Baton Rouge was requested by Drax
Biomass and Louis Dreyfus Commodities. Louis Dreyfus made a major investment in a
grain elevator at the Port. Drax Biomass built the two white round-shaped storage units
one sees on the left side of the Mississippi River Bridge when driving west. Drax
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Economic Outlook Page 55
Biomass has a facility in North Louisiana, and is building another in Pine Bluff,
Arkansas, that make wood pellets to be shipped to the Port for storage before being
shipped abroad to burn in electrical power plants. Drax ultimately plans to ship 600,000
tons of pellets through the Port, a volume that will require 40 new vessels a year calling
at the Port.
The impact of these two firms on tonnage handled at the Port has, and will be,
nothing short of dramatic, as seen in Figure 13. Note the 125% increase in 2014 as the
Louis Dreyfus facility came online. The reason for this huge jump is seen in the grain
tonnage numbers which rose from zero tons in 2012 to 5,180,724 in 2014. When Drax
Biomass finally begins full-scale shipping of pellets through the Port there will be
another spike in tonnage. The Port is expecting an impressive 100-150 more cargo
ship calling at the Port over the next two years as compared to 2015.
Fig. 13: Tonnage Handled at Port Of Baton Rouge: 2005-15
10,000,000
2012
2015
Grain
0
5,180,163
Petroleum
1,101,552 2,517,724
Cargo Docks 171,839
313,214
9,000,000
8,000,000
Tons
7,000,000
Expecting 100-150 More
Cargo Ships 2017 v 2015
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
05
06
07
08
09
10
11
12
13
14
15
Fiscal Year
Other Significant Boosts for the Baton Rouge MSA
While gains from industrial construction will dominate this region’s economy,
very important boosts will also be coming from a variety of corners:
 The IBM Technology Center has now been constructed and the company has
begun hiring. At 333 employees in the summer of 2016, IBM is ahead of its
planned hiring schedule. That schedule includes reaching a goal of 800 by the
end of 2017.
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Economic Outlook Page 56
 Construction has started on “Project X” a 140,000 square foot beverage
distribution facility north of Epic Piping in Livingston Parish. This company will
create 150 new jobs for the region.
 Martin-Brower Company---also in Livingston Parish---broke ground in October
2015 on a $16 million food distribution center that will retain 160 jobs and add
30.
 Paychex, a company that provides payroll, retirement and human relations
services to 600,000 small and medium sized businesses will add 100 jobs in
Baton Rouge.
 Insurance giant Aetna has announced it will open a new 100-person
administrative office in Perkins Rowe in Baton Rouge.
 We mentioned last year that Stixis was opening its first U.S. development office
at the Louisiana Technology Park. Plans were to hire 230 new people for the
office. Presently only 4-5 persons are employed there, so the firm is not moving
as fast as was hoped.
 Our Lady of the Lake has begun construction of a $230 million, 350,000 square
foot, 130-bed Children’s Hospital in the Healthcare Corridor. The complex will
also include a medical office building and is scheduled to open in the Fall of
2018.
 The $110 million renovation of Patrick Taylor Hall at LSU is in progress with
an estimated completion date of June 2017.
 The $45 million, 3-building Water Campus is well underway just south of
downtown Baton Rouge. Two building are completed and will see tenants
moving in by year end. Construction of the third $25 million building has just
started and should be completed in 18-24 months.
 The region will get an extra boost over the next two years from increased
spending on road projects. The state plans to let $419.2 million in projects over
2017-18, a 38% increase over the $303.6 million let earlier. The two biggest
projects listed were (1) $52.2 million for 3-laning I-10 from Highland Road to
LA73 and (2) $36.2 million to widen LA42 from US61 to LA44. In addition to
these state monies, the federal government has awarded the region $60 million to
close the Washington Street exit off of I-10 to eliminate the bottleneck coming
off the Mississippi River Bridge.
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Guessing the Impact of the Great Flood of 2016
While this document was being penned the Baton Rouge MSA is in the aftermath
of an historic flood created when two feet of rain was dropped on the area over three
days. A similar “100 year flood” hit the area in 1983, but the Great Flood of 2016 broke
even those records and has been named a “1000-year flood”. It has been estimated that
over 116,000 homes were flooded in the MSA.
President Obama declared 20 parishes in southeast Louisiana a federal disaster
zone. This designation made many flood victims eligible for FEMA grants of up to
$33,000 to help pay for repairs and replace property. Some property owners learned to
their horror that their homeowners insurance does not cover flood damage. Flood
damage is only covered if specific flood insurance policies were purchased. In East
Baton Rouge Parish, only 13.3% of property owners carried flood insurance, though that
figure was a higher 36% in high flood risk areas. In heavily flooded Livingston Parish,
only 22.2% of homeowners carried flood insurance, a figure that grew to 34.5% in high
flood risk areas. More aid will be available to some homeowners through the Small
Business Administration, where homeowners may apply for up to a $200,000, low
interest (1.563%) loan to repair or replace damaged property. Businesses and no-profits
can borrow up to $2 million at a 4% rate for businesses and 2.265% for non-profits.
“Guessing” is the operative word in the heading to this section. Tracking the
impact of this event is like trying to tell where a rocket is going when it is only five feet
off the ground. The natural tendency is to recall what happened in New Orleans after
Katrina and Rita (see Figure 8) and assume that this MSA may lose a decade of economic
growth. But there are major differences between the New Orleans event and what has
happened in this MSA. New Orleans was under water for four weeks and possibly longer
in certain areas, while the Baton Rouge area was under water for about 4 days. In
addition, in New Orleans major institutions were closed for varying----and significant--amounts of time. Universities had to forego the fall 2005 semester and help their students
join under universities or to lay out a semester. And even when universities were able to
open in the spring 2016 enrollment was considerably down. Many public and private
elementary and secondary schools could not open for the fall 2005 semester. The health
care system was severely damaged and hospitals were unable to open up quickly.
In the case of the Baton Rouge MSA the businesses are still in place---though
several will have a major clean up ahead. The universities and most schools will reopen
after two to three weeks. Great numbers of people have not left and their jobs are still
here. Finding lodging until homes are repaired and finding replacement vehicles will
likely be the most daunting challenges our citizens will face. It is a major personal
tragedy for thousands of people, and that cannot be minimized.
That being said, we have not altered our original employment forecast based
on the Great Flood of 2016. If anything, we are expecting an uptick in construction
employment as all the insurance, FEMA, and SBA monies begin flowing into the region
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for the rebuild effort. Most assuredly, local governments in the affected parishes will see
a spike in sales tax collections as people replaced clothing and appliances and as they
purchase building materials. Hopefully by the release of next year’s LEO, the Great
Flood of 2016 will be a horrific event in the region’s rear view mirror.
Shreveport/Bossier: Can’t Shake the Oil & Gas Effects
This MSA is now the fourth largest MSA in Louisiana with an estimated 181,800
non-farm jobs in 2016. Located in the northwestern corner of the state, this MSA is now
comprised of four parishes---Caddo, Bossier, Webster, and DeSoto. Webster Parish is a
recent addition to this MSA. All our employment numbers reflect the addition of this
parish.
Shreveport-Bossier has the highest concentration of durable goods manufacturing
employment in the state, and that tends to make the area much more susceptible to
national recessions than Louisiana’s other eight MSAs. Among the large durable goods
manufacturers in the area are CellXion (a manufacturer of cellular towers), Frymaster
(manufacturer of deep fryers and similar products for McDonalds and KFC), and
Ternium, a steel components manufacturer. This group has now been joined by
Benteler Steel, which we will discuss in the forecast section for this MSA.
It is also home of the state’s largest and most successful casino market. This
MSA now has six large river boat casinos plus the Harrah’s Racetrack, which
together employed about 5,507 people in 2016-IV. Bossier City is home for Barksdale
Air Force Base, an employer of 9,155 military/civilian workers and an important
economic driver for the area. Another big employer in the MSA is the LSU Health
Sciences Center with 5,260 employees. The Caddo-Bossier Port is home to several
firms including the Ternium steel firm, the Pratt recycling company, Ronpak, and
Benteler Steel. Altogether, tenants at the Port employ over 1,100 people.
This region was a huge beneficiary of an economic jolt from 2007 to about 2009
in the form of the Haynesville Shale---a very large deposit of natural gas. New fracking
technology made possible the harvesting of this field. In 2008, exploration companies
pumped $4.5 billion in new dollars, about $3.2 billion of that in the form of mineral lease
payments, into the northwest section of the state. In 2009, that figure rose to $7 billion,
of which about $1 billion was in the form of mineral lease payments. This largess
radically reduced the influence of the Great Recession on this MSA's economy, as we
will show below. We will also note a considerable tailing off of activity in the shale
since 2010.
Shreveport/Bossier Recent Employment History
Figure 14 tracks the employment history of this MSA over 1980-2016. The
Shreveport/Bossier area suffered through a prolonged, and deep, recessionary period
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from 1985-89. While this decline was partially a result of a badly declining exploration
industry, that was not the main culprit.
1985-89: The AT&T effect. Both the depth and length (this MSA was the last in
the state to begin the recovery process) of the recession was due to one firm. AT&T had
a large phone equipment manufacturing facility in Shreveport that employed 7,450
people at its peak in 1984. The firm then began a major downsizing effort that ultimately
dropped its employment to near 1,100. Those layoffs, combined with their negative
multiplier effects, caused the MSA’s employment to decline by 8.2 percent.
Casinos to the rescue: In 1990, the Shreveport/Bossier area began a slow assent
from the depths of its recession. Initially, job growth was positive, but anemic. Then in
1994, its employment began to rise rapidly---by an average of 4,600 jobs a year. The
source was riverboat casinos. These casinos have been among the most successful in
the state, because they have drawn heavily from the huge Dallas-Ft. Worth metroplex for
their customers.
Fig. 14: Shreveport-Bossier MSA Non-Farm Employment
1980-2016
200
2016: -2,100 jobs (-1.2% )
11,000 Jobs Below 2008 peak
190
2009
-4,200 Jobs
(-2.3% )
Thousands
180
2001-03:
3,900 Jobs
(-2.3% )
US
Down 2 Years
(-1.4% )
170
160
X
2012-13:
GM
Barksdale
Haynesville
Libby Glass
-8.2%
(AT&T)
150
140
80
85
90
95
00
05
10
15
Casinos added jobs to the region in another important way as well---the
construction of large hotels. Horseshoe Casino had a 25-story, 606-suite hotel; Casino
Magic operated a 94-room, 94-suite hotel; and Isle of Capri operated a 300-suite hotel.
These, of course, are pretty labor-intensive operations, so the MSA picked up a
significant employment boost here as well.
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Durable goods dependence & national recessions: The years 2001-03 were
particularly difficult ones for this MSA. The MSA lost 3,900 jobs over this three-year
period or 2.3% of its workforce. In percentage terms and in length, it was the worst
decline in the state, not unexpected in a very durable goods-dependent region.
Several factors played a role in this rather poor record. First, there was the
closure of some large manufacturing facilities in the area. In mid-2001, the Avaya
Communications (formerly, Lucent Technologies) closed its Shreveport plant, costing
the area 900 jobs. The Pennzoil Refinery was sold and dramatically cut back from 230
workers to only 85. Boeing closed its facility at the airport, terminating 162. Precision
Response closed its 250-person call center in early 2001. General Electric began the
process of transferring 400 positions at its industrial systems plant to another site in
Monterrey, Mexico. These were permanent layoffs.
Too, the state’s most successful casino market took a hit as business declined
with the recession. The area’s newest casino at the time, Hollywood, reduced its
workforce from 2,200 to 1,800. Three of the area’s five casinos reduced employment due
to the recession. Finally, a mixture of other firms, including Frymasters, Beaird, and
Exide Technologies imposed significant layoffs in 2002. Beaird, in particular, went
from a 700- to a 30-person workforce.
GM, Beaird, and Frymaster stop the fall: The Shreveport/Bossier MSA turned
the corner in 2004 and grew for five years in a row, expanding at an average rate of
almost 2% a year over 2004-08. Initially, General Motors was a key player in this
recovery. GM opened its new facility and hired 600 additional workers to begin testbuilding of the Hummer 3 at its old site. Its employment in the region jumped from about
2,400 to 3,600. However, a round of employee buyouts in 2007 dropped employment at
this plant back down to 2,153.
After taking over Beaird Manufacturing, the Eakin Company initially put that
firm back on an expansion path. Employment at the location jumped from 30 to about
570. Frymaster came back at an all-time high employment level of over 600 employees.
The new firm Steelscape (now Ternium)---a steel components manufacturer---opened at
the Port of Caddo-Bossier, creating 240 new jobs in 2007.
Haynesville & Barksdale Mitigate the Great Recession
As we mentioned earlier, normally this MSA is the hardest hit when a national
recession hits because of its high dependency on durable goods employment. For
example, note in Figure 14 that during the post 9-11 recession the U.S. economy lost jobs
for two years by a total of 1.4 percent. In contrast, the Shreveport-Bossier MSA's
employment fell for three straight years by a total of 2.3 percent.
When the Great Recession hit the result in Shreveport was almost turned on its
head compared to past history. The U.S. economy began losing jobs in January 2008.
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Shreveport-Bossier did not lose its first job until 10 months later. The U.S. economy lost
6.1 % of its jobs; this MSA lost only 2.3 % and it only lost jobs in one year---the
only MSA to pull that off. Instead of ranking dead last in the state, Shreveport-Bossier
ranked 2nd in least jobs lost during the Great Recession.
Haynesville flips recession effects: There were two key factors behind this
unusual performance. First and foremost was the tremendous amount of money pumped
into the economy by Haynesville Shale exploration over 2008-09. As we indicated
earlier, these funds amounted to $3.5 billion in 2008 and $7 billion in 2009, an immense
injection of economic activity into the region's economy.
One indicator of how important the Haynesville Shale activity was during the
Great Recession is shown in local government sales tax collections, which are
illustrated for four northwest Haynesville parishes in Table 13. First note that during the
last post 9-11 recession three of the parishes experienced declines in collections (we were
unable to get the earlier data for Bossier Parish), just as normally happens in the face of a
national downturn. However, despite the length and depth of the Great Recession, local
sales tax collections rose in all four parishes over 2008-09, with unusually large
increases in 2009 in Red River Parish (+205.1%) and DeSoto Parish (+82.2%).
Table 13
Sales Tax Collections in Selected North Louisiana Parishes
Parish
Red River
2001
2008
2009
DeSoto
2001
2008
2009
Caddo
2001
2008
2009
Bossier
2002
2008
2009
Source: Author survey of parish finance offices
Percent Change In Sales Taxes
-3.1%
71.1%
205.1%
-0.8%
3.6%
82.2%
-0.8%
7.0%
1.4%
NA
4.1%
5.5%
Similar findings occurred in property taxes collected in five Haynesvilleimpacted parishes as seen in Table 14. Not only did property taxes increase dramatically
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Economic Outlook Page 62
in all five parishes during the country's worst recession since the Great Depression, but
also it is clear from the last two columns that almost all of that growth was energyrelated. In Desoto Parish, property taxes increased by 3 ½ times. In Red River Parish the
increase was almost by a factor of seven. The Haynesville Shale was a huge factor in the
treasuries of these local governments.
Table 14
Property Tax Collections in 5 Haynesville Shale-Impacted Parishes:
2005 Versus 2013
Parish
Property Taxes
Property Taxes
% Energy-
% Energy-
2005
2013
Related 2005
Related 2013
Desoto
$22,395,351
$78,432,531
18.9%
62.4%
Red River
$3,549,617
$21,927,425
3.6%
47.8%
Webster
$15,728,690
$25,342,948
17.1%
26.0%
Bossier
$52,449,881
$97,054,727
8.5%
16.1%
Caddo
$158,347,601
$230,350,740
2.8%
10.5%
Source: Louisiana Tax Commission
Barksdale deserves some credit. Of course, the awarding of the Global Strike
Command to Barksdale Air Force Base also helped mitigate the impact of the Great
Recession. By September 2009, 275 of the 900 jobs attached to the GSF had relocated to
Barksdale. In addition to the Global Strike Force, Barksdale gained part of 700 positions
it would ultimately secure via flight training jobs and the reopening of a weapons storage
area that came to the MSA.
Several closures still hit the area. The gains from the Haynesville Shale activity
and the additions at Barksdale did not mean the region escaped the recession unscathed.
Consider the following:

Problems at General Motors dropped its workforce from over 2,000 to about
800.

Capitol One Bank closed a 150-person call center.

Verizon closed a 300-person call center.

