That’s a very good question, and it’s the essence of what we are considering as we, the people of Louisiana, cast our ballots on Oct. 12
The dogma of American government doctrine we learned as children would have us believe “We, the People” ably and nobly run our democratic republic, as well as this “Gret Stet” of Louisiana.
But the political messaging that’s been escalating its bombing runs as we move ever closer to election day is saying – openly or subliminally – it’s an individual, or the political party that person is affiliated with, that is and/or has been running Louisiana into the ground.
This a continuation of the question state (and even federal) politicians have been forcing you to ask yourself for the past four years, as the Republican-controlled Legislature (the state House, in particular) and the Republican Attorney General have wrestled with the Democratic Governor to assert party ideology and dominance over governmental policies and practices in Louisiana.
Now, voters are not only selecting our next governor and other statewide-elected officials, but are also picking their legislators. Those men and women will have, in addition to their regular annual lawmaking duties, the added responsibility for drawing new district lines following the 2020 Census – affecting Louisiana political outcomes for another decade into the future.
The potential rewards of that type of influence are immense, and so (as predicted when the bulk of this article was initially composed and published at the beginning of this year) these state elections are proving to be the most expensive in Louisiana’s 207-year statehood history. Individuals and special interest groups have filled and now depleted their war chests, expending their financial and ideological ammunition in launching their assaults on their proverbial enemies via airwaves and cyberspace.
Of course, their real target is you, the voter.
Throughout Louisiana’s statehood, the question of “Who runs the state?” has been asked often. “Queen Sugar” and “King Cotton” were the state’s earliest economic drivers, and while Louisiana indirectly benefited from the early to mid-19th century Industrial Revolution, this state also ultimately lost population to it. Factories grew elsewhere, while Louisiana grew and exported the raw cotton and sugar that would clothe and sweeten the lives of the nation’s expanding population.
Deep beneath Louisiana’s fertile soil, another natural resource waited. As commerce and industry expanded elsewhere, so did the demands for ways to fuel it. In 1870, a night watchman in Shreveport lit a match, and “accidentally” discovered natural gas coming from a recently-drilled artesian well. In 1901, nine months after and 90 miles east of the first Texas oil “gusher” Spindletop, an oil well drilled near Jennings, Louisiana, also began gushing forth “black gold”. By 1906, the state legislature had passed its first oil and gas laws, and in 1909, the first oil refinery in the state – what is now the Exxon refinery in Baton Rouge – came on line.
Some quarter of a million oil and gas wells have been drilled in Louisiana since then (though 35% of them – some 80,000 – ended up as dry holes), and this state was a major contributor to fueling the nation’s phenomenal growth throughout the 20th century. Therefore, for most of that century, oil and gas interests ruled in and over Louisiana.
The peak of the state’s oil production was 50 years ago, however – in 1969, with more than 728-million barrels produced. It has been declining ever since. Within five years of that production peak, several scientific studies were released, showing that Louisiana’s coastal land mass has been declining, in direct correlation to its oil and gas production. It was Dr. Sandra M. Gagliano’s 1973 study that estimated 39% of Louisiana’s land loss was due to the industries’ dredging of canals through the coastal wetlands.
Realizing their influence was waning as their industry’s environmental impacts were being documented, discussed, and disfavored, oil and gas concerns developed a new tactic just over 25 years ago: the “economic impact study”. Louisiana Mid Continent Oil and Gas Association released the first-of-its-kind study in 1993, showing the offshore oil and gas industry provided Louisiana with a positive economic impact of more than $3-billion each year.
It had the desired effect. In 1994, the state Legislature passed a massive incentive package, foregoing state revenue from severance taxes for certain types of wells – including wells deeper than 15,000 feet, and those that run horizontally. And, as LMOGA’s own “History of the Industry” proudly declares, “Oil and gas activity increased sharply after passage of the incentive legislation.”
