10/04 - National Security / World Trade Jobs: Jobs in a Global Economy

How Do We Balance the Reality of Global Competition with the Need to Keep Local Petrochemical Industry Jobs?

With the Presidential Election only weeks away, Louisiana Public Broadcasting joined with 20 other PBS stations around the country in a Day of Deliberation By the People event on Saturday, October 16 at the LPB Telecommunications Center in Baton Rouge.

The day-long discussion centered on National Security, including the war in Iraq , and the creation of jobs in a global economy. A total of 100 citizens, randomly selected by the LSU Public Policy Research Lab at the Manship School of Mass Communication’s Reilly Center for Media & Public Affairs to mirror Baton Rouge ’s demographics, participated. They were surveyed before and after the event to see if their opinions had changed about the Day of Deliberation topics. After the pre-polling, the citizens watched a background video on the subject, discussed the issues in 10 small groups, and formulated questions for the experts recruited for the group discussions.

Highlights from the Baton Rouge event aired on Wednesday, October 20 at 7PM as the Louisiana Public Square program for the month of October. Excerpts from the Baton Rouge meeting were also be featured on Time to Choose: A By The People Election Special which aired Sunday, October 24 at 6PM on LPB. In that show, the results of the Day of Deliberation groups were compared with national polling data on what people think about these topics.

This is the second Day of Deliberation that LPB has conducted. The first was a By the People special that aired in January of 2004.

LPB’s partners in the event include The Advocate; the Council for a Better Louisiana (CABL); League of Women Voters, Baton Rouge Chapter; WRKF-FM; KRVS-FM; and The Reilly Center for Media & Public Affairs at the Manship School for Mass Communications at LSU.

There is more information located at the By the People site including a national backgrounder in pdf format.

Backgrounder

Impact of the Global Economy on Louisiana Chemical Manufacturers

How Do We Balance the Reality of Global Competition with the Need to Keep Local Petrochemical Industry Jobs?

Overview:

As one of the top exporting states in the nation, Louisiana is increasingly bound in economic fortunes to the international economy. Louisiana’s petrochemical industry is currently experiencing downsizing due to energy costs that are not competitive with global prices.

Our petrochemical plants have been outfitted to use natural gas exclusively as an energy source, due to its clean- burning attributes. Additionally, natural gas often serves as a feedstock, the raw material for the products made at chemical plants.

Unlike oil, a globally traded commodity, natural gas is priced locally and its distribution is usually local. Current U.S. policy limits natural gas production at a time when demand is increasing due to a proliferation of new power plants that use it for fuel. With needs pushing the available resources, prices have risen dramatically. Since 2002, natural gas prices have more than doubled, from a $3 average to as high as $6.25 per thousand cubic feet.

Chemical plants in Louisiana are competing with international companies that are located in countries that have a glut of natural gas, such as Trinidad where it’s priced at $1 per British thermal unit, and sixty cents in Saudi Arabia . With the addition of drastically lower labor wages, the cost of producing chemicals in Louisiana is no longer competitive.

This becomes an ironic dilemma in a state where oil and gas is a major industry. While high energy prices will benefit oil and gas producers in the long-term, a crisis in the petrochemical industry is being felt today.

State Petrochemical Industry Begins to Shrink

Louisiana chemical makers employed 25,100 workers as of Spring, 2003.

A series of plant layoffs and closings have been announced in Louisiana over the last two years, as companies shift investment to plants overseas, where production costs are cheaper.

* BASF will lay off up to 500 workers from its Geismar plant within the year. Formosa Plastics reduced its work force in North Baton Rouge by 89 jobs.
* DSM Elastomers will eliminate 180 jobs with the closure of its Addis plant. ExxonMobil, beginning a planned reduction of 200 jobs over three years, shrunk its workforce by 74 jobs, mostly through transfers and retirements.
* Mississippi Chemical Corp has cut 24 jobs. Several ammonia plants along the Mississippi River between Baton Rouge and New Orleans have temporarily shut down.

Losing High Wage Jobs

The effect of job losses in the chemical manufacturing sector is particularly troublesome since they are high paying jobs
Overall, Louisiana has lost over 4,000 chemical industry jobs since 1998.

(averaging $25.23 per hour), that have a high multiplier effect. According to LSU economist Loren Scott, in East Baton Rouge Parish each chemical job supports another 4.6 positions. Conversely, when a chemical job is lost, the parish in effect loses 4.6 jobs.

Median Household Income:
Louisiana $32,566
U.S. $41,994
- 1999 statistical abstract of U.S.