Market conditions turned against Beaird Industries in 2008, and it was closed at
a cost of about 400 jobs.
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Economic Outlook Page 63

A weak U.S. housing market led to the closure of the Georgia Pacific plywood
plant in DeSoto Parish (-280 jobs), and the firm laid off 400 at its plant in
Springhill.
Recovering From the Great Recession: Not the Normal Pattern
Note back in Figure 14 that the Shreveport-Bossier MSA actually started enjoying
job gains in 2010. The increase was only 400 jobs or about 0.2%, but this was the only
MSA in the state to grow that year. The region also had a good year in 2011, adding
2,100 jobs, a very respectable growth rate of 1.2%.
This is the pattern one would normally expect to continue in a durable-goodsdependent economy---good solid growth on the recovery side of a recession. That
however, was not the pattern that has continued. The Shreveport-Bossier MSA has
been in a decline since 2012, losing 6,600 jobs (-3.5%).
Several factors have contributed to this poor performance. First, the GM plant
closed August 2012, costing the region 800 high-paying jobs. Area and state economic
developers have been hustling to find a replacement at the GM site, something we will
discuss in the forecasting section.
The Haynesville Shale has played a significant role in the first 2 years of this
employment decline. After being responsible for shielding the MSA from much of the
effects of the Great Recession, activity in this shale dropped precipitously.
After
reaching a peak of 142 rigs in April 2010, the rig count in North Louisiana plummeted to
only 23 in July 2013---an 84% decline. Rig activity has fallen further to 16 and has
shown few signs of robustness.
What caused this rig movement out of the Haynesville play? The answer lies in
the rate of return on equity (ROI) data in Figure 15. Note that the ROI in the Haynesville
Shale is far lower than in the other plays shown. There are two reasons for this
differential. First, the wells in the Haynesville are deeper than in these other plays, so it
was costing more to drill a typical well---about $9.5 million per well in the Haynesville
versus $6 million in the Eagle Ford or Marcellus Plays. Secondly, the Haynesville Shale
is a "dry" play, i.e., when you drill you get only natural gas. In parts of the Eagle Ford,
Marcellus, Woodford, Permian, and Granite Wash, exploration companies hit both
natural gas and the more highly priced oil. The latter are "wet" plays. The Haynesville is
simply at a serious disadvantage vis-à-vis other natural gas plays in the U.S.
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Economic Outlook Page 64
Fig. 15: Rate of Return on Equity: Various Shale Plays
50
45
48.3%
Liquids-Rich basins
Dry Gas Plays
Percent
40
34.0%
35
34.5%
30
25
24.0%
22.9%
20
15.9%
15
Cana
SW PA
Woodford Marcellus
Eagle
Ford
Granite
Wash
NE PA
HaynesMarcellus
ville
Source: Credit Suisse
A third factor holding back this region’s economy has been a reduction in forces
at Barksdale AFB. The troop count which was 8,655 in 2012 dropped to 7,577. A 24plane A-10C Wing was removed from the base in 2013. There were 500 jobs directly
tied to that wing, but luckily about 400 of those were absorbed into the 307th Bomber
Wing. Associated with all these reductions is obviously a reduction in spending in the
MSA that contributed to the region’s poor job performance over 2012-15.
Another contributor to the recent decline is Libbey Glass. This firm reduced its
workforce by 200 in early 2013, moving these jobs to Toledo and Monterrey, Mexico.
Readers may have noted back in Figure 14 that the Shreveport-Bossier MSA is on
track to lose another 2,100 jobs (-1.2%) this year. The principle driver behind this loss is
the oil and gas exploration industry. The U.S. Bureau of Economic Analysis estimated
that in 2013 (latest data available) $3.4 billion of this MSA’s earnings came from oil and
gas extraction and production. That is over 16.4% of the MSA’s gross domestic product.
The funk the oil and gas industry is in, which is heavily documented in the background
assumptions section, is having its negative impacts on this northwestern region of the
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Economic Outlook Page 65
state. Unfortunately, we expect that funk to linger into 2017.
specific losses below.
We will document some
Finally, it should be noted that the Shreveport-Bossier gaming sector has been
somewhat lethargic over the past couple of years. This sector has shed 713 jobs since
2014 according to data from the Louisiana Gaming Control Board.
Shreveport/Bossier Forecast for 2016-17: Dinged by Energy Sector
Figure 16 shows our employment forecast for this MSA over the next two years.
We are projecting that the Shreveport/Bossier MSA will be flat in 2017 (0%) and
add 600 jobs back in 2018 (+0.3%). The weak performance in 2017 will be driven by
an exploration industry that will remain under attack. The MSA would rank 6th in
employment growth rate among the nine MSAs in Louisiana.
Fig. 16: Shreveport-Bossier MSA Non-Farm Employment
Forecast: 2017-18
200
190
Thousands
180
170
160
2016: 0
(0% )
2018: +600 (+0.3% )
6th Best in State
150
140
80
85
90
95
00
05
10
15
Continuing Shrinkage from Oil and Gas
A ding to this area will continue to come from the oil and gas extraction sector
well into 2017. Figure 17 reveals the dramatic shrinkage in the rig count in north
Louisiana as the natural gas decline has hammered the rig count in the “dry” Haynesville
Play.
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Fig. 17: North Louisiana Rig Count: Mid-July
160
Average Annual Rig Count
140
138.0
120
100
93.0
81.0
80
72.0
60
57.0
59.0
50.0
40
36.0
33.0
36.0
25.0
21.0
20
27.0
23.0
23.0
16.0
0
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
Source: Louisiana Department of Natural Resources
There is a considerable lag in data on real gross domestic product for this MSA,
but what the available data do show in Table 15 is a decline of a billion dollars in the
contribution of the mining sector13 to RGDP in this MSA between 2011 and 2013. Given
the rig count pattern shown in Figure 17, we suspect when the 2015-16 data are released
contributions from the mining sector will have declined even more.
Table 15
Contribution of the Mining Sector to Shreveport- Bossier
MSA: 2009-2014
(Millions of Dollars)
2009
2010
2011
2012
2013
$21,793
$21,430
$20,231
MSA RGDP $20,023 $21,296
$3,608
$3,878
$4,189
$3,756
$3,186
Mining
18.0%
18.2%
19.2%
17.5%
15.7%
Mining
Share
Source: www.bea.gov.
2914
$20,848
$3,428
16.4%
At least three specific negative actions in the region can be associated with the
weak extraction sector. Two were at the Port of Caddo-Bossier. The new Benteler Steel
facility was being constructed specifically to produce pipe for the extraction industry.
The completion of the $665 million tube mill was supposed to correlate with 500 new
jobs at the site, but the company has only been able to support 300. The second phase---a
$227 million mini steel mill---was to be moved up in the construction schedule, but has
13
www.bea.gov. The mining sector is almost exclusively oil and gas related activities in this MSA. The
Dolet Hills lignite mine is located in this region but it is a minor player compared to oil and gas.
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Economic Outlook Page 67
now been delayed to post 2018. Benteler is examining the line-pipe sector as a possible
new market for its products.
Hexion, also at the Port, is engaged in the manufacture of coats for sand used in
fracking. Weakness in that market has lowered the firm’s employment down to just 16.
In the latter part of 2015, Enable Midstream laid off 190 oilfield workers.
No Growth from Gaming
Unfortunately, the region has gotten no growth help from the largest gaming
market in the state. As seen in Table 16, between 2014-I and 2016-I employment in the
gaming sector has dropped from 6,220 to 5,507---a decline of 713 jobs or -11.5%. These
losses were spread across all casinos and the racetrack.
Table 16
Gaming Employment by Unit in Shreveport-Bossier MSA
2014Q1-2016Q1
Unit
2016-I
2015-I
2014-I
Change: 2014-I to 2016-I
559
583
626
-67
Boomtown
1,115
1,149
1,187
-72
Eldorado
1,156
1,161
1,212
-56
Horseshoe
884
1,079
1,086
-202
Sam’s
999
1,060
1,070
-71
Margarittaville
529
519
653
-124
Diamond Jacks
265
319
389
-121
Harrah’s
Total
5,507
5,870
6,220
-713
Source: http://lgcb.dps.Louisiana.gov.
Good News: Benefits of a 4-Star and High Tech
Despite problems associated with a shrinking oil and gas sector, there are several
pieces of good news for this MSA. Attraction of the Global Strike Force to Barksdale
AFB brought with it 4-star General Robin Rand. Attracting a person of this high rank
brings additional business to the base. Indeed, 400 new positions (not more troops) were
brought in and another 200 jobs will be added over our forecast period. A new $20
million communications facility will be started in FY17 at the base. A planned $350
million in total capital expenditures should occur over the next three years.
The high tech sector should also be enjoying a job spurt over our forecast period.
At the Integrated Technology Center, CSRA---the anchor tenant---has 350 employees
now and is to expand to 800 employees by 2017 according to the Cooperative Endeavor
Agreement the firm has with the state. CSRA is opening a second customer service
center and will add 300 jobs over the next two years at an annual salary of $22,000.
Ribbon-cutting for this firm is scheduled for October 2016.
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Economic Outlook Page 68
Smaller gains in Manufacturing & Road Construction
Additional jobs are coming within this MSA’s manufacturing sector, though with
the exception of one, most are rather modest in size. ModuleX Solutions is in its new
750,000 square foot manufacturing facility. The company constructs modular buildings
for the telecommunications industry. These are blast-resistant, highly integrated
buildings. Presently at 98 employees, the company expects to grow to 357 by 2019.
Fiberbond in Minden is presently at 225 employees and is scheduled to add 100
over the next two years.
Express Jet at the Shreveport Airport is expanding its
maintenance facility and will add 40 jobs. TSE International in Shreveport is spending
$1.18 million to enlarge its manufacturing facility which makes tension stringing for the
electric utility industry. The company will add 30 jobs to its 62-person workforce.
Cellixon in Bossier is adding 40 jobs at its site.
At the Port of Caddo-Bossier, large operators Ternium and Pratt are stable, and
Ronpak---which moved its headquarters to the Port---will be adding about 60 to its
current 115-person workforce. A 125,000 square foot warehouse is under construction
and scheduled for a mid-2017 completion date. Tenants at the Port did well in adapting
to the Red River high-water temporary closure in 2015.
Finally, the state has let $152.8 million in road projects for 2017-18. This is a
hefty 65% increase over what was reported in last year’s LEO for this region. The
biggest project will be the widening of Swan Lake Road from I-220 to Flat River.
Lafayette: Another Year of Losses Likely
This MSA, located in south-central Louisiana (see Map 1), is composed of five
parishes---Lafayette, St. Martin, Vermillion, Acadia, and Iberia. With the addition of the
latter three parishes, Lafayette is now the third largest MSA in the state with an
estimated 205,900 people employed in 2016.
A key to understanding this region’s economy is its geographic location. Located
in an oil-rich area and not far from the coast, Lafayette became a prime spot to locate
service firms, fabricators, and other companies that do business with extraction firms
exploring South Louisiana and in the Gulf of Mexico. Consequently, like Houma, the
Lafayette MSA is closely tied to all aspects of the oil and gas exploration industry.
The MSA derives 7.6% percent of its jobs directly from the exploration
industry, the highest concentration among the state’s nine MSAs (the comparable
number for Houma is 7.4%). (The statewide average is 1.9 %.) Countless other jobs in
the MSA are tied to the extraction industry through the multiplier effect.
There are five deviations from this pattern. Stuller Inc. is a 1,150-person facility
that is the nation’s largest jewelry settings manufacturer. Acadian Ambulance is
another large employer in the area (1,350 employees) whose ties are not all directly
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Economic Outlook Page 69
related to the extraction industry, although the firm provides air-med helicopter services
and offshore rig/pipeline safety training to the industry. This company also monitors over
200,000 alarms in 40 states and monitors businesses and houses via videos, eliminating
the need for guards. A third, growing firm is the Schumacher Clinical Partners, which
provides ER and hospital medicine doctors to hospitals in 23 states.
Fourth, Lafayette has a new and growing high-tech sector which we describe in
detail in the forecast sector below. Finally, Lafayette is the home of one of the state's
larger public universities---the University of Louisiana at Lafayette. Until the mid-90s
this area also hosted the largest manufacturing employer in the state---Fruit-of-the-Loom--which had a huge facility near St. Martinville. That facility has been shuttered.
Recent History of Lafayette
Figure 18 displays the recent employment history in Lafayette and demonstrates
vividly the close ties this MSA has to the extraction industry. When oil prices
plummeted in the early 80s, so did the Lafayette economy. Remarkably, a fifth of the
MSA’s jobs disappeared over 1982-87. It was the worst downturn in Lafayette’s
recorded history. However, unlike similarly extraction-dependent Houma---which took
10 years to recover its losses from that recession---Lafayette came out of its “V” much
quicker.
The key was diversification. In the late 1980s, the previously mentioned Fruitof-the-Loom constructed very large facilities in the area and in a short period of time
became the state’s largest manufacturing employer. By 1994, Lafayette had recovered all
its lost jobs and began setting new employment records. (This does not show up clearly
in Figure 18 because of the adjustment in the makeup of the MSA in 1990.)
Soft gas prices in 1992 set Lafayette back a bit, but like Houma, the hit was
nothing like the 1982-87 period. Surging employment at Fruit-of-the-Loom pushed
employment up briskly for the next couple of years.
Then Lafayette entered a “bad news-good news” period. The bad news: As a
result of the North American Free Trade Agreement, Fruit-of-the-Loom began a round of
massive layoffs. The good news: Layoffs at Fruit-of-the-Loom coincided almost exactly
with two important events. One was a jump in oil and gas prices that sent the exploration
industry on a hiring binge. The other was a new entrant that both diversified the
economy even more and was labor-intensive to boot---Stuller Inc. Stuller hired enough
employees that it became the largest jewelry settings manufacturer in the U.S. Lafayette
employment expanded right through the Fruit-of-the-Loom layoffs.
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Fig. 18: Lafayette MSA Non-Farm Employment
1980-2016
240
2015-16: -7.4% (-16,500 jobs)
2016:
-4.1% (-8,900 jobs)
220
New Record: 9/11
Earliest in the State
Thousands
200
180
X
Late 2001:
Closure of
F-O-L
160
-19.4% X MSA Changes 2015:
+Iberia, Acadia, & Vermillion
Decline
140
2009-10
-9,200 Jobs
(-4.3% )
120
100
80
85
90
95
00
05
10
15
The year 1999 was a bad one for Lafayette. Oil prices fell to under $10 a barrel,
and that sent the extraction industry into the layoff mode again. Forty-three hundred jobs
disappeared from the MSA (see the decline for 1999 shown in Figure 18).
For the next two years, Lafayette was back in the growth mode, setting new
employment records in 2001 when most other MSAs in the state were being depressed by
the national recession. Help in this recovery came from two sectors. Several significant
distribution centers, including the large Wal-Mart distribution center near Opelousas and
Magnolia Distribution Center in Lafayette, opened during this period. Then in 2001,
the MSA attracted the Cingular Wireless call center, which hired 1,200 employees.
Unfortunately, Lafayette experienced a big blow in November 2001 when Fruitof-the-Loom’s Martin Mills plant was shuttered, terminating 1,300. By this time, the
post 9-11 national recession was also impacting Stuller Inc., which laid off about 175
employees. In 2003, Devon Energy transferred 60 employees out of Lafayette, and
Fleming Company---a wholesaler supplying the troubled K-Mart---closed its
distribution center there as well. The combination of these events, coupled with a
lackluster response of the extraction industry to high energy prices, kept this MSA in a
funk (-2,500 jobs) for three straight years.
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The Impact of Katrina & Rita
It is obvious from examining the 2005 and 2006 data points in Figure 18 that
something special happened in this MSA in those two years. Non-farm employment
spiked upward by 10,800 jobs or 8.2 percent over those two years. What caused this nice
rebound in employment in Lafayette?
One factor was resurgence in the oil patch. The rig count rose from about 165
to over 201, which meant (1) new exploration jobs, (2) new exploration servicing jobs,
and (3) new oilfield-fabrication-associated jobs for the Lafayette area.
Indirect energy effects: But a larger factor by far was the impacts of Hurricanes
Katrina and Rita. These two storms impacted the Lafayette area in two broad ways.
First, there were the spillover effects of the destruction of the offshore energy
infrastructure. Both Katrina and Rita were very destructive to the energy infrastructure in
the Gulf of Mexico. A total of 115 offshore platforms were destroyed and another 52
were damaged by the two storms. Underwater pipeline systems were also damaged.
Lafayette is the home to several fabricators and oilfield service firms that garnered some
of the repair work on these facilities.
Evacuee effects: Secondly, Lafayette became a home to many evacuees after the
storms---about 34,336 by one estimate. Evidence from the Census Bureau suggests that
Lafayette experienced the same population adjustment as Baton Rouge except on a
smaller scale. Census data indicate that between July 2005 and July 2007, the Lafayette
MSA population increased by 9,033---a heady 3.7 percent increase in only two years.
2007 to Early 08: $140 Barrel Oil Pumps Up the Region
Data indicate that the employment growth rate slowed from about 5,400 jobs a
year in the previous two years to a slower 4,000 jobs a year over 2007-08. Still, this
represented a very healthy growth rate of 2.8 percent a year---second only to Houma
among the state’s eight MSAs.
This slowdown was partially due to the completion of much of the Gulf of
Mexico rebuild effort, but also, Morton Salt closed its 197-person facility at Weeks
Island in 2007, one of the few bits of negative news coming out of this region. That was
somewhat offset by the Nucomm call center coming to Lafayette in 2007, adding 500
new jobs.
Growth in 2008 was initially spurred by a very robust oil patch as oil prices
reached record levels in the fall of 2008, and natural gas prices were unusually high as
well. Also, Acadian Ambulance built a $15 million expansion that led to 300 more jobs.
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High Energy Prices and Job Declines in Lafayette
A problem arose near the end of 2008. After peaking at $132.61 a barrel in
September 2008, the price of oil began a rapid, but temporary, slide down to a bottom of
$39.06 in March 2009. Employment in the Lafayette MSA responded as it always does
to declining oil prices. The state rig count fell from the 190 level to near 170. The MSA
began recording job losses in the latter half of 2008.
But there was another factor in the MSA’s employment decline. Beginning in
April 2009 oil prices began to rise again and were at a very profitable $46.72 by May
2009. By August 2009 oil prices were over $70 a barrel, where they stayed well above
that level through mid-2014. Despite these unusually high and very profitable energy
prices, the rig count in south Louisiana continued to fall. For example in August 2008,
when oil prices nudged $140 a barrel, the rig count in south Louisiana (land and water)
was 56 rigs. It fell to only 30 rigs in August 2009 despite very high oil and natural gas
prices. As seen in Figure 18, the Lafayette MSA lost jobs in 2009 and 2010---a total 2year decline of 4,400 jobs (-3%). We are unaware of any other time in the history of the
Lafayette economy when energy prices were this high and the economy actually lost jobs.
We believe there are two factors behind this poor behavior. First, our
conversations with decision makers in this field and region indicate that President
Obama’s proposed $36 billion tax on the extraction industry sent a chill through this
sector and pushed down the rig count despite the presence of higher and very profitable
oil prices. We gave a detailed analysis of this tax proposal in the 2010 LEO. This tax
was proposed in President Obama's FY10 budget, but Congress was so absorbed in the
healthcare debate that this legislation did not come up for debate. However, the
administration has continued to promote it, so the threat to the industry still lingers. Of
course, a second factor was the difficulties associated with the BP oil spill.
Recovery from the Great Recession: From Unbelievable to Believable Numbers
The Lafayette MSA has had a very healthy recovery from the recession, adding
14,200 jobs (+6.9%) over the four years from 2011-14. It is important to note the fact
that this MSA (1) was the first to set new employment records (in September 2011)
after the losses incurred during the Great Recession and (2) had the best recovery
record of all nine MSAs over 2010-14.
2015-16: Ogre of Low Oil Prices Raises Its Ugly Head
Unfortunately, it was Lafayette’s lot to face another down cycle in oil prices. The
decline from $105.71 a barrel in August 2014 to a low of $27.76 in January, 2016 had its
usual effect on the very oil-dependent Lafayette MSA. Job losses began to be recorded in
April 2015. As seen back in Figure 18, we are estimating the region will be down
16,500 jobs (-7.4%) over 2015-16 as compared to 2014. Most of that loss (-8,900 jobs)
will occur this year. Candidly, in last year’s LEO, we under-estimated just how harmful
these low prices would be on Lafayette.
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While this is certainly unhappy news, it is suggested that readers take another
hard look Figure 18 and what happened in this MSA in the early 80s. Barring a really
unforeseen catastrophe, no one is expecting a repeat of the level of job-hemorrhaging that
occurred over 1982-87.
Forecast for 2017 and 2018: Another Year of Angst
Figure 19 provides the reader with our projections for employment for this region
over the next two years. We are forecasting further job losses in 2017 totaling 5,000
(-2.4%). By 2018 we expect the blood-letting to be over and the economy to
stabilize.
Layoffs Continue in the Oil Patch
In the past two years the Lafayette economy has been hammered by layoffs in the
exploration and closely related industries. For example:

Frank’s International indicated in April 2015 that it would be laying off 400500 employees worldwide. Approximately 150 of those terminations have
occurred in the Lafayette area.

In February 2015, Parker Drilling divulged it was furloughing 50-297. Thirtyfive were reported terminated at the company’s New Iberia location.

Exterran closed its plant in Broussard in December 2015, resulting in 75 workers
losing their jobs.

In late 2014 Hercules Offshore indicated the firm would lay off 450 employees,
although the exact number terminated in the Lafayette area is uncertain. Hercules
sold its lift boat division, and the office personnel associated with the company’s
drilling division were all moved to Houston.

Chevron is moving its focus from the GOM shelf to GOM deepwaters.
Unfortunately, the Chevron Office in Lafayette was the company’s shelf office.
That 300-person office is now down to under 15 employees.

GE Drilling has released 77 employees.

In New Iberia, CARBO Ceramics is closing temporarily at a cost of 61 jobs.

Blue Sky Innovations, which provides helicopter support servicing offshore
work, has cut 58 positions.

Acadian Ambulance reduced its offshore rig and pipeline safety division by 320.
One hundred of those job losses were in Lafayette.
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
In February 2014, Danos reported it planned to start constructing a $23.2 million,
172,000 square foot offshore equipment and piping plant at the Port of Iberia.
The company expected 100 new jobs at the site. That project was moved out of
the MSA to Amelia and the company recently announced a layoff of 80
employees.
These are just the reductions we are aware of from public announcements or
WARN notices filed with the Workforce Commission. There have most certainly been
more. Two key energy firms headquartered in Lafayette have struggled in this low-price
environment. The stock price of Stone Energy has plummeted from a high of about $500
a share to $13.94 in mid-august 2016. PetroQuest has faced a similar problem, with its
stock price falling from the $30 range to under $2 a share in mid-August 2016. These
and other energy firms desperately need an oil-price revival.
Prospects for the GOM Are Critical
In that regard, the Lafayette energy sector depends heavily on the prospects for
activity in the Gulf of Mexico (GOM). Thus, our forecast for Lafayette’s immediate
future turns heavily on the trustworthiness of our analysis of the oil market as detailed
back on pages 10 to 18.
In that section we argued that oil prices would gradually rise from $42 a barrel
this year to $53 in 2017 and then $60 in 2018. In the past, oil prices in this range would
leave the GOM exploration market on its last legs. That in turn would mean the
Lafayette economy would be in for a longer run decline.
Though at least one firm (ConocoPhillips) has indicated it is exiting deepwater
exploration, our conversations with other oil executives indicate their companies are
working strenuously with suppliers to produce a new, lower-cost exploration
environment. They are expecting the breakeven point in the deepwaters to be reduced
from the $70-$80 range to the $55-$60 a barrel range. If our oil price forecasts are near
the mark, then sometime in 2018 these companies will start to sanction deepwater
projects again and hopefully that momentum will reverse the dive in the Lafayette
economy.
Lafayette’s long run track depends greatly on that description of the GOM market
coming true.
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Fig. 19: Lafayette MSA Non-Farm Employment
Forecast: 2017-2018
240
220
Thousands
200
180
160
Acadia,
Vermillion &
Iberia Added X
140
2017: -5,000 jobs (-2.4% )
2018: Flat
120
100
80
85
90
95
00
05
10
15
Unsettling New From Bell
Unexpected news was received from Bell Helicopters in summer 2016. With
state help, the firm has constructed a $26.3 million facility at the Lafayette Airport to
assemble the new line of 505 Jet Ranger helicopters. Full production was to commence
in late 2017 with 115 new jobs at $55,000 a year.
Bell has now announced it is moving production of the 505 Jet Ranger to Canada
and is relocating the 525 Relentless cabin sub-assembly from Amarillo, Texas and its
Grumman MQ-8C aerial vehicle from Alabama to Lafayette. It is unclear what this
modification will mean to the 115 target, but the general consensus is that it will not be
met.
Really Good News at the Port
Countervailing all this negative news is what is happening at the Port of New
Iberia. Four companies have made significant announcements at the Port. Dynamic
Industries has landed two 24-month contracts to fabricate modules for deepwater
platforms and will be hiring an additional 400 workers. Primoris is building a new
facility to manufacture pipe and will hire 400.
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Economic Outlook Page 76
Logan Industries is building a new facility to store deepwater drill rigs and is
adding 300 employees. Finally, long-term Port resident, Bayou Companies, is
constructing a new $14 million pipe coating facility to service the Shell Appomattox
project and will add 40 people to its 320-person workforce. The addition of these 1,100+
jobs will be a significant factor in mitigating the losses in the oil sector.
Stability within the “Big Three”
Also of good fortune for Lafayette is the general stability within its “big three”
companies. Now that layoffs from its rig and pipeline safety division are in its rearview
mirror, Acadian Ambulance is maintaining its large 1,350-person presence in Lafayette.
This very successful ambulance and alarm monitoring firm continues to expand with
mergers in other states. Stuller Inc. moved a 15-person unit from Iowa to Lafayette and
expects to add about 20 employees a year over 2017-18 to its 1,150-person workforce.
Another large firm headquartered in Lafayette is Schumacher Clinical Partners, which
employs 568 people in Lafayette and will add 40-50 people over our forecast period.
Growing through mergers and growth, this company is now recording $1.4 billion in
annual revenues by providing ER and hospitalists doctors to hospitals in several states.
More High Tech Jobs Coming
Over 2017-18, Lafayette will benefits from steady growth in its existing high tech
firms and the entrance of some new ones. For example:

A 38-year old Canadian information technology company---CGI---has leased a
50,000 square foot $13.1 million building in ULL’s Research Park. CGI will hire
400 employees over four years for jobs that will pay, on the average, $55,000 a
annually. CGI employment is presently at 200 employees, and the firm will add
200 more jobs through 2018.

Enquero is a new software technology center. Enquero pays it employees an
average of $64,300 annually. Already at 110 employees, Enquero plans to add
another 110 jobs over 2017-18.

Perficient---a St Louis based software development center---has 70 persons
employed and will add another 70 over the next two years. The firm plans to
have 245 employees at the Lafayette site within six years.

A new firm---Waitr—has opened a technology operations center in Lafayette to
provide online and mobile software solutions that partner with local restaurants to
provide home delivery. Waitr plans to hire 100 software engineers and 100
drivers.