Additionally, prices for crude oil, which had been around $25 per barrel at the start of 1994, went up around then, increasing to over $45 per barrel by the start of 1997. By November 1998, the price per barrel had plunged again, to a low of $17.25. Nearly ten years later, though, in June of 2008, the price per barrel of oil reached an all-time high of $161.28. In late August 2014, oil dropped below the hundred-dollar-per-barrel mark, dropping to $36 per barrel in early 2016. As of the end of 2018, the price was hanging around $45 per barrel.
In 1982, just over 42% of Louisiana’s total state general fund came from mineral revenues: oil and gas severance taxes and royalties. In the most recent budget year, those sources were barely more than 6% of total state general fund revenue. Corporate income taxes overall totalled less than five percent (4.8%) of the entire state general fund. Instead, we the people – through individual income taxes and sales taxes we pay – provided 74% of Louisiana’s state general fund revenue.
Yet despite the declining proportions of state revenues received from oil and gas – and from business and industrial corporations as a whole, our state keeps subsidizing the profitability of these industries through all manner of alluring tax exemptions.
Why?
Because “jobs”.
That’s the threat they always use: if we the people don’t give them tax break after tax break, they’ll take their businesses and jobs elsewhere. They won’t, of course. The last time a new refinery was built in the U.S. was 1977 – 42 years ago – and that was the Marathon facility in Garyville, Louisiana.
Other states won’t offer them what we have in the past and continue to present on proverbial silver platters.
As for the overall oil and gas-related jobs in Louisiana, the economist who has been doing the industry’s “economic impact” studies for the past 25 years, Dr. Loren Scott, reported the 2018 jobs total at 44,580. In 2008, it was 53,000. And in 1998, it was nearly 82,000.
That precipitous loss of nearly half the jobs the oil and gas industry once provided can be attributed to a number of factors. For example, what the industry rarely says is that advances in computerized controls and automation have eliminated the need for people to actually do many of these jobs. And, in fact, design and installation of these automation improvements that eliminate jobs is exactly what Eddie Rispone’s company, ISC Constructors, does.
So sure, Rispone and his company have “created” some jobs on their own payroll, but how many other jobs have they eliminated in order to increase the profitability of other companies?
Many of these industries have consistently applied for ITEPs, avoiding the payment of local property taxes for up to a decade, for improvement projects that actually eliminated jobs, rather than creating them. Up until recently, they got those tax breaks nearly automatically.
Take an example from the beginning of this year: Georgia-Pacific, a subsidiary of Koch Industries, announced in January it would be permanently shutting down and selling off the majority of its Port Hudson paper mill by mid-March. At least 650 employees of the East Baton Rouge facility lost their jobs – positions that paid, on average, about $80,000 annually.
It was a near-total turnaround from what local officials were told on month before, in December 2018, as Georgia-Pacific sought a new industrial tax exemption (ITEP) for a recently-completed $42-million expansion that promised 30 additional jobs. The exemption from paying property taxes on the expansion was valued at $772,000 in the first year.
In 2018, through ITEPs previously granted, G-P was already exempt from paying close to $9-million in local property taxes on the Port Hudson facility. Since 1998, they had received 36 exemptions, and avoided paying more than $203-million in property taxes, according to the database compiled by Together Baton Rouge.
In 2010, the Jindal administration cut an “economic development” deal with Georgia-Pacific: the company would do a $300-million mill modernization, and the state would finance it with $300-million in Gulf Opportunity Zone bonds – plus give the company a $3-million tax credit and ITEP property tax exemptions. The state would benefit, we were told, because 1000 jobs would be “saved”.
How’s that working out for us, now?
Meanwhile, Louisiana remains a petro-colonial state, with our “good masters” consistently seeking rules and laws that favor their status and keep them flush with money to propagandize the people and contribute to the campaigns of candidates who will see the issues in a way that is advantageous for the oil and gas industry.
