By: Trent Tucker
It is no secret that the Louisiana economy has struggled in recent years. Studies ranking states based on economic environment, median household income, poverty rates, and unemployment rates continue to slot Louisiana at the end of their lists.[1] Much of the state’s recent disappointing performance is connected to its ties to the dying oil and gas industry.[2] Throughout the past few decades, as more data has emerged showing the effects of climate change, the public’s focus has shifted to the need for renewable energy implementation.[3] This shift has affected oil and gas companies across the board through decreased demand for products as well as an influx of regulations making products more costly to produce and slicing profits.[4] While the potential for a resurgence in the oil and gas industry use looks bleak, there may be opportunity for the state to shift its economy in a new direction that could provide a more balanced and lasting economic solution. The increased construction of industrial solar energy facilities throughout the state evidence this opportunity that could provide a major benefit to the state’s economic outlook.[5]
Louisiana has immense economic ties to the oil and gas industry and lacks a healthy renewable energy industry.[6]In 2019, the oil and gas industry in Louisiana contributed $73.0 billion to state GDP from the production, processing, transportation, distribution and retail of crude oil, natural gas, natural gas liquids and petroleum products.[7] The state income generated by this activity within the state represents approximately 26% of total state GDP.[8] Oil and gas operations support approximately one out of every nine of the state’s jobs, many of which provide annual wages which are significantly above the state average.[9] The 249,800 jobs supported by this industry generated $14.5 billion in wages to in-state workers. Louisiana has 17 operating refineries in the state with a total capacity of 3.4 million barrels per calendar day, making it the 2nd most prominent U.S. state in refinery capacity.[10] At a strict contrast is the state’s investment in renewable energy infrastructure and development.
Louisiana currently ranks 48th among all U.S. states for clean power, with only 52 megawatts in combined utility-scale solar energy, wind energy and storage capacity.[11] Louisiana’s renewable energy currently accounts for about 3.3% of utility-scale electricity generation, far less than the national average of 18.5%.[12] This extreme underdevelopment is due in large part to the perception of the state and its residents as being a traditional oil and gas state that is not quick to turn away from its longstanding reliance on the oil and gas industry. While it may not be immediately obvious, the state is well suited for renewables based on its abundance of natural resources.[13] The state is specifically well suited for solar energy production.[14]
While the current economic climate in the state looks bleak there is potential for economic growth in the state based on recent renewable energy investments. According to Professor Terrence Chambers, director of the University of Louisiana-Lafayette’s Energy Efficiency and Sustainability Energy Center, there is roughly $6 billion in investments waiting to come to Louisiana that could provide power for more than 1 million homes with solar energy or roughly one-quarter of the state’s net electricity demand.[15] Seven major solar facilities have been proposed in Louisiana for construction before 2024.[16] Records indicate that previously undisclosed projects seeking economic incentives include three utility scale solar facilities in the St. James Parish community of Vacherie and one each in Thibodaux, Bogalusa, Singer and Franklinton.[17] Proposed $200 million projects in Thibodaux, Bogalusa, and Singer would individually produce up to 200 megawatts of power per year. The projects proposed in Vacherie are smaller but would still produce 120, 90 and 80 megawatts respectively, and, finally, the facility proposed for Franklinton would produce 50-megawatts.[18] All are major undertakings that would provide a much-needed economic benefit to the local communities by way of tax dollars and job creation.
Further, Governor John Bel Edwards has recently issued two executive orders directed towards the ambitious commitment to cut the state’s greenhouse gas emissions 25-28% by 2025.[19] This ambitious pledge coupled with the large opportunity for solar power in Louisiana has caused many to predict a potential shift in renewable energy production in the state. [20] The LSU Center for Energy Studies reported that the energy industry is responsible for 61% of the state’s total emissions.[21] The majority of which comes from 20 petrochemical facilities owned by ExxonMobil, Shell, Marathon Petroleum, Citgo, Dow Chemical, Valero, and Phillips 66.[22] Based on this percentage, most task force members say that the only way to meet the governor’s goal of net zero emissions by 2050 is to significantly reduce the state’s industrial footprint.[23]
The economic benefit from a strategic shift toward renewable energy production in the state is clear. The growing renewable energy sector has the potential to pump money and jobs into the state’s struggling economy. Based on recent guidance from the governor there seems to be a shifting mindset towards increased consideration of environmental issues, specifically carbon emissions. These two factors point to a pivot in Louisiana’s energy sector. While it remains to be seen how quickly any potential change will occur; the trajectory of the state seems to slowly be shifting away from the oil and gas industry.