Global Systems Data is expanding its headquarters in Northpark and adding 44
jobs to its computer and satellite communications business.
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
An environmental engineering testing company---the ATC Group---has moved
its headquarters back to Lafayette from Colorado, bringing with it 50 new jobs.
The Lafayette area will also be bolstered by $278.9 million in state road projects
to be let for the region over 2017-18. The great bulk of this spending will be $175.5
million to widen I-10 from I-49 to LA33. It is our understanding that a company has
chosen the old Evangeline Downs site for the largest Fedex facility on I-10 between
Houston and Jacksonville. Plans are to open this $11 million facility in March 2017 with
100 employees.
Houma: When Will the GOM Return?
The Houma MSA is composed of two parishes---Lafourche and Terrebonne---and
this is one of the MSAs whose composition did not change when the Census Bureau
generated new MSA designations. Located in the south-central coastal area of the state
(see Map 1), Houma is highly dependent on the oil and gas extraction industry and the
spillover sectors---machinery, fabrication, shipbuilding, water-borne transportation---that
feed off of extraction activities.
In July 2016, 7.4% of the MSA’s employment was directly in oil and gas
extraction, nearly four times the statewide average of 1.9%. The key word in that last
sentence was "directly". There are many fabricators and shipbuilders in the MSA that
cater almost exclusively to the extraction industry. Plus, Terrebonne Parish is the home of
Port Fourchon, basically a small city on the Gulf, which services about 90 percent of the
offshore platforms and drill ships in the Gulf of Mexico.
Houma’s Recent History
Figure 20 tracks the non-farm employment history of this MSA over 1980-2016.
What strikes an observer most in this graph is the unusually wild fluctuations in the
region’s employment over time. Because of its heavy dependency on the extraction
industry (the second heaviest of any MSA, behind Lafayette), wild fluctuations in energy
prices over the past 36 years have dramatically impacted Houma. The influence of
energy prices can be seen in the big “V” and the little “Vs” shown in this graph.
The BOOM years: The first, and biggest, “V” occurred after one of the greatest
bull runs for any MSA in Louisiana history. From 1975-81, this MSA enjoyed a
remarkable period of growth in response to oil prices that peaked at $37.50 a barrel for
Louisiana crude in 1981. That would be about $109.52 a barrel in today’s prices.
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Economic Outlook Page 78
The BUST years: A big “V”---covering the period from 1981-91---followed this
boom period. The marked decline in oil and gas prices between 1982 and 87 sent this
region into a free-fall. Some 17,200 jobs or nearly a quarter of the workforce vanished.
Car dealerships, restaurants, banks, and any retail establishment suffered through a
terrible period as the MSA shed a quarter of its jobs. Houma was the worst hit MSA in
the state by this recession. It took a decade for Houma to recover all the jobs lost during
this dramatic downturn.
The long road back: When oil and gas prices recovered somewhat from 198791, this metro area rose up the other side of the “V”. Exploration activity in Louisiana
has been moving southward across the state since the 1950s, indeed, heading further and
further offshore in the Gulf. Houma’s geographic location on the coast made it the ideal
site from which to launch offshore exploration.
Fig. 20: Houma MSA Non-Farm Employment
1980-2016
110
2015-16: -10.2% (-10,400 Jobs)
2016:
-5.8% (-5,600 Jobs) X
100
X
Thousands
90
2009-11:
-5,100 Jobs
(-5.4% )
6th of 8 MSAs
1997: New Record
(10 Years)
X
80
-24.6%
Decline
70
60
New Record: Feb. 2013
50
80
85
90
95
00
05
10
15
The little “Vs”: Still, every time energy prices got soft, Houma’s employment
declined. The MSA lost 1,500 jobs in 1992 when natural gas prices declined as a result
of two straight unusually warm winters, and it lost 3,100 jobs in 1999 due to low oil
prices. Interestingly, Houma went through the post-911 U.S. recession unscathed. In
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Economic Outlook Page 79
fact, the MSA picked up 5,000 new jobs over 2001-02 when most of the other regions of
the state were in absolute decline.
Note in Figure 20 that the “Vs” have been getting shallower and shallower. This
is primarily because the extraction industry is running much leaner now and has learned
not to respond too strongly to rising energy prices. The firms that lend money to
extraction firms have learned the same lesson.
Still it is important to note in Figure 20 that there has always been a left side to
the “V”. That is, after energy prices have remained high for an extended period, the
extraction industry has always responded by returning to the oil patch to take advantage
of the higher prices. At least that was true until 2004. Response to the run up in oil and
natural gas prices at that time was more tepid than expected in 2004, with little change in
the rig count. In fact, Houma was the worst performing MSA in Louisiana in that year.
Legacy lawsuit effects: We believe this poor response resulted from industry
fears generated by “legacy” cases, in particular the Corbello case. In the time since the
Corbello case, the industry has been lobbying hard for tort reforms to correct their
perception of abuses arising out of the Corbello case. A degree of success has been
achieved. One of the factors that made the Corbello case so onerous to the industry was
that much of the settlement was based on allegations that drilling had impaired the
ground water supplies. The great majority of the Corbello award was for this damage,
and the plaintiff could simply pocket the award and was not required to use the award to
correct the problem. Act 1166 required that if damage was alleged to have occurred to a
water aquifer, the award must be used to correct the problem. That eliminated a lot of the
incentive for suing extraction companies.
Secondly, in the Terrebonne Parish School Board v Castex case the School
Board was suing to require the oil company to backfill canals that were dredged years
ago. This was especially troubling to the extraction companies because there are
thousands of miles of these canals across the southern part of the state and the cost of
filling them would be astronomical. The Louisiana Supreme Court over-ruled this
judgment and said firms cannot be required to backfill a canal unless it was specified in
the initial contract to drill. It was also determined that when permission is given to drill,
there will always be a “footprint” that will be left that is reasonable to that activity. If the
footprint is excessive and not reasonable to that activity, the landowner has a right to sue.
Despite the reforms and legislation passed in the regular session of the State Legislature
during 2006, several legacy lawsuits are still active in the state.
The Katrina & Rita Effects
Like Lafayette, Houma received a nice injection of activity as a result of the two
hurricanes. Over the three years of 2005-07, Houma gained a whopping 12,400 jobs,
a remarkable increase of 14.9 percent or 5 percent per year. It was the fastest
growing area of the state. In fact, growth in Houma was so strong that in 2007, Houma
moved past Lake Charles to the fifth largest MSA in the state. Effects of the recent oil
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Economic Outlook Page 80
price drop, coupled with an industrial boom in Lake Charles, has moved the latter MSA
back above Houma again.
The source of this employment reversal is much the same as occurred in
Lafayette. First, there was finally a response in the oil patch to higher oil and natural
gas prices. As an MSA heavily laden with exploration companies, oil service firms, and
shipbuilders for the offshore sector, Houma benefited from this resurgence. Too, this
MSA is home to many fabricating and repair/maintenance firms that benefited from the
rebuild effort of offshore energy infrastructure that was damaged by Katrina and Rita.
Finally, Houma also benefited somewhat from an influx of evacuees. Houma, at
58 miles, is the closest MSA to New Orleans (Baton Rouge is 79 miles from New
Orleans). Based on FEMA assistance applications, we estimated that this MSA’s
population ballooned upward by 62,810 people in the first two weeks after Katrina--second only to Baton Rouge in attracting evacuees.
However, like Baton Rouge, Houma experienced the same population adjustment
as did Baton Rouge and Lafayette. Census Bureau data show that between July 2005
and July 2007, the Houma MSA population increased by 3,449 people or about 1.7
percent. This is slightly more than the MSA tends to grow anyway. Thus, there was an
exodus of evacuees from the MSA, but a number remained there as new residents, giving
a bit of an extra boost to the retailers, real estate firms, and service providers in the area.
2008-09: High Energy Prices & Job Losses??
The experience in the Houma MSA over these two years pretty much mimics that
of the Lafayette MSA. 2008 started out strongly as oil prices climbed to a high of
$132.61 a barrel in September 2008. Then the price of oil began a rapid slide down to a
bottom of $39.06 in March 2009.
Beginning in April 2009 oil prices began to rise again and were at a very
profitable $46.72 by May 2009. Oil prices continued to rise through 2013 and the first
half of 2014 as seen back in Figure 5.
However, despite these very profitable energy prices, the Houma MSA was the
first MSA in the state to begin losing jobs during the Great Recession---recording its first
job loss in August 2008. Over 2009-10 the MSA lost 4,800 jobs---a 4.9 percent decline--ranking its performance 6th among the eight MSAs in the state. It is historically
unprecedented for this MSA to be losing jobs in the face of relatively high energy
prices. We believe the reason for this poor performance mirrors a similar weak
performance in nearby Lafayette: the chilling effect of President Obama's proposed new
taxes on the extraction industry. In addition to the extraction firms cutting back, Gulf
Island Fabricators and nearby J. Ray McDermott laid off workers in 2009, and Offshore
Specialty Fabricators laid off 90 workers that year.
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2011: Oops - Forgot about BP
In our 30 years of producing the Louisiana Economic Outlook, few things have
surprised us more than the performance of the Houma economy in 2011. In the LEO
released in the fall of 2010---six months after the oil spill and in the middle of the
moratorium on drilling---we projected significant job losses for the area. Eleven
deepwater drill ships left the Gulf, and activity at Port Fourchon dropped 35-40% below
pre-spill levels. Normally, that would translate into a major decline in employment in the
MSA.
What we failed to take into account was the massive amount of money that BP
would pump into the area's economy for the cleanup effort and to pay out on claims for
losses due to the spill. While we do not have a good handle on the cleanup spending
(which we know was quite large), we do have relatively good information on the amount
BP paid to businesses and individuals who claimed losses due to the spill.
As of August 2011, BP had paid out $132.1 million in claims in Terrebonne
Parish and $81 million in claims in Lafourche Parish. As a reference point, that is
about 3.1% of Terrebonne Parish personal income and about 2.1% of personal income in
Lafourche Parish. The combination of BP's cleanup expenditures and its payouts to
claimants was sufficient enough to overcome slowdowns in exploration and cause a very
modest 100-job loss in 2011 instead of the 1,500-job loss we predicted in the 2011-12
LEO.
2012-14: Strong Bounce Back
As seen back in Figure 22, the years 2012-2014 were very good years for the
Houma MSA. The MSA added 8,700 jobs over those three years. That is an average
growth rate of 3.1% a year, an enviable achievement compared to most MSA’s in the
country. Its growth rate in 2014 was 2.1%---tying Lafayette as the third highest among
Louisiana’s nine MSAs. Only the exceptionally booming Lake Charles and Baton Rouge
MSAs performed better. Note in Figure 20 that (1) in 2013, the Houma MSA blew past
its previous employment peak of 2008 and (2) in 2014 the MSA crossed the 100,000
employment mark for the first time in its history.
The comeback in the Gulf is largely responsible for this surge. Not only did
exploration activity return and surpass its previous peak, but also Gulf Island added
several hundred workers and Chouest's new shipyard, LaShip opened and grew to 1,200
employees. The major port servicing the offshore industry, Port Fourchon, turned from
retrenching to bustling. It was a very good three years indeed.
2015-16: Sliding Down another “V”
Oil prices have entered another steep decline, and the Houma economy does what
it always does---it is sliding down the left side of the “V”. There is no sugar-coating the
impacts when declining oil prices are visited on this region. The MSA has lost an
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estimated 10,400 jobs over the past two years, a 10.2% decline. About half of that decline
(-5,600 jobs) will be occurring in 2016. Unfortunately, as will be documented below,
2016 is unlikely to be the bottom of the “V”.
Forecast for 2017-18: GOM Will Determine the Extent of the Slide
Houma’s forecasts are shown in Figure 21. We are projecting that the impacts of
declining oil prices will impact the Houma economy well into 2017 and then bottoming
out in 2018. We expect the MSA to shed another 4,000 jobs in 2017 (-4.3%) before
the slide ends and the economy flattens out in 2018. This will rank the MSA 9th among
the MSAs in the state in economic growth. Importantly, we are not expecting a decline
as large as the early 80s recession that devastated this region---a decline so deep it took
10 years to recover. The 80s decline cost the MSA 24.6% of its jobs. If our forecasts are
correct, this downturn will cost the region 14.1% of its jobs.
Fig. 21: Houma MSA Non-Farm Employment
Forecast: 2017-18
110
Comparison:
1981-87: -24.6%
2015-17: -14.1%
100
Thousands
90
Below 100,000 in 2015
New Record: July 2013
Past 100,000 in 2014
80
70
2017: -4,000 jobs (-4.3% )
2018: Flat
60
50
80
85
90
95
00
05
10
15
To appreciate the reaction to plummeting oil prices by of some of the firms in the
Houma MSA a few examples are offered:
Edison Chouest, a company that both builds and operates supply boats working
the offshore oil and gas market is in a serious retrenching mode. The company
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has 100 of its boats tied up at dockside. Chouest has laid off 1,600 from it
shipyards. In order to maintain its crew levels, Chouest has gone from a “28 days
on; 14 days off” schedule to “14 days on; 14 days off”. Crews get to work fewer
hours (and earn less) but they remain employed.

Bollinger Shipyards was recently acquired by Chouest. Bollinger is in the midst
of a $1.5 billion, 32-boat contract with the Coast Guard to build the Fast Response
Cutter. In May 2016 the company received a contract for 26 more of these ships,
which will keep 800 employees busy into 2020. It is the company’s
repair/conversion work---mainly associated with work in the GOM---that is down
considerably. Bollinger has filed a WARN notice with the Louisiana Workforce
Commission to lay off 275 workers.

Work at a huge fabricator in the area---Gulf Island Fabricators---is off so much
that the company’s workforce has declined from 2,000 to 250. The company has
been securing small jobs to keep its workforce. Its Dolphin yard employs 350.
Both firms are trying to get fabrication work associated with (1) the chemical
boom in South Louisiana and (2) brown water tug and cruise boats.

Chett Morrison has seen its employment decline from 515 to 400. The
company has developed a new riser storage/maintenance unit and plans to hire
back 70 people. Executives are looking at land acquisition to get into the
maintenance and small fabrication work on land projects.

In Houma, shipbuilder Thoma-Sea has seen its employment drop from 500 to
300, but the company plans to hire back 50-80 to complete a recently added
project. Thoma-Sea is diversifying into non-oil and gas vessels and is on the
short list for several projects that will hopefully maintain its labor force.

At Port Fourchon the evidence of the energy downturn is being manifested in a
number of ways. First, the Port has been approached by its tenants for a reduction
in lease rates, because the companies for which the tenants provide services are
pushing rates for the tenants down. The Port Commission Board has approved a
20% rate reduction from April 2015 through December 2016. Secondly, tenants
are taking a step back on planned capital projects at the Port. On the other hand,
the 7,000 foot Slip C will be finished by the end of 2016. In Slip C 100% of the
space is at right of first refusal with no leases as yet. The Port is beginning a 5-7
year plan to develop Slip D, but the speed of that development will depend on the
leasing up of Slip C. The Port will be spending $10 million on capital projects
over the next two years, a significant reduction from its $90 million plan
announced earlier.

Baker Hughes announced in February 2015 it was closing its 60-person wire-line
facility in Houma.
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
CHI Aviation in Galliano is closing its facility and laying off 74 pilots,
mechanics, and support staff by the end of 2016.

National Oilwell Varco is closing its Houma facility in 2016 at a cost of 80 jobs.

In May 2016, Offshore Specialty Fabricators indicated it would terminate 67
people in mid-summer at its Houma site.
Like Lafayette, Much Depends on the Future of the GOM
It bears repeating in the Houma section our position regarding the future of the
GOM that was penned in the Lafayette section. The Houma energy sector depends
heavily on the prospects for activity in the Gulf of Mexico (GOM). This is especially
the case for this MSA due to the preponderance of shipbuilders, fabricators and service
firms in the region. Thus, our forecast for Houma’s immediate future turns heavily on the
trustworthiness of our analysis of the oil market as detailed back on pages 10 to 18.
In that section we argued that oil prices would gradually rise from $42 a barrel
this year to $53 in 2017 and then $60 in 2018. In the past, oil prices in this range would
leave the GOM exploration market on its last legs. That in turn would mean the Houma
economy would be in for an even longer run decline.
Though at least one firm (ConocoPhillips) has indicated it is exiting deepwater
exploration, our conversations with other oil executives indicate their companies are
working strenuously with suppliers to produce a new, lower-cost deepwater exploration
environment. They are expecting the breakeven point in the deepwaters to be reduced
from the $70-$80 range to the $55-$60 a barrel range. If our oil price forecasts are near
the mark, then sometime in 2018 these companies will start to sanction deepwater
projects again and hopefully that momentum will reverse the dive in the Houma
economy. Deepwater players are also expecting negotiations with BSEE on the new
drilling rules to significantly reduce the cost of those regulations.
Houma’s long run track depends greatly on that description of the GOM market
coming true.
A Bump from Virdia, Roads and LOOP
While good news is difficult to find in the Houma MSA when “sliding down the
V”, there are some positive events on the horizon. Virdia Corporation is constructing a
$60 million biochemical plant located next to the Raceland Raw Sugar Mill. The
company will turn bagasse from sugar cane into high-value industrial sugars and biofuels.
The plant should be completed by the end of 2016 and employ 81 people at $55,000
annually. The Louisiana Offshore Oil Port (LOOP) will spend $25 million to add three
above ground storage tanks at the Clovelly Hub. Finally, the state DOTD has let $90.2
million in road projects for this 2-parish region over 2017-18---about the same amount
as we reported last year. Of this amount $35.3 million will be used to relocate a piece of
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LA1 from Golden Meadow to Leeville. GOMESA monies will start coming to help with
this road elevation in 2017.14 If the Louisiana Department of Transportation and
Development (DOTD) dedicates 10% of the GOMESA monies for the improvement of
LA1, backers will try to bond this earnings stream to build the road out more quickly.
Lake Charles: The Whole Country Envies This Expansion
Located in the far southwestern corner of Louisiana (see Map 1), the Lake Charles
MSA is composed of two parishes---Calcasieu and Cameron. This MSA is dominated by
three industries. One is what is broadly referred to as the petrochemical industry. This
phrase handily combines two closely related industries---chemicals and refining ( the
latter includes LNG export terminals). The Lake Area Industry Alliance reports that
Calcasieu Parish was the home to 16 different chemical plants, two refineries, one
LNG export facility, and three industrial gas processing plants. Total employment in
these facilities was 6,180 direct employees and 3,656 contractors in 2014 according to the
LAIA. Like the Baton Rouge area, this huge capital-intensive petrochemical complex
supports a very large industrial construction industry.
A second major industry in Lake Charles is gambling. Pre-Rita, Lake Charles
was home to five riverboat casinos. Now there are three in operation, plus the Delta
Downs Racetrack. The two largest operational casinos are L’Auberge du Lac, which
opened in the summer of 2005, and the Golden Nugget, which opened in December
2014. Hurricane Rita badly damaged both of the casinos owned by Harrah’s. Harrah’s
sold its two licenses to Pinnacle Entertainment, owner of L’Auberge du Lac. Pinnacle
moved a license to Baton Rouge. Isle of Capri closed one of its smaller riverboats and
moved that license to Shreveport. Total employment at the three casinos and the racetrack
is at 5,713 as of 2016-I.
With the closest gambling establishments to the Houston metroplex, Lake
Charles’ riverboat casinos were an instant success when they opened in the mid-1990s.
When Delta Downs added slot machines and became a “racino”, it added another 1,057
workers to the area’s gambling industry, a number that has drifted down to 722.
A third key sector is aircraft repair. There are now two significant employers
located at Chennault Industrial Airpark---Northrop Grumman and AAR. Changes in
tenants at Chennault have had a major impact on the MSA’s employment pattern over
time. Closely allied with the aircraft industry, two significant employers at Lake Charles
Regional Airport are Era Helicopters with 750 employees and PHI---another helicopter
service firm. CB&I Modular Solutions (formerly Shaw) is estimated to employ about
1,000 workers whose main focus to date has been manufacturing modular equipment for
the nuclear power industry.
14
GOMESA provides for the federal government to share 37.5% of qualified oil and gas leasing revenues
from certain Outer Continental Shelf leases with Alabama, Mississippi, Texas and Louisiana.
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A History of Ups and Downs
A history of the Lake Charles economy is depicted in Figure 22. This MSA
suffered mightily between 1981 and 1986 as the chemical industry reeled from a huge
loss of sales in its foreign markets. The region lost a whopping 17.9 percent of its nonfarm jobs. This loss was caused by a large run up in the exchange value of the dollar.
Not only did the industry itself reduce employment by one-third, but capital expansion
plans were also halted, hammering the industrial construction sector at the same time.
Coincidentally, the Reagan administration fully deregulated the price of crude
oil in the early 1980s. One side effect of this action was that several marginal refineries
found it increasingly difficult to remain competitive and shut down. The loss of jobs in
the two highest-wage industries in Louisiana’s manufacturing sector, combined with a
shuddering halt to industrial construction and other negative multiplier effects, sent the
Lake Charles economy into a serious 5-year dive.
Lake Charles was actually the first MSA in Louisiana to begin recovering from
the terrible statewide recession of 1982-87. The key was the attraction of Boeing
Aircraft to Chennault Field. Boeing created over 2,000 jobs to refurbish K-135 transport
airplanes for the Air Force. That helped set Lake Charles off on a recovery mode. The
recovery was further aided by a sudden drop in the exchange value of the dollar, which
rejuvenated foreign markets for the chemical firms and set them off on a new round of
hiring and capital expansions. (Note the magnitude of this recovery is distorted in Figure
22 by the addition of Cameron Parish employment data to this MSA’s job statistics.)
In 1992, Boeing announced the closure of its facility, and the job loss there caused
Lake Charles’ employment to slide sideways for two years. The next three years were
excellent growth years for Lake Charles. Three factors powered this expansion. First,
there were some unusually large capital projects under construction in the petrochemical
sector. Citgo and Conoco/Pennzoil combined for $1.6 billion in expansions during this
period.
Secondly, it was during this period that the riverboat casinos came to Lake
Charles. Thirdly, Boeing was replaced at Chennault Airpark by Northrop Grumman--a facility that took 707s, stripped them down, and installed the Joint System Target
Attack Radar System (JSTARS) in them. This was an addition of 1,900 good-paying
jobs for the Lake Charles economy.
It is obvious from Figure 22 that the good times ended for Lake Charles in 1999.
The MSA lost 2,800 jobs in that year and was essentially flat for the next six years.
There were several contributors to this poor performance. The first involved hits at the
aircraft repair facilities at Chennault Airpark. As Northrop Grumman came near the end
of its JSTARS contract, the firm began handling fewer aircraft and consequently began
terminating workers. NG reverted to doing maintenance, repair and overhaul (MRO)
work on the JSTARS aircraft, and its workforce dropped all the way down to 350. The
attraction of EADS to Chennault helped offset NG layoffs somewhat, but even that firm
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Economic Outlook Page 87
reduced its workforce from about 350 down to 160 before selling to Aeroframe
Services.
Fig. 22: Lake Charles MSA Non-Farm Employment
1980-2016
110
2016: +2.7% (+2,800 jobs) X
Best in State
100
Thousands
90
2009-10:
-5,900 JObs
(-6.3% )
Worst in State
80
X Cameron Parish Added
70
-17.9%
New Record: Oct. 2013
60
50
1980
1985
1990
1995
2000
2005
2010
2015
Secondly, a combination of 9/11 and the national recession reduced trips to the
area gambling establishments, prompting layoffs there. Thirdly, Xspedius moved its
headquarters office in Lake Charles to St. Louis.
But by far the most important contributor to the downturn was the funk in the
chemical industry. High natural gas prices forced this vitally important industry in Lake
Charles to hunker down and look for ways to reduce costs. One way was to reduce the
number of employees. Too, the industry placed capital expansion projects on hold and
delayed maintenance/repair work as much as was safely feasible. The result was a
significant reduction in industrial construction employment.
The Surprising “Rita Effect”
What may surprise readers the most about the data in Figure 22 is the growth in
2005 and 2006. Despite being hit by a vicious storm, this MSA’s employment actually
grew---adding 2,700 jobs over those two years. The larger portion of that growth
occurred in 2005, the year of the hurricane.
Rita's impact on housing: There were 47,384 homes damaged by Rita in this
MSA---but only 2,284 incurred severe damage and 6,673 major damage. Residents could
and did return to the Lake Charles area fairly quickly. Normally one would be aghast at
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Economic Outlook Page 88
these figures, but against the backdrop of the housing destruction in New Orleans, they
pale. It is very important to note that with the exception of lower Cameron Parish (the
most sparsely populated parish in the state) there was virtually no flood water damage
in Lake Charles. That means regular homeowner’s insurance was applicable to the
damage. As a result, all the impediments to rebuilding that existed in New Orleans due to
standing flood waters did not exist in Lake Charles.
Rita’s impact on Lake Charles manufacturing: It is the nature of the
manufacturing industries in Lake Charles that they would seemingly be very vulnerable
to a powerful storm like Rita. Chemical plants and refineries are very capital-intensive,
and all their capital is outside and exposed to the elements. In fact, three refineries in the
area were damaged and shut down: (1) Citgo (324,000 b/d); ConocoPhillips (239,400
b/d), and (3) Calcasieu (30,000 b/d). All three were back up by December 2005.
Also, the aircraft industry, which operates in large hangers, seemed likely victims
of high winds. Despite these vulnerabilities, these industries made it through the storm
without losing much downtime. There was $40 million in damage to hangers at
Chennault, but the two firms operating there continued to do so despite the
inconvenience.
Importantly, staffing was not as difficult a problem as in New Orleans because
most housing remained intact in Lake Charles.
Rita’s impact on the Lake Charles gaming sector: As a result of Rita the two
Isle of Capri-owned casinos and the L’Auberge du Lac encountered minor damage and
were reopened by November 2005. However, the two Harrah’s riverboats were badly
damaged by the hurricane. Again, Pinnacle Entertainment, which owns L’Auberge du
Lac, purchased both of Harrah’s licenses in Lake Charles. Pinnacle returned one license
to the Gaming Control Commission and moved the other license to Baton Rouge.
Rita’s impact on other sectors: A look at other sectors in Lake Charles
indicates a solid recovery in the aftermath of the storm. By January 2005, all hospitals in
the MSA except one in Cameron Parish were fully operational. The Lake Charles
Regional Airport began operating at an even higher level than pre-Rita. By contrast, it
was 2014 before the New Orleans airport was operating pre-Katrina levels.
Within a month of Rita’s landfall, all of the public schools in the MSA had
reopened and virtually all hotel room space was back to normal by the end of 2006. The
Port of Lake Charles escaped any flooding by Rita. However, it did experience about
$40 million in wind damage and initially had no power. Within a few days power was
restored and the port was open to receive shallow water vessels.
Careful reviewers may have noticed another important fact back in Figure 22. In
2007 Lake Charles MSA set a new record in employment---exceeding the previous
peak by 2,100 jobs. Construction associated with the storm recovery was still robust in
2007, about 2,200 jobs higher than just after Rita. However, construction’s growth
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Economic Outlook Page 89
peaked in 2007 and was slightly lower in 2008, constituting something of a temporary
drag on the area economy.
The Great Recession Felt Hardest Here
Among Louisiana's eight MSAs, none suffered more than the Lake Charles MSA
from the Great Recession. Although this MSA's employment began to slide later than the
national economy---in February 2009 as compared to January 2008---2009 was
particularly harsh on the region. In that year the MSA shed 3,900 jobs and then it lost
another 2,200 in 2010---an employment drop over two years of 6.5%. This is a worse
decline than that experienced at the national level (6.1%).
What was behind this poor performance over 2009-10?
factors, including:
There were several