Consider what we now know of Exxon’s subterfuges, for example. In the 1970s, even as they were funding LSU’s initial research and studies into remedies for Louisiana coastal land loss, the petrochemical giant was also conducting pioneering research into global climate change. Yet after one of Exxon’s senior scientists informed company executives that, in 1977, there was general scientific agreement that burning fossil fuels was accelerating the global warming phenomenon, Exxon focused their secretive climate modeling research, ultimately determining, by 1982, that “significant reduction in fossil fuel consumption would be necessary to curtail future climate change.” The internal report to Exxon executives also noted “There is concern among some scientific groups that once the effects (of climate change) are measurable, they might not be reversible.”
Bless Exxon’s heart: they didn’t tell any of us. Instead they poured profits into an intentional public campaign of misinformation – questioning the science and fact of global warming, utilizing the same strategies previously employed by Big Tobacco regarding smoking and lung cancer, and – along with Koch Industries – provided climate change-denying organizations with tens of millions of dollars in support.
Here in Louisiana, the oil and gas industry paid lobbyists to argue against alternative energy proposals. They ultimately killed off the state’s solar energy tax credit program, which benefited homeowners and the environment, while arguing to keep the industry’s corporate concessions intact. They sought and received designations of refineries – and now pipelines – as “critical infrastructure”, protectable at gunpoint and making protesting those developments a felony.
They have battled and defeated every piece of proposed legislation to limit – or even study – industrial groundwater usage. And they’ve defeated every attempt to require facilities install fenceline air quality monitors, even as the oil and chemical companies “settled” EPA lawsuits citing them for decades of excess emissions in violation of the Clean Air Act.
The industry fought tooth and nail in 2014 to kill the Southeast Louisiana Levee Board lawsuit which accused 97 oil, gas, and pipeline companies of damaging the wetlands. They continue to try and buy elections of parish officials in an effort to kill off the 42 coastal land-loss lawsuits now pending trial in federal court. All this, despite the companies having signed agreements before dredging all those coastal canals – agreements which promised they would follow state law requiring proper maintenance of the rights of way and eventual restoration of the land to its original condition.
The oil and gas companies – and their allied chemical industries, all of which would continue their power and control over Louisiana – keep pushing for “tort reform” measures to pass the Legislature. These industries utilized portions of their profits to promote the narrative that “Louisiana is a judicial hellhole” because “trial lawyers are running the state” (with the unspoken, but implied addendum of “into the ground”).
Gov. John Bel Edwards is – by trade – an attorney, and a year-and-a-half ago, in March 2018, the Wall St. Journal published an opinion piece that previewed the tactics oil and gas interests would be using to try and defeat him – branding him as a trial lawyer who wants to retain power, along with all his trial lawyer friends. The author of that commentary, Allysia Finley, is rated “right” for her media bias, according to allsides.com. Certainly, right-wing bloggers and columnists with other publications picked up on her commentary, and over the following week amplified it, with statements such as “The trouble with trial lawyers is that for the most part, they suck the life out of the economy.” And they all re-iterated the oil and gas industry’s mantra: “The oil industry is booming in Texas while it is stagnant or declining in Louisiana. Blame it on the state and several parishes filling lawsuits against the industry.”
Unsurprisingly, ExxonMobil, Shell, PPG, and especially Koch Industries have been longtime heavy funders of the American Tort Reform Association – the group that publishes an annual “Judicial Hellholes” report. Louisiana is usually ranked near the top of this report, with accompanying statements such as, “The Pelican State’s legal climate has suffered at the hands of powerful trial attorneys and the politicians they have controlled for decades. Gov. John Bel Edwards, a trial lawyer, has helped further stack the deck against defendants down on the bayou, and Louisiana is unlikely to escape this litigiously fevered swamp anytime soon.”
