SignalHub-Does Another Plastics Plant in Louisiana’s ‘Cancer Alley’ Make Sense? A New Report Says No

A massive new plastics plant planned for Louisiana’s St. James Parish in that state’s chemical corridor faces the same challenging economic headwinds that have SignalHubstalled the construction of petrochemical plants in Appalachia, according to a new analysis by the Institute for Energy Economics and Financial Analysis.

The 46-page report lists a series of economic risks and concludes that the Formosa plant project along the Mississippi River should be abandoned. At the same time, Formosa faces a new dynamic in Washington, with the Biden administration pledging an all-of-government focus on environmental justice and the president himself provocatively referring to the area along the Mississippi between Baton Rouge and New Orleans as “Cancer Alley.”

The report found that:

— The plastics market is unlikely to grow fast enough to absorb the products the plant would produce amid a global oversupply of ethylene, a plastics building block, and other chemicals. 

— With China adding to its own plastics manufacturing capabilities, the outlook for exports from the United States is not promising.

— Rising construction costs will diminish the plant’s profitability.

— Long-term demand for virgin plastic production will likely decline as recycling and bans on single-use plastics increase and new ways to make plastics are developed.

— A credit rating service had recently downgraded Taiwanese Formosa Plastics Group from AA to AA-minus due to weak demand, lower profits and uncertain oil prices, while noting that the estimated cost of the plant in Louisiana had risen 24 percent, from $9.4 billion to $12 billion.

“If you had just one risk factor, that would be manageable,” said Tom Sanzillo, director of financial analysis for IEEFA, a nonprofit think tank that supports a clean energy transition. “But this involves multiple risk factors.”

On top of those risks, Sanzillo noted that the company faces new regulatory hurdles in the courts, with Formosa suffering setbacks with two key air and water permits and new scrutiny from the Biden administration.

Some of the fundamental economic problems, he said, are the same ones that led IEEFA and other economic forecasters last year to question the construction of a $5.7 billion ethane cracker plant in southern Ohio even before the pandemic, due to changing plastics markets. A final investment decision there by Taiwanese-owned PTTGC America has been delayed.

IEEFA also last year questioned the economic prospects for a Shell cracker plant already under construction near Pittsburgh and said that they had worsened. 

In Louisiana, Formosa and its subsidiary, FG LA LLC, have faced major opposition from local, regional and national environmental groups, which has only intensified with Biden in the White House.

Formosa calls the plant “The Sunshine Project” and is promising 8,000 construction jobs and 1,200 permanent jobs that pay $84,500 in salary plus benefits, and hundreds of millions in state and local taxes.

Janile Parks, director of community and government relations for Formosa’s local subsidiary, FG LA LLC, said the company “remains committed to the project and continues to monitor all relevant factors closely.”

She noted that “widespread impacts of a global pandemic” have contributed to difficulties in evaluating construction and other costs.

“As a result, FG has deferred major construction on The Sunshine Project until the pandemic has subsided and/or effective vaccines are widely available and distributed,” she said. 

The industrial complex would be built in two phases and would produce polyethylene, polypropylene, polymer and ethylene glycol used to make products like car body parts, plastic bottles, grocery bags, drainage pipes, artificial turf, polyester clothing, antifreeze and playground equipment, according to the company.

Still, industry advocates in the region say they have clearly noticed how shifting political dynamics are affecting the plant’s progress. Biden and his aggressive climate agenda mark a clear shift to the left and away from President Trump’s conservative, pro-fossil fuel and deregulatory agenda, which sought to elevate the petrochemical industry in the Gulf Coast and in Appalachia.

The newspaper in Baton Rouge, The Advocate, on Sunday reported that “new scrutiny at the highest levels of government has encouraged environmental groups that felt largely ignored by the Trump Administration. And it has industry groups ready to more aggressively defend their projects in public.”

“There’s a level of frustration within industry and a desire to speak out,” Connie Fabre, president and CEO of the Greater Baton Rouge Industrial Alliance, told the newspaper. “It’s like it’s time. We’re ready to start speaking out against this stuff because it’s just not fair.”

The project also has had some setbacks with its permits.

After a lawsuit filed by the Center for Biological Diversity, RISE St. James, Louisiana Bucket Brigade and Healthy Gulf, the U.S. Army Corps of Engineers agreed last November to suspend a Clean Water Act permit it had issued to the company while it examines certain issues. 

One of the things the corps will be reviewing is other potential locations for the plant, including other parishes, said Delia Ridge Creamer, a campaigner working for the Center for Biological Diversity. Some 40,000 people have sent letters to the corps, asking to be heard during that new review, she said.

Last November, Louisiana District Court Judge Trudy White ordered the project’s air permit back to state environmental regulators for further analysis, ruling that its environmental justice analysis was inaccurate. However, a three-judge state appellate panel last week found that White had exceeded her authority.

The plastics and petrochemical complex, proposed on 2,400 acres in a predominantly Black portion of St. James Parish, also faces new opposition from members of Congress.

Last week, Reps. Raúl M. Grijalva (D-Arizona), chairman of the House Natural Resources Committee, and A. Donald McEachin (D-Virginia), wrote to Biden, urging him to revoke the plant’s Army Corps permits. 

They argued that the project is not consistent with the Biden administration’s commitment to environmental justice.

“Along the 85-mile stretch between Baton Rouge and New Orleans, communities of color are already overburdened with the cumulative impacts of more than 150 petrochemical facilities,” they wrote. “With a majority Black and low-income population, St. James Parish alone has 12 refineries within a 10-mile radius.”

Sharon Lavigne, an environmental justice advocate with the group RISE St. James, said the plant’s construction would be a death sentence for her community.

An analysis by ProPublica found in 2019 the complex could more than triple the level of cancer-causing chemicals that residents of St. James are exposed to.

But Lavigne said she’s feeling the tide is turning in the environmental justice advocates’ favor, in part because she has long thought the plant didn’t make financial sense.

“We are making headway,” she said. “There is no doubt in my mind. I feel like with all the people we have behind us, trying to fight this plant, I think the Biden administration is going to listen to us.”