In 2008 Citgo announced it was closing its 192-peron lube plant which added to
the drag of reduced construction spending.

Aeroframe, which does maintenance work for FedEx and US Airways aircraft
had to reduce its workforce from 475 to 250 as both firms idled many of their jets
due to the sagging global economy.

The weak national economy hurt business at the area's important casino industry.

The region was delivered a blow in the Summer of 2010 when Pinnacle
announced it was stopping construction on the Sugarcane Bay Casino and was
turning in that license to the Gaming Control Board. It should be noted that the
combination of the Great Recession and the unusually weak recovery negatively
impacted the casino market.

During this period the region's petrochemical firms really tightened their belts
especially with regard to capital projects. This is illustrated below in Table 17
which contains data supplied by the Lake Area Industry Alliance which shows an
almost 3,000-job decline in contractor jobs at area plants over 2007-10.
Fortunately, the data for 2011-12 show this downward trend was reversed, and in
the case of contract workers has almost increased over 50% from the 2010 trough.
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Table 17
Employment in Lake Charles Area Petrochemical Plants
Year
Full Time Employees
2005
6,401
2006
6,158
2007
6,221
2008
6,070
2009
6,042
2010
5,961
2011
6,683
2012
6,754
2013
6,083
2014
6,180
2015
6,420
2016
6,507
Source: Lake Area Industry Alliance
Contract Employees
3,003
2,830
5,412
3,572
3,070
2,456
3,265
4,273
3,611
3,656
4,021
NA
Finally: A Growth Year in 2012
Referring back to Figure 22, readers will notice the beginnings of a recovery in
2011 (+600 jobs) and very good growth over 2012-16. In fact, the latest data indicate
Lake Charles is the fastest growing MSA in the state. We estimate that employment in
the Lake Charles MSA will grow by 2.7% in 2016, at a time when the overall state
employment is falling at a rate of 0.9%. What is particularly impressive about this
performance is it has been accomplished despite the fact that a major employer--Dynamic Industries---basically shut down its 500-person operation in Lake Charles in
2013. The firm won phase I work on manufacturing components for the Marine Well
Container project. However, the company was unsuccessful in landing phase II, so
terminated its operations in this region.
On a far more positive note, during this period Shaw Modular Solutions opened
its new facility and now has an estimated 1,000 employees. Aeroframe added
employees as one of its key customers---FedEx---began to fly more planes. Importantly,
turnover work at area petrochemical firms rose from $350 million in 2010 to over $800
million in 2012, and area chemical firms in general were enjoying an increase in
business due to increased exports. Note back in Table 17 that LAIA surveys indicate
direct employment in petrochemical firms jumped by 793 employees over 2011-12 and
contract employment rose a whopping 1,817 jobs over that same time period.
Ground-breaking took place on the $500 million Golden Nugget Casino in July
of 2012. Work began on a $176 million expansion at Sasol and at the Lake Charles Port,
IFG started construction on phase I of a new $59.5 million grain elevator. Even more
importantly, $5.6 billion worth of work began on the first two “trains” at Cheniere’s new
LNG export terminal. We will have more to say about this project below.
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2014-16: The Real Boom Begins
As Lake Charles entered 2014, we began to see the first evidence of a massive
boom in this corner of the state unlike any we have ever seen before. Note how the
employment line in Figure 22 moves up markedly in 2014, 2015, and 2016. Specifically:

In 2014 employment in the Lake Charles MSA set a regional record for the first
time since 2008.

In 2015, employment passed the 100,000 mark for the first time in the MSA’s
history and it passed Houma to become the fourth largest MSA in the state.

Lake Charles has now been the fastest growing MSA in the state for three straight
years, adding 12,500 jobs and expanding by 4.5% a year. In 40 years of
monitoring the Louisiana economy we have never seen back-to-back job
performances like that in any MSA in the state.
What was the source of this remarkable performance? By mid-year 2016 we had
tabulated $96.4 billion in announced industrial projects for the MSA since 2012. We
have been monitoring the state’s economy for four decades; this figure exceeds the best
year of announcements for the whole state by a factor of at least 10.
Of this total, we estimate that $45.4 billion of these projects are already
underway or completed, and approximately $51 billion are at the financing, permitting
or FEED stage (that is, they are still “potential” projects). This means that if these
projects go vertical, Lake Charles will see record setting growth well into 2018. Our
projections for this region are based on the very conservative assumption that few of
these projects will go forward. If just one or two break ground, our forecast for 2018 will
be too conservative by far.
Forecast for 2015-16: Will the Boom Tail Off in 2017?
Figure 23 shows our forecasts for the Lake Charles MSA over the next two years.
We are expecting Lake Charles to add 3,800 jobs in 2017 (+3.8%), with the growth
rate dropping slightly in 2018 to 2,200 jobs (+2%)---a total growth rate of 5.8% over
two years. No other MSA in the state is expected to come close to this growth rate.
Baton Rouge comes in second with a 2.2% growth rate. Lake Charles’ growth rate is
expected to be nine times greater than the state as a whole (0.6%) over that same time
period. The slower growth rate in 2018 is based on some of the projects underway
beginning to tail off as completion nears. However, our forecast for 2018 assumes almost
none of the projects at the FEED stage will go forward to construction. This is a very
conservative position and one that could make the 2018 projection far too conservative.
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Fig. 23: Lake Charles MSA Non-Farm Employment
Forecast: 2017-18
120
110
100,000+ for first time
Thousands
100
X
90
80
70
1990:
Cameron Added X
2017: 3,800 jobs (3.6% )
2018: 2,200 jobs (2.0% )
9X Faster Than State
60
50
80
85
90
95
00
05
10
15
With the abundance of projects announced in the area it is tricky determining how
to present them to the reader. This is especially so given that some are underway and
some are still at the FEED/financing stage. Our approach is to break the projects down
into LNG exporters versus “others” and then each category will be further broken down
into “underway” versus FEED stage.
Projects Underway: LNG Exporters
A key reason for the explosive growth in this region recently has been the
construction underway on two massive LNG export facilities.

The largest of the construction projects underway is the Sabine Pass LNG by
Cheniere Energy. The company will be building six “trains”----groups of
machinery that takes natural gas from a gas to a liquid form for shipping. The
first two trains are about 99.4% complete. In fact, Cheniere made its first export
from the facility in summer 2016. Construction of Stage 2 is 87.4% complete,
and Stage 3 is 38.3% complete. Cheniere has six, 20-year contracts in hand for
buying its product. Importantly, the company also has a permit from the
Department of Energy to export to non-free trade partners of the U.S., a permit
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Economic Outlook Page 93
that is absolutely vital before one of these terminals can begin construction.
Cheniere will spend $20 billion on this 6-train project. This would make it the
largest single capital investment in Louisiana history, if not U.S. history. The
project will create 148 new, high-paying ($100,000 a year) jobs and retain 77
jobs.

Sempra Energy began construction on its Cameron LNG project in August 2014.
This export terminal will be a 3-train unit and cost $10 billion to construct. In
July 2016, Sempra received final approval in September to export to non-free
trade partners of the U.S. Sempra has also filed information with FERC to add
two more trains at this site. Operations will begin in 2018, but the firm estimates
100 people will be employed by 2017 and 190 by 2018.
Projects at FEED Stage: LNG Exporters
There have been six LNG exporter announcements that are still at the
FEED/financing stage. These six projects are at various stages in the planning and
financing process. While we are not pessimistic about the viability of all six, it does not
seem likely that any will break ground before 2018.
One reason was explained back on pages 26 and 27. Right now the pricing
competitive advantage that used to exist has narrowed to near zero or to a dis-advantage
because of low oil prices. Secondly, right now the market is in an excess supply
environment due to the opening, and prospective opening, of several new projects.
Data in Figure 24 were put together by BRG Energy to describe the problem
visually. Note that the worldwide demand for LNG is projected to rise steadily over
2016-25. The jaggedness in the line is due to within year seasonal demand patterns.
Note that due to new capacity coming on line the world market will be in an excess
supply mode until about 2022-23. Then the market will start to enter an excess demand
environment. The “potential” LNG will want to time their construction to come on
line in about 2023. That means that a 5-year construction project would want to
commence in the 2018-19 time frame.
There may also be a competitive advantage to those projects that involve smaller
“trains”. The more typical trains have been large enough to produce five thousand tonnes
annually (mtpa). The firm then must sell that much in the market and few markets can
absorb five mtpa. There may be an advantage going forward to projects with trains that
produce one mtpa. It is easier to sell ½ to one mtpa, which gives these smaller units more
flexibility.
The experience of the team behind each project and the size of the trains being
built may be good signals as to which of the potential LNG exporters actually pulls the
trigger and “goes vertical”.
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Figure 24
Supply & Demand for LNG Worldwide: 2016-25
The potential LNG exporters include the following:
15
16

Driftwood LNG is a proposed 4-train unit that is being headed by the former
chief of Cheniere. This $10 billion project (according to the Port) would be
located on 44 acres on the western side of the Calcasieu River. This project is
probably three years out before construction begins. It would employ 100 workers
at an average annual pay of $75,000. The site will actually be designed to hold
eight trains and five metric tons of exports.

An Australian company---Magnolia LNG---is planning a 4-train LNG export
facility at the Port of Lake Charles. An EPC was let with SK E&C USA in
December 2014 to build the first two trains for $1.98 billion. FERC approval was
received for Magnolia in April 2016. An epc agreement15 has been signed, and is
ready to go. The firm is still working on commercial sales, and has sold two
million tonnes to the U.K which is about one train worth of LNG. They are
marketing another six mtpa. No FID16 has been reached.
Engineering/procurement/construction
Final Investment Decision by the company’s Board of Directors
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Economic Outlook Page 95

Southern California Telephone & Energy (SCTE) signed a 99-year lease on
232 acres on Monkey Island to build a 6-train, $9.3 billion liquefaction plant.
These trains would produce 12 mtpa. The company filed a permit with FERC and
submitted a permit to the Department of Energy for permission to export to nonfree trade partners. SCTE signed a 20-year, binding natural gas supply agreement
this June. In May, the firm secured a long-term agreement with the Chinese
JOVO Group to buy LNG and perhaps invest in the facility.

In December 2014, Venture Global announced plans to build a $4.25 billion
LNG export facility on 938 acres at the mouth of the Calcasieu Ship Channel that
would be capable of producing 11.1 mtpa. In February, Shell agreed to a 20-year
contract to buy 1.1 mtpa. Venture Global has received DOE permission to export
to Free Trade countries and its application to export to non-FTA countries is
pending. This company is well-funded with commercial teams living in Europe
and Asia. A FID has yet to be made.