The most recent report, issued Dec. 26, 2018, ranks Louisiana number five – up from number eight the previous year. California is number one, followed by Florida, New York City, and St. Louis, Missouri, then Louisiana. TopVerdicts.com’s most recent list of the 100 highest court awards in civil lawsuits shows California with 33 of the top 100 verdicts, with Florida having 11 on the list. But the highest awards, and the greatest number in the top 100 – 42 – were in Texas, including the top two verdicts. One was for half a billion dollars, with the biggest verdict being for more than $8-billion. Both of those cases were for business-to-business breach of contract.
Texas did not make the “Judicial Hellholes” list at all. Louisiana, ranked number 5, did not have a single case among the top 100 verdicts. Yet the oil and gas industry keeps telling us Texas has it right, while Louisiana suffers because trial lawyers are the problem.
Oil and gas isn’t the only business sector trying to attribute Louisiana’s problems to trial lawyers The Louisiana Association of Business and Industry has long been engaged in demonizing trial lawyers as the bane of Louisiana business, while they’ve waged a campaign for “civil justice reform”, as they’re now calling it. LABI has long been the primary financial backer of Louisiana Lawsuit Abuse Watch, which claims to be “a citizen watchdog group dedicated to stopping lawsuit abuse that threatens local businesses and jobs.”
LABI president Stephen Waguespack – who was former Gov. Bobby Jindal’s executive counsel, and is himself a lawyer by trade – wrote a column October 3, 2018, titled “It’s Time for Some 1-800-LEGALREFORM.”
In it, he said: “It’s all about the incentives created by the State Capitol over the years to promote a lawsuit culture in Louisiana. What has never been honestly discussed with the public are the laws the Louisiana Legislature has put in place and protected over the years to intentionally incentivize and promote one of the most active lawsuit industries in the entire nation – laws that have become strong incentives created by the Louisiana Legislature to create a robust and competitive business environment for trial lawyers.”
Contrary to the usual preconceived notions of the makeup of the Louisiana Legislature, the majority of our lawmakers are not lawyers. (Perhaps logic would prevail more often, if they were.) Presently, only 27% (27 House members, 12 senators) of the 144 total legislators are attorneys by trade. However, more than 42% of total state lawmakers (45 House members, 16 senators) state their primary occupation as “business owner” or “business other”.
The Business of Running State Government
We hear it all the time: “Government should be run like a business.” Those most prone to spouting this cliche’ are usually members of the business community themselves, and generally have an idealized notion that business is efficient and – thanks to competition in the marketplace – businesslike operations foster effectiveness.
Yet as McGill University professor of Management Henry Mintzberg has written in the Harvard Business Review, “Running government like a business has been tried again and again, and has failed again and again.”
It is, essentially, a logical contradiction, which ensures it will not succeed.
Mintzberg points out that the measure of business success is profitability. Yet as we’ve seen during seemingly endless Louisiana legislative debates over the past several years, those who advocate for “more businesslike government” are also the ones adamantly opposed to the state having even a fraction of a cent of surplus funding – insisting repeatedly on making Louisiana “do more with less.”
“Government,” they insist, “is not supposed to show a profit.”
The two leading Republicans challenging incumbent Gov. John Bel Edwards are pitching hissy-fits because Louisiana has ended the past couple of budget years with comparatively small surpluses. They’re saying it’s proof we can reduce taxes, even while they each tout their business acumen as the reason to elect them instead of re-electing Edwards.
However, the last four years have proven the persistent efforts of the Jindal administration (aided and abetted by business people in the Legislature) to starve state government by privatizing government services – while further wooing business “customers” with corporate tax giveaways – have done nothing to increase Louisiana’s overall valuation. We remain at or near the bottom of every list of “quality of life” measurements. We, the citizen-”shareholders”, have seen minimal return on our investment.
Yet there is one sector of the business community that is doing phenomenally well, and it’s a segment of LABI’s membership that has been working behind the scenes for more than a decade, preparing to make their big move toward becoming the next answer to the question of “Who Runs Louisiana?”
Let’s call them the “Erector Set”.
They’re the construction industry, and the industrial construction contractors, in particular.