The loss of income from layoffs also hurts local governments by decreasing tax revenue. Susan Tully, human resources manager at Vulcan Chemical reports the chemical industry brings $790 million annually to state and local governments.





New Ways To Deal with the Changing Petrochemical Industry

End Drilling Limits in the Gulf

In 2003, Louisiana legislators worked to impress upon the current administration the need to end its moratorium on natural-gas exploration in some areas of the Gulf of Mexico . New drilling could produce badly needed jobs, as well as provide additional fuel and feedstock for chemical manufacturers.

Dan Borne, president of the Louisiana Chemical Association, claims the immediate cause of the current crises in the industry is “government policy that, in effect, promotes the use of natural gas – and at the same time restricts its supply.” Borne calls for “a comprehensive strategy for growing our natural gas supply in an environmentally responsible way.”

Proponents say the Gulf should be opened to further oil and gas exploration to bring the price of gas down, and allow our companies to be competitive globally. Opponents wonder: Why use our reserves of oil when it is available cheaply elsewhere? They say there is environmental risk involved, that we don’t have to take. The United States may have a greater need in the future for these reserves.

Liquefied Natural Gas Terminals

One supply method for natural gas being considered is liquefied natural gas (LNG) terminals. These terminals take in a chilled, compressed form of gas that can be transported in greater amounts than regular natural gas, thereby reducing costs. Supplies may come from countries that currently do not have a viable market, and where gas prices are low.

LSU Researcher David Dismukes has pitched the idea to the chemistry industry. Dismukes says that aggressive construction of LNG terminals – 15 terminals built – could mean $929 million in economic impact and 11,612 jobs. With low development – 6 to 12 terminals – Louisiana would lose $1.67 billion and 20,902 jobs. Fewer than six terminals could result in a loss of $2.8 billion in economic activity and 61,926 jobs lost over 10 years.

Concerns about these terminals usually revolve around the highly explosive nature of the materials being transferred. Terminals in the Gulf , however, would not be near populated areas.

In Louisiana , decades of oil extraction activities in the coastal marshes have contributed to significant amounts of land loss. With 25 to 30 square miles of the state’s coastland disappearing each year, environmentalists worry that plans to “streamline” the permitting process could come at the expense of environmental concerns. Groups such as the Louisiana Environmental Action Network, want the environmental community to be involved in LNG planning discussions.

Proponents say Liquefied Gas Terminals [LGTs] would provide natural gas, a clean fuel, to a hungry Louisiana market. Opponents note that additional pipelines to support LGTs may further erode Louisiana ’s disappearing coastline. Existing pipelines would require legislation to make sure owners are keeping them up properly. Building these LGTs would take time, and if the state “streamlines” the process, will this mean lax controls on the industry.

Product Specialization

In 2002, the United States lost its longtime standing as a net exporter of chemicals as shipments from Western Europe and Asia reversed the trade balance. From a $1.3 billion U.S. surplus in 2001, the trade balance slipped to a $4.4 billion deficit in 2002.

Global competition with chemical manufacturers may spur a longtime transformation in the sort of products made in Louisiana ’s chemical plants. The challenge is to adapt by making higher-value specialty chemicals that are in greater demand in the United States . New Jersey is an example of a state that once made large amounts of basic chemicals, but has evolved into a major producer of pharmaceuticals.

Some Approaches

* Increase our petrochemical industry's ability to compete on the global stage by seeking ways to lower the cost of natural gas. Support ending of drilling limits in the Gulf to ease to upward market pressure on prices by increasing natural gas availability. Support construction of LNG facilities in Louisiana to increase availability of foreign natural gas supplies.
* Accept globalization and the resulting competition as a reality. Support efforts to transform the types of products made in our chemical plants to “niche” or specialty chemicals which are more viable on the world stage.

NOTE: This backgrounder was prepared by Donna Lafleur, based on research by Al Godoy. Special thanks to David Dismukes, Ph.D., LSU Center for Energy Studies, and the Baton Rouge Advocate, a Deliberation Day local partner, and the following reporters, whose articles provided much of the information in this backgrounder: Ned Randolf, Chad Calder, John McMillan and Sara Bongiorni.

Click here to view the online survey results

Click here to view the LSU Before and After Survey Results

Our Panelists:

We want to know your opinion! Leave your comments in the box below.


Oh I see this is the second Day of Deliberation that LPB has conducted. The first was a By the People special that aired in January of 2004. Thanks buddy!

Posted by Jason Bravo  on  03/20  at  12:11 AM
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