In October 2015, a team involving former Governor Buddy Roemer announced
plans for an $11 billion LNG export facility on the Calcasieu Ship Channel. G2
LNG would employ 250 people at an average wage of $85,000 once operational.
KBR has been awarded the FEED work on the project.

Bechtel Corporation has been selected to conduct the FEED work on the $7
billion Delfin FLNG project. Delfin would be a floating deepwater port about 50
miles off the coast of Cameron Parish. A draft EIS (environmental impact study)
has been submitted. Few Louisiana construction jobs would be associated with
this project.
We should note that in last year’s LEO there was another announced, and very
large ($10 billion), LNG export project---Lake Charles LNG. This was one of the older
projects, having been announced back in mid-2011. Regulators had given final approval
to the project and we expected it to be the next “potential” project to go vertical.
However, this project was tabled by Shell in mid-summer this year. Indications are that
this was a “hard” tabling of the project.
Projects Underway: Chemicals & Others
There are several non-LNG export projects underway in ths MSA, and two are
quite large.

In March 2015, Sasol broke ground in March 2015 on its $8.9 billion ethylene
cracker and derivatives project. The price of that project has down been raised to
$11 billion due to heavy rains, higher labor costs, and elevated bid contracts.
Once completed the facility would employ 528 Sasol employees plus 358 contract
workers with a $58.9 million annual payroll. Sasol’s planned hiring schedule
was: 2015 -100; 2016 – 200; 2017 – 350; 2018 – 500. Since actual opening has
been pushed forward to 2019 the hiring schedule may be pushed forward.
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Economic Outlook Page 96

One of Lake Charles’ larger employers---Axiall Corporation---with 1,250
employees presently in the area has chosen the MSA for a $3 billion suite of
facilities. This project is a joint venture with the Korean firm Lottie Chemical
Corporation. The new units include a world-scale ethane cracker and an ethylene
derivatives plant. This project will ultimately employ 215 people at $76,000$87,000 annually. The project broke ground in June 2016.

Construction should be completed this year on Matheson Tri-Gas’ a state-of-theart air separation unit to supply gases to Sasol. This $130 million project will
create 27 new hires at $76,900 annually.

Westlake Chemicals is spending $330 million to expand its ethylene production.
Work on this project started in mid-2016. The firm will hire 25 more employees.

Indorama Ventures has begun a $175 million renovation of a dormant ethane
cracker at the old OxyChem site (closed since 2001). The firm expects to be
operational in 2017-III and employ 125 employees at an average annual salary of
$50,000.

Dongsung FineTech has begun a $5 million renovation of a building at the Port
of Lake Charles for a cryogenic insulation manufacturing facility. Once
completed the firm will hire 250 people at $40,000 a year.

Union Pacific Railroad will be spending $19 million to replace railroad ties, add
rock ballast, and replace tracks between Iowa and Sulphur and between Dequincy
and Kinder.
This very impressive list of projects, plus the two LNG projects underway, is the
reason that Lake Charles is one of the fastest growing MSAs in the entire country.
Potential Projects: Chemicals & Others
It addition to the projects listed above there are several waiting in the wings that
are at the FEED stage. Our forecasts do not allow for these projects to start construction
over 2017-18, so if any do, that will make our forecasts to pessimistic for the region.
These projects include the following:

The larger of Sasol’s two announced projects is its proposed $11-$14 billion Gasto-Liquids facility. The company would take natural gas and produce from it
96,000 b/d of diesel, naphtha, and other chemical products. This huge facility
would employ 700 people with a $95 million annual payroll. The company
announced in January 2015 that this project would be delayed until (1) an
evaluation is made of any cost overruns at the $11 billion ethylene plant now
under construction (there have been significant overruns) and (2) the price of oil,
diesel, and the state of the global economy.
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
Juniper LNG was building a $100 million plant to manufacture diesels, waxes,
and naphtha at a Praxair site in Westlake. Financial problems forced the company
into bankruptcy in April 2016. York Capital purchased the assets in July 2017 so
there is hope the project will be completed. The company was renovating a
dormant steam methane reformer, with plans to add 29 new jobs at $85,000
annually.

Advanced Refining Technologies---a joint venture of W.R. Grace and Chevron--has planned a $135 million residue hydro-processing catalyst production plant
and additional alumina capacity at the Grace site. The group has ordered some
long-lead items but has delayed construction due to market conditions.

Another large plant proposed for the Port of Lake Charles is a $1.5 billion GTL
plant by G2X Energy. Air permits have been secured but water (and some other)
permits are still pending. This plant will have three modules: (1) one to convert
natural gas into methanol (Big Lake Fuels), (2) a second to refine methanol into
liquid propane and 87-octane zero sulfur gasoline and (3) a unit composed of
cooling towers, waste treatment and other auxiliary units. Methanol Holdings
Trinidad Limited (MHTL) announced it will partner with G2X on the Big Lake
Fuels module. Once operational, the Big Lake Fuels module would employ 125,
and once all three units are built the modules would employ 243 workers at an
average annual wage of $66,500. Ground was broken on the Big Lake Fuels plant
in January 2016. Then the company purchased a similar facility in Beaumont and
has shifted its focus to that plant. Work on the Lake Charles site has been delayed
until after the Beaumont facility is completed.

To support all the action taking place in this region, Entergy Corporation is
planning to start a $187 million transmission project in the area that would be one
of the largest transmission projects in the company’s history. The company is
seeking PSC approval to proceed.

Finally, an investment group is planning a new facility on the Cameron Parish
coast to service the offshore oil and gas exploration industry. The $1.5 billion
Port Cameron would be a 500 acre deepwater port.
Construction Labor Demand: Huge Bump, Then Big Decline?
A quick review of the projects we have detailed that are underway in this region
leads to the inevitable conclusion that there will be an historic demand for construction
workers in this MSA. The Lake Area Industry Alliance (LAIA) has generated estimates
of the demand for construction workers needed over the next 18 months to build these
projects for which there is an engineering/procurement/construction (EPC) in place.
LAIA’s results are summarized in Figure 25. Estimated employment will grow from
about 10,000 in August 2016 to a peak of about 14,900 in April 2017---a remarkable
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Economic Outlook Page 98
bump of 4,900 additional workers. What is even more remarkable is that in mid-2012
LAIA’s survey showed 5,500 construction workers employed by its members.
Figure 25
Estimates of the Demand for Industrial Construction Workers
In the Lake Charles MSA
Source: Lake Area Industry Alliance
Note that because some of these facilities will be completed by mid-2017,
construction employment among LAIA members is projected to enter a significant slide,
dropping by some 4,500 jobs. It is this projected decline that is largely responsible
for our forecasted reduction in total employment in the MSA in 2018.
There are two factors that might prevent this decline from happening or at least to
temper the decline rate. First, the Figure 25 is a survey of LAIA members. Membership
at LAIA does not include key companies such as Cheniere LNG, Indorama Ventures,
G2X Energy, Juniper LNG or Advanced Refining Technologies. These are non-trivial
projects or potential projects that could keep the construction numbers up. Secondly, the
data in Figure 25 are only for projects for which an epc has been awarded. If any of the
numerous potential projects we listed above go vertical, that will boost the decline line
as well.
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Economic Outlook Page 99
Finally, LAIA has done economic developers and economy watchers in general a
great service by also surveying their members about expected increases in permanent
jobs as projects come to completion. Those estimates are as follows: 2016 - +109; 2017 +312; and 2018 - +180.
This unusually large jump in construction workers has created housing challenge
to the region. Entrepreneurs have responded by developing temporary housing villages
for the workers. One Lodge North Lake in Sulphur broke ground on a $4 million
worker village in June 2016. It will start with 208 bed units on 28 acres, with 40 more
acres available with a 2,500-person capacity. One Lodge North Lake should be ready for
occupancy by November 2016. At Port Vinton, work began in May 2016 on Mossville
Lodge, a $60 million temporary housing project with a 2,350-person capacity.
An Adjustment in the Casino Market
Lake Charles enjoys the state’s second largest casino market, drawing crowds
from casino-less Texas. In a real surprise to many, the MSA’s casino market actually
grew in 2015 when the new Golden Nugget Casino opened. Expectations were that the
new casino would simply cannibalize business away from the other two casinos with no
net gain to the market. However, as seen in Table 18, casino employment grew
substantially between 2014-I and 2015-I---from 3,329 employees to 5,748. Not only was
there no cannibalization, but the market grew by 2,419 employees while the Golden
Nugget added a lesser 2,337.
Table 18
Lake Charles Casino Employment
Casino
2014-I 2015-I 2016-I Change: 2014-I to
2015-I
2,285
2,402
2,055
117
La’Berge
1,044
1,009
947
-35
Isle of Capri
0
2,337
1,989
2,337
Golden Nugget
3,329
5,748
4,991
2,419
Total
Source: Louisiana Gaming Control Board
Change: 2015-I
to 2016-I
-347
-62
-348
-757
The year 2016 has clearly been a year of adjusting to the new tenant in the region.
All three casinos have adjusted their employment downward. The result is the region lost
757 casino jobs this year.
Chennault: Good News & Bad News
The news at the Chennault Airpark is decidedly mixed. The good news is the
employment growth at Northrop Grumman. NG does MRO (maintenance, repair,
overhaul) work on the military’s JSTARS and KC-10 Extender fleet. Employment has
ramped up from 730 to 950 in the past year, and the firm plans to add another 100 jobs by
year end and then remain steady through 2017.
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Economic Outlook Page 100
At the other extreme are the deteriorating conditions at AAR. AAR is the largest
aircraft maintenance, repair, and overhaul (MRO) organization in the U.S. and the third
largest in the world. The firm can do MRO work on wide-bodied aircraft up to the
Airbus A380. In January, the company had 600 people employed at this site. At this
writing, AAR is down to 100 employees. The firm is down to one plane that will be
finished in August and there is nothing on the horizon afterwards.
Chennault Airpark has signed a professional services agreement with CSRS of
Baton Rouge to determine interest in an expansion to begin in late 2017. The Airpark
proposes a $257 million expansion to build and operate an air cargo facility on 220 acres
now occupied by the Mallard Golf Course.
Other Public Construction
In addition to the private sector projects listed earlier there will be public monies
being spent in the area as well. The state has let $157.2 million in state road projects in
this MSA over 2017-18. After spending $38 million on capital projects this year, the
Port of Lake Charles will spend another $46 million in 2017.
Monroe: Slow Recovery Underway
Located in the northeast corner of the state (see Map 1), the Monroe MSA is
comprised of two parishes---Ouachita and Union. Monroe is the third smallest MSA in
the state (ahead of Alexandria and Hammond), with an estimated 79,400 non-farm jobs in
2016.
Until the turn of the century, this MSA had the highest concentration of
employment in the broad category called “finance/insurance/real estate” (FIRE) of any
MSA in the state. Partly that was because of the 2,400-person JPMorgan Chase
Mortgage facility, the service part (400 employees) of which was spun off to Wing Span
Portfolio. Wingspan subsequently folded. Another big contributor to this ranking was
the 1,200-person State Farm claims center. The latter closed its doors in 2005, and
Chase absorbed the Bank One documents depository, so FIRE’s influence in this MSA’s
economy has been reduced somewhat.
Other large employers in the region include Graphic Packaging, a paper/carton
plant that employs about 1,340 people at its three sites. CenturyLink---one of
Louisiana’s Fortune 500 Companies--- also plays a key role in this MSA’s economy with
its workforce now approaching 2,600. Delphi Lighting was a major player until it closed
its 800-person headlight manufacturing facility in June 2007. Vantage Health Plan is a
newer addition to the region and has grown to employ 1,280 people. The University of
Louisiana Monroe is also located in this MSA and has about 300 faculty members.
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Economic Outlook Page 101
Monroe Employment History
Figure 26 traces Monroe’s employment history from 1980 to 2016. Like Baton
Rouge this MSA was only lightly tapped by the deep recession of 1982-87. Monroe only
lost jobs for two years---1986 and 1987---and even then the decline was only 2 percent as
compared to the 9 percent statewide job loss. The reason for the light hit is that Monroe
has almost no jobs in extraction or chemicals, which were the two industries that suffered
the most during that recession.
By 1989, Monroe had retrieved all those lost jobs and was setting new
employment records. Between 1987 and 2002, this region enjoyed a 14-year stretch of
growth, with five of those years registering 2.5 percent plus annual growth rates. (The
increase in 1990 is distorted by the addition of Union Parish to the MSA’s numbers.)
The years from 2002 through 2011 were not good ones for the Monroe MSA as
evident in Figure 26. Remarkably, Monroe did not have a growth year during this
entire 9-year period. The decline was not horrendous, but it was steady. After going
flat in 2003, the MSA lost 4,300 jobs over 2003-11, a 5.4 % decline. (The three years
from 2005-07 were flat.) During the "Great Recession" the region lost 2,300 jobs, a
decline of 3.0 percent---tied with Lafayette as the third best performance in the state.
Fig. 26: Monroe MSA Non Farm Employment
1980-2016
85
80
Thousands
75
70
Losses:
Wingspan Portfolio
State Farm
IP-Bastrop
Shaw Fabrication
Pilgrim's Pride
Accent Marketing
Guide Group
Coca Cola
X
2009-11:
-2,300
(-3.0% )
65
60 Union Parish Added X
55
X 2016: +600 jobs (+0.8% )
800 Jobs Below 2002 Peak
50
1980
1985
1990
1995
2000
2005
2010
2015
Consider the body blows this region took during those nine years:
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Economic Outlook Page 102

The biggest hits came with the initial layoffs at, and then total closure of, the
State Farm Insurance claim office, costing the area 1,100+ jobs.

Guide Corporation reduced the workforce at its headlight plant, and then totally
shuttered the facility in 2007, at a cost of 650 jobs with an annual payroll of $53
million.

Graphic Packaging also engaged in workforce reductions

Holsum Bakery closed its facility in Monroe, terminating 50 employees in the
process.

In 2008, International Paper closed its 550-person paper mill in nearby Bastrop.

In 2009, Shaw closed a pipe fabrication plant that had 202 employees and an $11
million annual payroll.

In 2008, Pilgrim’s Pride closed a chicken processing plant in Union Parish that
cost the region an estimated 1,500 jobs.

In early 2010, Accent Marketing lost a major client and dismissed 340 workers
at its call center.

Coca Cola closed its bottling plant, laying off 85 people.
That is a remarkable list of 9 significant closures during those 9 years. It is a
wonder that the job loss was not much greater.
2012: An End to the Blood-Letting
As seen back in Figure 26, Monroe actually experienced net job growth in 2012
for the first time in nine years, and it was a healthy boost of 1,000 jobs. There were no
more major layoff announcements in that year, and the region received a shot in the arm
from a number of sources.

CenturyLink continued to move like a freight train in its acquisition efforts. In
2014, the company made a commitment to keep its headquarters in Monroe
through 2020 and added to its Monroe workforce.

Foster Farms reopened the shuttered Pilgrim's Pride plant and is now back up to
1,200 employees in Union Parish.

Gardner Denver Thomas relocated operations in Wisconsin to the Monroe area
in 2010, generating 67 jobs initially and now employs 300.
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Economic Outlook Page 103

As a sign of a longer run commitment to the region, Graphic Packaging
brought in new equipment from a mill in Colorado to increase productivity of its
workforce, which it plans to keep stable for now.