[1] See Ashley Hamilton, Louisiana is Now Ranked Last Among Best US States for Economy, News 15 (Aug. 25, 2021), https://www.kadn.com/content/news/-Louisiana-is-Now-Ranked-Last-Among-Best-US-States-for-Economy–575175121.html [https://perma.cc/FP7Q-LRYC]; see also Sydney Barrett, The Louisiana Economy Is Struggling With Dependence On Oil And Tourism, Research Shows, Trading U (Jul. 28, 2021), https://trading-u.com/the-louisiana-economy-is-struggling-with-dependence-on-oil-and-tourism-research-shows/ [https://perma.cc/5Z2P-32C3].
[2] Barrett, supra note 1.
[3] See Mike Smith, Massive, Controversial Solar Project Near Lake Charles Offers Peek Into Louisiana’s Energy Future, The Advocate (Oct. 5, 2021), https://www-theadvocate-com.ezproxy.law.lsu.edu/lake_charles/article_14a9a1d6-254d-11ec-a2f7-ab74b5673f5e.html [https://perma.cc/ZD8K-MQU4].
[4] Barrett, supra note 1.
[5] Smith, supra note 3.
[6] David Gura, Oil Industry: Integral To Louisiana Culture And Economy For Decades, npr (June 17, 2010), https://www.npr.org/sections/thetwo-way/2010/06/17/127909486/oil-industry-integral-part-of-louisiana-culture-and-economy-for-decades [https://perma.cc/E8KX-VZ43].
[7] The Oil And Natural Gas Industry Is One Of The Leading Industries In Louisiana In Terms Of Economic Impact, Taxes Paid And People Employed, lmoga, https://www.lmoga.com/benefits-of-the-industry/economic-impact [https://perma.cc/BJD8-DZX2].
[8] The Economic Impact of the Oil and Natural Gas Industry in Louisiana, icf (Oct. 5, 2020), https://www.lmoga.com/assets/uploads/documents/LMOGA-ICF-Louisiana-Economic-Impact-Report-10.2020.pdf [https://perma.cc/U5KB-W6VH].
[9] Id.
[10] Id.
[11] “Utility-scale” refers to solar panel farms big enough to contribute to the commercial power grid; Tina Casey, Louisiana Shakes Off Clean Power Blues with New Push for Solar, Triple Pundit (Aug. 10, 2021), https://www.triplepundit.com/story/2021/louisiana-clean-power/726641 [https://perma.cc/8HXM-3LXA].
[12] Smith, supra note 3.
[13] Comparison of Solar Power Potential by State, Nebraska energy statistics (Mar. 11, 2010), https://neo.ne.gov/programs/stats/inf/201.htm [https://perma.cc/VCK4-ZS3D].
[14] See id.
[15] Wesley Muller, Solar Power Offers $6 Billion Opportunity For Louisiana, Researchers Say, Louisiana Illuminator (Aug. 17, 2021), https://lailluminator.com/2021/08/17/solar-power-offers-6-billion-opportunity-for-louisiana-researchers-say/ [https://perma.cc/8YDH-PWX5].
[16] 7 Big Solar Farms Proposed in Rural Louisiana by 2024, U.S.News (July 2, 2021), https://www.usnews.com/news/best-states/louisiana/articles/2021-07-02/7-big-solar-farms-proposed-in-rural-louisiana-by-2024 [https://perma.cc/ME32-ZNQX].
[17] Id.
[18] Id.
[19] William Huguet, Carbon Capture and Storage – A Ray of Light for the Louisiana Energy Economy?, Kean Miller (Aug. 20, 2020), https://www.louisianalawblog.com/environmental-litigation-and-regulation/carbon-capture-and-storage-a-ray-of-light-for-the-louisiana-energy-economy/ [https://perma.cc/X5JC-TL95].
[20] Muller, supra note 15.
[21] Id.
[22] Id.
[23] Id.