In April 2017, Lotte Chemical of South Korea agreed to move its US headquarters to Calcasieu Parish, overseeing their joint project with Westlake Chemical. That would need 3000 construction workers, and would eventually provide 265 permanent full-time jobs.
In January 2018, Entergy began work on a new $872-million generating plant in Calcasieu Parish, requiring 700 construction workers.
In April 2018, Formosa announced it would build a $9.4-billion chemical facility in St. James Parish, eventually offering 1200 permanent full-time jobs, and requiring 8000 construction workers.
July 2018, Shintech said it was ready to start a $1.49-billion expansion in Iberville Parish, for 120 more full-time jobs and 3000 construction jobs.
January of this year, Gov. John Bel Edwards and the Louisiana Department of Economic Development announced South Louisiana Methanol – a project of New Zealand-based Todd Corporation, partnered with Saudia Arabia-based SABIC – is building a $2.2-billion new methanol complex in St. James Parish. Ultimately, it will provide 75 permanent full-time jobs, and, while being built, employ 800 construction workers temporarily.
In March 2019, Exxon announced a $469-million expansion of its chemical plant in Baton Rouge, needing 600 construction workers.
In May, Louisiana Economic Development said Shell was “advancing plans” for a $1.2-billion expansion of its facility in Geismar, and would be needing more than 1000 construction workers for that Ascension Parish project.
In July, Methanex said it would need more than 1000 construction workers for building its third methanol plant in Geismar.
And in August, Formosa said it would need about 500 construction workers for a #332-million expansion of its Baton Rouge facility.
Louisiana is in a cycle of major industrial expansion, and with demand for construction workers continuing strong, the owners of Louisiana construction firms are earning record profits.
What to do with all that money?
A majority of CEOs and presidents of Louisiana’s top contractors utilize their wealth in philanthropic pursuits. Turner Industries’ Roland Toups is a notable supporter of Catholic organizations and a major contributor to Our Lady of the Lake Hospital’s programs and expansion campaigns. Ratcliff Companies’ Robert Ratcliff uses his wealth and expertise to support cultural improvement efforts in Alexandria.
Others use their wealth to benefit the universities located in their communities. Lenny Lemoine of Lemoine Companies is deeply involved with growth and improvments at U-L Lafayette. Lincoln Builders’ Clint Graham similarly supports Louisiana Tech, and Paul Flowers of Woodward Design+Build assists Tulane University in a like manner.
Over the past 15 years, each of them and their companies have contributed to political campaigns and causes. They and their companies give to business-related political action committees (PACs), including the LABI-run regional PACs, but not in major amounts. Additionally, they support candidates within or from their local communities, but rarely do they give the maximum amounts allowed by law.
A few of Louisiana’s industrial contractors have made politics their charity-of-choice. Robert Boh of Boh Brothers and Lawrence Gibs of Gibbs Contruction both donate large amounts to candidates’ campaigns. Yet looking through their records of contributions over the past 15 years, it’s clear they are “non-denominational” in their support, giving to Democrats and Republicans alike – as long as those running are members of the local community to begin with.
Other industrial contractors on Louisiana’s top ten list have made it their mission to grow their personal influence on government policies, spending immense amounts toward buying politicians and political influence, and funding large PACs under their own control. These are the ones we’re calling the “Erector Set”.
Over the past decade, they’ve been weaving their web of influence through activism within the Louisiana Association of Business and Industry. (Principals with five of Louisiana’s top ten contractors serve on LABI’s Board of Directors.) They’ve each endowed their own political action committees (PACs) with six-figure donations – PACs that they each chair and control – and have given copious sums to their buddies’ PACs as well as those run by LABI and the contractors’ own trade groups.
They’ve heavily supported certain candidates for offices – almost exclusively Republicans – and have engineered policy changes through those paid-for politicians.
And the Erector Set is hoping to crown one of their own as the new king: Eddie Rispone.