Angus Chemical invested about $100 million in its plant in Sterlington,
including a $10.8 million investment in 2011 in a new electrical substation and
general electrical system, which helped the firm remain productive enough to
retain its 174 jobs.
Fortunately, that growth pattern in 2012 continued through 2014.
averaged 800 new jobs a year over 2012-14.
The MSA
2015-16: Adding 600 Jobs a Year
Despite the loss of 400 jobs at Wingspan Portfolio Advisors, the Monroe MSA
has steadily added 600 jobs a year for the past two years. Continued growth at
CenturyLink, the entrance of IBM to the market, and the steady growth at Vantage Health
Plan have kept Monroe on a steady, if not spectacular growth path. We estimate that by
the end on this year, this MSA will be only 800 jobs shy of recovering all the jobs lost
during the disastrous nine years between 2002 and 2011.
Forecast for 2017-2018: Prepare to Set a New Record
Our projections for this MSA are shown in Figure 27. We project that
employment in the Monroe MSA will add 400 jobs a year over 2017-18, for a total
growth rate of 1%. This growth rate will rank Monroe fourth among the nine MSAs in
Louisiana over this two year period. If this forecast holds true, sometime in 2018
Monroe will pass its old employment peak and begin setting records again.
At the present, the key to Monroe’s economic future appears to lie in the
prospects for its larger existing businesses. Ground-breaking for the new IBM
Applications Development and Innovations Center in an 88-acre, mixed use development
across from CenturyLink took place in March. This is the only really new addition to the
area of which we are aware. This new facility is scheduled to open in 2017-IV, but IBM
is already hiring and using Tower Place in downtown Monroe as a temporary base. The
firm is at about 150 employees and will increase to 400 by 2019.
After a series of layoffs at the Chase Mortgage facility employment has
stabilized at about 1,200. The employment decline was due to (1) a shedding of extra
workers hired to handle the post-Great Recession mortgage crisis and (2) the spin-off of a
business unit to Wingspan. Wingspan ultimately closed in Monroe.
Of course, the real key to the future health of this economy is the outlook for its
largest employer---CenturyLink. This company has just opened its new Technology
Center of Excellence along with 800 new jobs. CenturyLink now employs 2,600 people
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Economic Outlook Page 104
in Monroe. CenturyLink is one of the major success stories in Louisiana in the past 10
years.
Fig. 27: Monroe MSA Wage & Salary Employment
Forecast: 2017-18
85
80
Thousands
75
70
2017: +400 Jobs (+0.5% )
2018: +400 jobs (+0.5% )
65
60
55
50
80
85
90
95
00
05
10
15
A relatively new player in the area---and also a great success story---is Vantage
Health Plan. Vantage is now at 1,280 employees and is scheduled to add 170 a year
over the next two years. In 2016, the company completed a $24 million specialty office
building and spent $20 million to renovate a state office building downtown.
Nearby Angus Chemical was bought by an investment and it is our
understanding the firm is launching a multi-year, $100 million upgrade plan at the site.
Over 2017-18, the state will be letting $86.9 million in new road projects---up 19%
from last year’s number. Of this amount, $36.6 million will be used to widen Arkansas
Road from Caldwell Road to LA143, and $24 million will be spent on the Kansas
Lane/Garrett Road connector.
Alexandria: Popped by UTC & GE, but RA?
Alexandria is the second smallest of Louisiana’s nine MSAs with about 64,200
non-farm employees in 2016. This MSA is comprised of two parishes---Rapides and
Grant. Alexandria derives the lowest percentage of its employment from the “basic”
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Economic Outlook Page 105
sectors---mining and manufacturing---of all the MSAs in the state except Hammond.
Located in the central part of Louisiana (see Map 1), it has typically served as the
retail/services center for the north/central part of the state.
Alexandria also has the second highest percentage of employment in the
government sector (20%) of all the MSAs as well---even larger than Baton Rouge
(16.5%), which is the state capital and home to two large state universities. Among the
significant state agencies in the area was the Huey P. Long Medical Center, the 400person charity hospital for this region, which was taken over by two of the private
hospitals in the region. Pinecrest Support and Services Center provides care for the
mentally disabled and employs about 1,300 people. Central State Hospital for the
mentally ill has about 300 workers at the present time. Nearby Fort Polk is the largest
military installation in the state. While not actually located in the Alexandria MSA, this
huge base has a noticeable impact on this MSA’s economy.
Procter & Gamble has a significant 1,200-person operation in this MSA, and
Union Tank Car with just over 400 employees. The utility company Cleco, with 1,200
employees, is also a major force in this MSA’s economy, and Roy O. Martin employs
about 1,200 at various wood processing sites in the region. Crest Industries---which is
the umbrella firm for DisTran, CNR, Beta Engineering and Mid State Supply---makes
steel poles and substations for electric power generation and employs about 600.
Alexandria’s Recent Employment History
Alexandria’s employment history is illustrated in Figure 28. Five key points will
be noticed by the careful reader when viewing this figure. First, note that there was a
slight bump upwards in 1990. The Department of Labor revised the employment
statistics only back to that year to take into account the addition of Grant Parish to this
MSA.
Secondly, note that this MSA enjoyed an almost recession-free history until
2001. Except for a mild decline in 1982, its employment track had basically been a line
moving constantly upward for the last two decades of the 20th century.
Even the post-9/11 national recession in 2001 only mildly impacted the
Alexandria MSA, causing a meager loss of only 200 jobs (-0.3 percent). This means the
Alexandria MSA was the second-least impacted of all the state’s nine MSAs---not a
surprising finding given the lower manufacturing base and the government-orientation of
the region. (Hammond was the least impacted.)
Note thirdly that there is a distinct kink in the graph starting in 1992. Two
factors contributed to this nice boost in Alexandria’s growth rate. The first was a
seemingly negative event---the closure of England Air Force Base. Civic and
governmental leaders turned this economic lemon into lemonade by gaining control of
the base assets and turning it into an industrial park/retirement village. England
Industrial Airpark is now almost totally reoccupied. Several businesses have moved to
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Economic Outlook Page 106
the site, and the regional airport has been relocated there. A new, 150-person
Immigration and Customs Transfer facility was opened at the Airpark in the summer
of 2014 and serves as a domestic transportation hub for moving detainees.
Too, during this period I-49 was being constructed through the heart of the city,
adding an unusual injection of construction jobs to the economy. There was a slight
slowdown in 1996-97 when one of England’s newest and largest tenants---J.B. Hunt
Trucking---shut down their operation there.
Fig. 28: Alexandria MSA Non-Farm Employment
1980-2016
70
X = 2016: +200 Jobs (0.4% )
65
X
Thousands
60
55
2001:
Recession
-200 jobs
(-0.3% )
50
45
2009-12:
-4,200
(-6.3% )
40
80
85
90
95
00
05
10
15
2005-08: Great Growth Years
Fourthly, note that the recovery from the 2001 recession was initially lackluster at
best. Employment was basically flat from 2002 through 2004. However, as seen in
Figure 28 the next four years were very good ones for this MSA. Employment jumped
by 6,100 or a strong 2.5 percent annually. This was one of the best performances in the
state over that 4-year time frame.
During this rapid expansion phase there was (1) a doubling of the size of the
federal prison at Pollock, (2) significant capital expenditures at England Airpark, (3)
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Economic Outlook Page 107
$132 million on the construction phase of Union Tank Car (UTC), (4) UTC began a
hiring process that resulted in 670 workers initially at its new plant, (5) the huge $1
billion+ Cleco Rodemacher plant was under construction at the time, creating about
1,700 construction jobs, and (6) a new $60 million MARTCO plant was constructed in
the southern part of the MSA.
On the outer edges of the MSA, there was a $100 million addition to the Paragon
Casino in nearby Avoyelles Parish, and a large amount of construction spending took
place at Fort Polk. While these two projects are outside of the MSA’s borders, they
created extra earnings which were often spent in Alexandria’s retail and service
establishments. Offsetting all this good news was the closure of Parta Systems, a 110person pharmaceutical parts manufacturing plant.
2009-13: A Pounding from the Great Recession & State Government
The fifth lesson from Figure 28 is the continuous drop in employment over the
four years from 2009-13. During that period, this MSA lost 4,200 jobs---a 6.3%
decline.
Great Recession Effects: The Great Recession was partly the culprit.
Alexandria’s employment took quite a hit over 2009-10, losing 3,600 jobs or a 5.4
percent decline. Only Lake Charles at 6.3% had a worse record during the Great
Recession.
There were several factors behind this drop. The attraction of a large, highpaying, durable goods manufacturer like Union Tank Car is great for an area. However,
when the national economy goes south, durable goods manufacturers get hit the hardest.
After reaching a peak employment of 670 in early 2008, orders for UTC tank cars
dropped so much that the firm reduced its employment to 270. Eight to nine companies
that lease cars from UTC went bankrupt and returned their cars. Plus, demand for new
railcars was down as always happens when you have a recession as bad as the Great
Recession. For example, in 2006 about 60,000 rail cars were sitting idle; by spring 2009
this number was up to 540,000.
Secondly, the region’s lumber industry came under attack due to the weak
national housing market. Specifically, Louisiana Hardwood in Lemoyen halted its
second shift in 2009, and International Paper closed its container board plant in late
2009, terminating 230 people. Thirdly, the huge $1 billion+ Cleco Rodemacher plant
construction project was finished in 2009, resulting in the loss of those 1,700 construction
jobs. Also, on a lesser scale, Dresser Industries began moving from a manufacturing
orientation towards assembly, and reduced its workforce by 75 in early 2010. Finally,
Star-Tech lost a major customer and laid off 300 people.
State/Local government layoffs: What is odd about this region’s employment
since the end of the Great Recession was that its employment continued to trend
downwards well past the recession time frame. From 2011 to 2013, this MSA lost
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Economic Outlook Page 108
another 800 jobs despite the fact that most of its key manufacturers have been in an
expansion mode and the Jena Indian Tribe opened a 46,000 square foot, class II casino in
February 2014 that employs 300 people.
A different culprit was responsible for this decline. We mentioned earlier that this
region has a higher percentage of employment in the government sector than any other
MSA in the state. More often than not that lends an extra measure of stability to a region,
but not when state and local governments are having budgetary problems. Since 2010,
state government employment in the MSA is down 1,400 jobs and local government
has declined by 400 jobs.
Forecast for 2017-18: Popped by UTC & GE But RA & Sundrop?
Figure 29 contains our forecasts for the Alexandria MSA for the next two years.
We are projecting that this MSA will lose 200 jobs in 2017 and rebound with 200
jobs in 2918. Thus, we are expecting the regions employment to be net flat over
these two years. This growth rate will place Alexandria in 7th place among the nine
MSAs in the state. It is important to note that this forecast makes no allowance for two
major projects to break ground. If these projects come to fruition, Alexandria will enjoy
a much larger growth rate.
Fig. 29: Alexandria MSA Non-Farm Employment
Forecast: 2017-18
70
2016: -200 jobs (-0.3% )
2017: +200 Jobs (+0.3% )
65
Thousands
60
55
50
X Grant Parish added
ASA? Sundrop?
45
40
80
85
90
95
00
05
10
15
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Economic Outlook Page 109
Thumped by UTC and GE/Dresser
The drop in employment that is projected for this MSA in 2017 can be traced to
two key employers. Union Tank Car has announced it is laying off 244 workers in
summer 2016 because a primary customer is leaving its fleet. UTC is now operating at a
reduced force, a condition that will likely last at least a year. The firm purchased the GE
fleet, which means there will be an even lesser need to build new cars.
GE Oil & Gas (the old Dresser facility) announced it will terminate 269 of 289
employees at the company’s valve manufacturing plant in Pineville. These layoffs should
be completed by year end and are part of a restructuring by GE.
Stability among the Big Four
Alexandria is host to four key private companies that are projecting stable
workforces over the next two years:

Cleco is one of the largest employers in this region at 1,200 employees. In March
2016, Cleco was purchased by a consortium made up of (1) Macquarie
Infrastructure & Real Assets (an Australian investment bank), (2) British
Columbia Investment Management Corporation, and (3) John Hancock Financial
to purchase Cleco. Assurances have been secured that the CEO and other senior
management will be Louisiana residents, as well as four members of the Board
including the Chair, and employment at the company is to remain at least stable in
the near term.

Similar in size to Cleco are the three Roy O. Martin (Martco) plants in the area
that employ 1,100. This very successful company has secured a strong market
share in the wood-oriented building materials market. Demand remains very
strong at the plants. No major capital expenditures or employment changes are
expected over 2017-18.

Proctor & Gamble’s large plant employs about 1,200 direct and contract
employees. The company has shifted powder detergent operations from Georgia
to Alexandria and added about 50 at its site.

