Exxon wins state approval for tax break on potential Baton Rouge expansion worth more than $500 million
ExxonMobil on Wednesday won approval for a multimillion-dollar property tax break on a potential Baton Rouge plant expansion the company said is worth between $500 million and $1 billion.
The state Board of Commerce and Industry gave its approval, with the backing of Gov. John Bel Edwards.
Economic development officials said the approval was the next step in landing the project in Baton Rouge. Exxon said it will make a final decision later this year on whether to put the project — a major expansion of its polypropylene operations — at its polyolefins complex on Scenic Highway in north Baton Rouge
The oil and gas giant said the project would be the largest investment in Baton Rouge since 2010, when it spent $800 million adding an ultra low-sulphur diesel unit to its refinery.
Exxon’s Industrial Tax Exemption request now goes to the East Baton Rouge School Board, Metro Council and Sheriff for approval. Mayor-President Sharon Weston Broome, like Edwards, signed a letter in support of the project.
The polyolefins plant expansion is the first, and largest, of four projects approved under the state’s new rules for ITEP, which were enacted this summer. If approved, the project would receive an 80 percent property tax abatement — down from 100 percent previously — over 10 years, instead of eight. ITEP is designed to give manufacturers a break on their property taxes on new capital expenditures.
While the project is worth between $500 million and $1 billion, according to the company, only $335 million of it qualifies for the ITEP.
Exxon’s tax break would be worth $5.7 million in the first year, and the firm would pay 20 percent property taxes for a decade. The company said it would pay $6.9 million in property taxes over the life of the 10-year exemption, along with $32 million in sales taxes.
The company said the project would create 45 new direct jobs, 20 permanent contractor jobs and 600 construction jobs at peak development, if it moves forward. The project would double the plant’s polypropylene production, said plant manager Angela Zeringue, largely serving the automotive market.
Those 65 new jobs would be in place by the middle of 2021, Zeringue said.
The project is part of a 10-year, $20 billion “Growing the Gulf” initiative by Exxon to expand manufacturing capabilities in the region.
ITEP, the state’s most expensive tax incentive program, has historically exempted manufacturers from local property taxes on capital expenditures for two five-year periods.
Together Baton Rouge, the advocacy group which has vocally opposed many ITEP applications from Exxon, said it met with representatives of the company earlier this week. The group asked Exxon to pull five other ITEP applications for projects that have already been completed, and indicated it would be easier for the company to gain approval for the polyolefins expansion if it did so.
Exxon responded that those applications were filed in 2016 but had to be updated to adhere to new rules, and helped create 18 new jobs. Spokeswoman Stephanie Cargile said even though they have already been completed, they are “crucial” for Exxon Baton Rouge to stay competitive for future growth.
LED Secretary Don Pierson, in a statement, defended Exxon and said other ITEP applications filed by Exxon, when complying with state rules in place, “merit the tax benefits authorized by the state of Louisiana for the program.”
The Board of Commerce and Industry on Wednesday approved without discussion several similar applications for projects already completed.
Representatives from the Baton Rouge Area Chamber and other groups spoke in favor of the polyolefins project, and the board voted unanimously to approve it after heaping praise on Exxon and voicing support of the project.
“We are definitely in support of your project,” said board chair Steven Windham.
“On day one this plant will begin to contribute to the local community through the millages collected,” Pierson said.
The ITEP program has been at the center of a long, contentious debate between industry groups and opponents, mainly Together Baton Rouge and its affiliates throughout the state. Edwards reined in ITEP with an executive order in 2016, then tweaked it again this summer. Together Baton Rouge did not speak out against Exxon’s request at Wednesday’s meeting.
The Advocate reported late last year that the $1 billion-a-year ITEP has for decades allowed manufacturers to receive tax benefits while actually cutting jobs.
Edwards in April sent a letter to Charles Dabadie, Exxon’s Americas regional manufacturing manager, offering up his support for the plant expansion and the corresponding tax benefit. Edwards noted Exxon has “been a fixture in greater Baton Rouge for more than 100 years, demonstrating the mutual benefits that can accrue to a corporation and a community.”
“(ITEP) recognizes job retention, and LED, as program administrator, recognizes this manufacturing project will continue a significant job multiplier that considers jobs both inside and outside the plant boundaries, in addition to the new jobs represented on the program application,” Edwards wrote.
“Because of these factors, the state of Louisiana supports Exxon Mobil’s application for ITEP, as provided for by the Louisiana Constitution.”