Modest growth (+40 jobs) is expected at the 600-employee Crest Industries.
Crest is the umbrella company for Dis-Tran, CNR, Beta Engineering, and MidState Supply. The company’s makes steel poles and substations for the electrical
utility industry.
Investimus Foris & SolScapes Add a Punch
There are some new monies coming to the Alexandria MSA, which while small
compared to what is happening in the lower part of the state, are non-trivial for an MSA
of this size. The largest of these is the decision by Investimus Foris---a Lithuanian
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Economic Outlook Page 110
Company---to invest $265 million to convert an idled biofuels refinery in Grant Parish
into an ammonia manufacturing plant. The company is aiming to produce 500,000 tons
of ammonia annually and hire a workforce of 85 at a $55,000 annual wage. It is our
understanding that construction will start on this facility about the time the LEO is
released. SolScapes in Lecompte has announced will be adding 40 jobs to its 35-person
workforce. The average annual salary for these new jobs will be $28,000. SolScapes is a
utility maintenance firm.
Construction at England & State Roads
At England Airpark, some $72.3 million in capital expenditures are scheduled
for the next two years. Of this amount, $52.8 million will be spent on the airfield side,
rebuilding the infrastructure of runways and working on ramps and electricity. Another
$19.5 million will go to the land side, on road projects, a rental car maintenance facility,
and a warehouse for prospects. Last year, Airpark officials announced the creation of a
new 1,600 acre mega-site to help bring new industry to the MSA.
A further injection of construction monies will come from new state road
lettings. These lettings will total $64.8 million over 2017-18. The biggest project will be
$15.9 million on the UP overpass on US71 near Tioga.
ASA, Sundrop & Cool Planet: Big Potential for Alexandria
Among Louisiana’s smaller MSAs, few have a greater potential for a breakout
two-year period than Alexandria. There are two potential projects that could radically
improve this MSA’s growth in the immediate future and another that could give it some
solid gains.
The most exciting of these by far is the announcement by Revolution Aluminum
(RA) that it would spend $2.4 billion on a new mill and campus at the old International
Paper site in Pineville. RA plans to make strong, light-weight aluminum metals for the
automotive/aerospace sector. There would be 850 ASA employees at the site and another
600 workers at corporate partners. An average annual wage of $70,500 is expected for
these employees---much higher than the average for the area. The site has been
purchased, dirt is being moved, and improvements are being made to rail infrastructure.
Speculation is that financing will be finalized on this project in September and the project
will go vertical in 2016-IV. We have not built the possibility of RA going vertical into
our forecast.
We have been reporting for about two years on the possibility of Sundrop Fuels
building a facility in this region. Sundrop is perfecting a technology that combines forest
waste with hydrogen to produce fuel. In a positive move for this project, the Sundrop
team has purchased Cowboy Town on the north side of Alexandria. The company will
start building a $40 million test facility there in January 2017 which is scheduled to open
in 2017-IV with about 30 employees. The company is at the pre-FEED stage on a $2______________________________________________________________________________________
Economic Outlook Page 111
$2.5 billion plant. This stage is required to secure a loan guarantee for DOE. A final
investment decision is expected by 2018-II. It would require three years to construct this
larger plant. To Sundrop’s advantage their fuel can be used to meet renewal fuels
standards (RFSs). Companies refining petroleum-based fuels must use cellulose-based
fuels in their process to meet their RFSs.
Finally, Cool Planet Energy is considering building three biomass-to-gasoline
refineries in north-central Louisiana. One of the plants would be at the Port of
Alexandria. The renewable fuels sector has suffered setbacks as the price of oil has
fallen. At this juncture the firm is trying to build a market for its CoolTerra product---a
product that can be put in soil to hold moister longer. This project has been on the
potential board for quite a while now and is looking iffy.
Obviously, Alexandria’ outlook depends significantly on these three projects
going forward.
Hammond: Look to SLU & North Oaks
For the first time in decades, Louisiana has added a new MSA to its ledger. The
Hammond MSA is composed of one parish---Tangipahoa---and is located from the
northwestern edge of Lake Ponchartrain north to the Mississippi line and between Baton
Rouge on the west and Slidell on the east (see Map 1). This parish is perhaps best known
as the “Strawberry Capital of the World” and is host to a famous strawberry festival each
year. In 2016, an estimated 43,600 people were employed in this MSA, making it the
smallest of the nine in Louisiana.
The two largest employers in the parish (aside from the School Board) are North
Oaks Medical Center (2,601 employees) and Southeastern Louisiana University
(1,398 employees). Bringing up a close third to SLU is North Lake Division Evergreen
Life Services (1,100 employees) which provides services to about 214 residents with
intellectual and developmental disabilities. Evergreen Presbyterian Ministries manages
NLDELS for the Louisiana Department of Health and Hospitals. The dominance of these
three players means healthcare and educational services play a larger role in this
economy than in the state as a whole. Healthcare represents 22.1% of employment in this
MSA versus 15.3% at the state level, and educational service is 11.8% versus 8.7% at the
state level. This MSA has the highest percentage of government employment (24.5%)
of any MSA in the state.
Manufacturing is not as large an element in this MSA (3.8% of employment) as is
the case at the state level (7.6%), and manufacturing has a larger food processing
component than the other MSAs, headed up by the 550-person Sanderson Farms poultry
processing plant and the 164-person (and growing) Elmer’s Candy plant.
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Economic Outlook Page 112
There are two significant distribution centers in this region. A large 800-person
Walmart Distribution Center is located in Tangipahoa Parish as is the 376-person SNS
Wholesale Grocers (formerly Winn-Dixie).
The city of Hammond enjoys a unique location only 40 miles from the state
capitol to the west and about the same distance to the North Shore business region to the
east. Residents in the southern part of the parish are a relatively easy commute to New
Orleans via I-55 or to the plants along the Mississippi River. As a consequence, a
relatively high percentage (14%) of this parish’s residents earns their income outside of
the parish.
History of Hammond MSA: After 7 Years of Stagnation - Growth
The history of this MSA from 1990 through 2016 is illustrated in Figure 30. It is
apparent from a casual glance at this chart that the Hammond MSA has been through two
distinct periods---a period of solid upward growth from 1990-2007 followed by nine
years of stagnation from 2008-16.
Fig. 30: Hammond MSA Non-Farm Employment
1990-2016
44
40
X
X = 2016: -0.4% (-200 jobs)
Thousands
36
2005-06:
The "Katrina Effect"
+1,600 jobs
(+3.9% )
32
28
No Impact
2001 Recession
24
20
1990
1995
2000
2005
2009-10:
-800 jobs
(-1.8% )
2010
2015
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Economic Outlook Page 113
In a College Town Enrollments Matter
What is behind this peculiar pattern? It is important to note that the largest city
in this MSA---Hammond---is very much a university town. SLU is one of its largest
employers at 1,398. However, the university attracts ten times that many students to the
region, students who bring a great deal of spending power to the community.
The powerful influence that SLU has on this MSA is seen when comparing the
MSA employment data in Figure 30 with SLU’s enrollment data in Figure 31 and the
university’s budget data in Figure 32. Hammond’s growth phase from 1990-2007 was
mirrored by a huge growth in fall enrollment and budget at SLU. Enrollment at the
university jumped by 5,670 students over 1990-2005, an impressive rise of 54.5% and the
budget rose a whopping 175.4%.
Fig. 31: Southeastern Louisiana University Enrollment
Fall 1990 - Fall 2015
17,000
2005 Peak: 16,068 X
Enrollment Fall Semester
16,000
15,000
14,000
1990-2005:
+5,670 (+54.5% )
13,000
2006-15:
Down 1,474 (-9.2% )
12,000
11,000
10,000
90
92
94
96
98
00
02
04
06
08
10
12
14
Source: SLU Office of Institutional Research & Assessment
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Economic Outlook Page 114
Fig. 32: Southeastern Louisiana University Budget
Fall 1992 - Fall 2016
130,000,000
2008 Peak: $122.7 million X
Budget as of the Fall Semester
120,000,000
110,000,000
100,000,000
1992-2008:
+$78 mm
(+174.5% )
90,000,000
2013-16:
+8.8%
80,000,000
70,000,000
2009-13:
Down $16.3 mm
(-13.3% )
60,000,000
50,000,000
40,000,000
92
94
96
98
00
02
04
06
08
10
12
14
16
Source: SLU Office of Institutional Research & Assessment
Hammond’s seven years of employment stagnation from 2008-2016 were
accompanied by an actual decline in enrollment and generally reduced funding at SLU.
Enrollment declined from a peak of 16,068 students in the fall of 2005 to 14,594 in fall
2015---a 9.2% decline. The university’s funding dropped by 13.3% over 2008-13,before
recovering by 8.8% the next three years. Still, by fall 2016 the budget at SLU was $6.9
million below its fall 2008 peak. The combination of declining enrollment and funding
was a key reason behind the lethargy in this MSA from 2008-16 shown back in Figure
30.
Healthcare Keeps MSA’s Head above Water
Economic conditions would have been much worse for this region had it not been
for an energetic healthcare sector. Unfortunately, data on this small MSA’s healthcare
sector are sparse. The U.S. Bureau of Economic Analysis and Bureau of Labor Statistics
and Louisiana’s Workforce Commission only provide data back to 2005 and up to 2013
on the Hammond MSA healthcare sector.
What is available are data on employment at the largest healthcare system in this
MSA----North Oaks Medical System. The history of employment at North Oaks is
shown in Figure 33. Again, it is instructive just how closely employment at North Oaks
mirrors the pattern of employment in the MSA in general. Note that North Oak’s
employment grew rapidly (+63%) over 1995-09, the same period when employment in
the MSA was rising as well. However since 2009, employment at North Oaks has been
basically flat, just like employment in the MSA as a whole.
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Economic Outlook Page 115
Fig. 33: North Oaks Medical System Employment
2,800
2,600
1995-09: +1,005 jobs
(+63% )
Employment
2,400
2,200
2,000
1,800
1,600
1,400
94
96
98
00
02
04
06
08
10
12
14
16
Source: North Oaks Medical System Human Resources Division
Almost Impervious to Recessions
Figure 30 reveals another unique characteristic of the Hammond MSA over 19902015: This MSA is almost impervious to the impact of national recessions. There was a
short U.S. recession from July 1990 to March, 1991 during which this MSA’s
employment actually grew. Employment rose again during the 2001 recession, then
during the Great Recession---when the U.S. lost 6.1% of its jobs---the Hammond MSA’s
employment only declined 1.8%, a loss of only 800 jobs.
This resilience can largely be traced to the makeup of the region’s economy. Its
huge healthcare and educational services sectors are typically touched only lightly, if at
all, by national downturns. On the other hand, the durable goods manufacturing sector
that typically gets hammered by a national recession, is largely absent from the
Hammond region. Only 3.8% of its employment is in manufacturing (as compared to
7.6% at the state level), and even then employment is heavily concentrated in nondurable
goods manufacturing such as food processing.
Forecast for 2017-18:
Figure 34 contains our forecasts for the Hammond MSA over 2016-17. We are
projecting that the region will add 100 jobs a year over the next two years which will
mean a growth rate of about 0.2% a year. In terms of percentage growth this will rank
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Economic Outlook Page 116
the MSA fifth among Louisiana’s nine MSAs. In absolute terms, its 200 new jobs will
rank sixth.
Fig. 34: Hammond MSA Nonfarm Employment Forecast
2017-18
44
40
Thousands
36
2017: +100 jobs (0.2% )
2018: +100 jobs (0.2% )
32
28
24
20
90
92
94
96
98
00
02
04
06
08
10
12
14
16
18
Year
While the ranking among the MSAs in the state is okay, the reality is that the
trend line in Figure 34 is not really moving. There are no major capital projects or
employment spurts planned at North Oaks. While “budgeted expenditures at SLU are up
0.9% this fall, the state budget is in such a bind that administrators have to plan for the
very real possibility of mid-year budget cuts. No spike in enrollments at SLU is
expected. The combination of these events tends to keep the trend line in Figure 34
pretty constant.
A break to a trend like the one from 1990 to 2007 is going to require some
significant, large announcements from the private sector and those are noticeably absent.
The Walmart Distribution center plans to add 70 jobs to its 750-person workforce, and
Southern Foods is moving its Brown’s Dairy from New Orleans to Tangipahoa Parish,
creating 186 jobs. The state will be letting $30.1 million in road projects for the region
over 2017-18---a 46% increase over last year’s announcements. This does not count
another $24.9 million that will be spent in the region on other public infrastructure
projects. These gains were partially offset by 81 layoffs at the Garden City Group, a
legal administrative services firm in Hammond.
The construction sector will benefit from millions in insurance, FEMA, and
private dollars flowing into the MSA to help folks rebuild from the Great Flood of 2016.
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Economic Outlook Page 117
A regrettably small percentage of homes that were flooded in Tangipahoa Parish were
covered by flood insurance, which will certainly stretch out the timing of the recovery in
addition to adding to the financial grief of those impacted.
THE OUTLOOK FOR THE RURAL PARISHES: 2017-18
Back in Map 1 we illustrated where the nine MSAs are located in Louisiana.
With the recent expansions to three of our MSAs and the addition of the Hammond MSA,
there are now 35 of the state’s 64 parishes located in these nine MSAs. The remaining 29
parishes are designated as “rural”.
With few exceptions, most of these rural parishes have a distinctly agricultural
economic base. Among the exceptions are Lincoln and Natchitoches Parishes---which
are homes to relatively large universities---the coastal parish of St. Mary---which has a
significant attachment to the oil and gas extraction industry---and Vernon Parish on the
central Texas border which is the home parish for Fort Polk, a very large military base.
A little less than 11% of the state’s employment exists in these 29 parishes.
Figure 35 tracks employment trends since 1990 in these rural parishes and provides
forecasts for 2017-18.
Fig. 35: Non-Farm Employment - Rural Parishes
1990-2016: Actual; 2017-18: Forecast
245
240
Thousands
235 1991-93:
230
-15,200 Jobs
(-6.6% )
225
2007-11:
-13,200 Jobs
(-5.5% )
220
2001-02:
-17,100 Jobs
(-7% )
2017: -3,200 Jobs (-1.5% )
2018: Flat
215
210
1990
1995
2000
2005
2010
2015
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Recession Impact on Rural Parishes Hard
While employment in the rural parishes is quite variable, the reader is urged to
note the vertical axis in this graph. Since 1990, employment in this region has only
varied over a range from a low of 210,000 to a high of 241,000---not as wide a
fluctuation as may appear initially. Having noted that, this region’s employment is very
sensitive to national recessions. In the early 1990s’ recession rural employment fell for
three straight years. Rural parishes lost 15,200 jobs, a drop of 6.6 percent. Then in the
post-9/11 recession, rural region employment fell hard for two years---a loss of 17,100
jobs or seven percent. During the Great Recession, rural employment fell for four
straight years by a total of 5.5%.
Employment in rural areas actually started to decline a year before the initiation
of the Great Recession. Bursting of the housing bubble starting in 2007 led to layoffs and
closing in several of Louisiana’s large wood products firms. These firms tend to be
concentrated in rural parishes. For example:

Weyerhaeuser Corporation laid off 185 at its facilities in Lincoln and Winn
Parishes.

Weyerhaeuser Corporation laid off 39 at its Bienville Parish site.

Hunt Forest Products temporarily idled its Natalbany facility in Tangipahoa
Parish.

Boise Cascade indefinitely curtailed 130 workers at its plywood veneer plant in
Allen Parish.
Bad news in the wood products area was partially offset by good news in those
parishes with ties to the extraction industry. Red River Parish had an especially good
2009-10 due to flourishing drilling activity in the Haynesville Shale in the northwestern
part of the state. In the coastal parishes, offshore drilling in the Gulf was strong until the
BP spill, then large sums of money came flowing into these parishes for cleanup work or
in claims payments made to businesses and individuals. This was enough to keep rural
losses from their typical routine of experiencing losses greater than the nation.
Some Recovery: 2012-13
Note that the rural area of the state had two years (2012-13) of recovery from the
Great Recession but remained well shy of its pre-recession employment mark. By 2013,
the region was 8,500 jobs away from its previous 2006 peak.
Having noted that, it is important to note that the area enjoyed some nice
announcements post Great Recession. Among the positives are:
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Economic Outlook Page 119

In Bogalusa General Dynamics opened a call center that handles government
healthcare calls. GD opened its facility in the summer of 2013 and now employs
over 600 people.

Gulf Coast Spinning has spent $130 million on a new cotton spinning facility at
the Bunkie Industrial Park. Over 300 jobs were created at the plant, paying an
average annual wage of $30,100.

In Urania, German Pellets GmbH constructed the world’s largest wood pellets
manufacturing plant, capable of producing 1.1 million tons of pellets a year.
About 150 people are employed at this plant in LaSalle Parish.

Universal Plant Services recently completed its $3.9 million plant in Jena in
LaSalle Parish. The firm hired 95 employees who work on welding, fabrication,
and equipment overhaul and repair.

A real success story for Ruston in Lincoln Parish is Mortgage Contracting
Services, a firm that protects and preserves vacant properties for mortgage
companies. MCS doubled the size of their facility to 200,000 square feet and
added 90 new jobs.

Conagra built a 2-phase sweet potato processing plant in Richland Parish adding
several hundred jobs.

Metal Shark Boats in Jeanerette secured a $192 million contract with the Coast
Guard to construct 500 patrol boats. The firm added 100 workers to its
workforce.
The 2014-16 Decline
Sadly the recovery in rural Louisiana was short-lived. The region has been in a
free fall for the last four years. No small part of this decline is associated with the
deteriorating exploration market. The rig count has plummeted in the rural parishes in
the Haynesville Shale region in northwest Louisiana. St. Mary Parish on the southern
coast is host to numerous firms that service the offshore exploration industry.
Specifically, Danos & Curole have terminated 80 people from their relatively new site.
In Vidalia, Fruit-of-the-Loom closed its plant ending 167 jobs. Gulf Coast
Spinning shuttered its facility in Bunkie. Construction delays and cost over-runs drove
the new German Pellets plant in LaSalle Parish into bankruptcy. The 125-150 jobs
associated with the opening of that plant are in jeopardy.
Rural Forecast for 2017-18: Another Year of Decline; Then Stability
Note in Figure 35 that we are projecting rural employment will fall another
3,200 jobs in 2017 (-1.5%) before stabilizing in 2018. The primary reason for the
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Economic Outlook Page 120
continued decline next year is the same as our expectations of more losses in Lafayette
and Houma---a problematic exploration industry. The industry is heavily enough
represented in these parishes to create a drag well into 2017.
That is not to say there are no positives for the region. In fact there are enough
positives to mitigate the losses in 2017 and add to stability in 2018. Among these
positives are:

Hazelwood Energy Hub is spending $400 million on four salt domes and above
ground tanks to store and blend 10 types of oil. Construction is underway and is
scheduled for completion in 2018. Located in Port Barre, Hazelwood will hire
123 workers at an average annual pay of $63,500---a very high rate for a rural
area.

Close to Hazelwood in Grand Coteau in St. Landry Parish C&G Scientific
Containers is spending $8.3 million on a packaging, environmental and
pharmaceutical facility. The firm will hire 100-175 people.

Tennessee Gas Pipeline will hire 300 people to construct a pipeline to serve
southwest Louisiana. The $170 million project will involve a natural gas
compressor station in Franklin Parish and the expansion of an existing compressor
and pipeline in Madison Parish.

Monster Moto has spent $4 million on a headquarters and manufacturing facility
for mini-bikes and go-carts in Ruston. Presently, the company has only an
assembly operation underway with 25 employees. Once its market is more fully
developed the firm expects to add a manufacturing side and grow to 287 jobs over
10 years.

An advance was filed with the Department of Economic Development by BOE
Midstream for a $127.8 million railcar storage, repair, and cleaning facility in
Lacassine that was expected to yield 300 new jobs paying an average annual
salary of $40,000. BOE has now exited this project and due diligence is
underway by another prospect. It is our understanding that the scope of the
project has changed as well.

The construction industry in these rural areas will also get a boost from $433.9
million in state road projects that will be let over 2017-18.

Roy O. Martin has three lumber yards in the rural areas of the state that employ
1,100 people. That number is expected to remain the same over 2017-18.

Finally, Vidalia is spending $39 million on a new 145 acre port (Vidalia Port). It
is scheduled to be opened in mid-2017. The city has already built a road
connecting the Vidalia Industrial park to the new port.
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Economic Outlook Page 121
THE OUTLOOK FOR THE STATE: 2017-18
In the pages above we have reviewed the prospects for each of Louisiana’s nine
MSAs and its rural parishes for 2017-18. Figure 36 illustrates the results of summing up
these individual area forecasts to get the outlook for the state as a whole. We are
forecasting a net loss of 700 jobs in 2017 due to the heavy drag of the exploration
sector. Some negative oil-related spillover will occur in 2018, but growth in other
sectors with push the state into a growth mode, adding 13,700 jobs (+0.7%).
Fig. 36: Louisiana Non-Farm Employment
Forecast: 2017-18
2,000
1,900
Thousands
1,800
1,700
1,600
2017: -700 jobs (-0.1% )
2018: +13,700 Jobs (+0,7% )
1,500
1,400
80
85
90
95
00
05
10
15
The elusive annual 2,000,000 job mark---which was actually achieved in the last
three months of 2014---will remain tantalizingly elusive for the next two years. Actual
construction of some of the large “potential” plants in the Lake Charles, Baton Rouge and
New Orleans MSA could give us a much more promising future. An early turn-around in
the oil and gas exploration industry could do the trick as well.
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Economic Outlook Page 122